SH. DEEPAK AGGARWAL,PANCHKULA V. DCIT, CENTRAL CIRCLE -1, CHANDIGARH

ITA 273/CHANDI/2022

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The case involves Shri Deepak Aggarwal, who appealed against the application of a higher tax rate of 60% on unaccounted cash of Rs. 9 Lacs seized during a search operation under section 132 of the Income Tax Act, 1961. The search was conducted on 13-07-2016, and the higher tax rate was applied by the Assessing Officer under section 115BBE, which was upheld by the Commissioner of Income Tax (Appeals). The Tribunal, referencing a decision by the Madras High Court, ruled that the higher tax rate applies only to transactions from 01-04-2017 onwards, and since the cash was seized before this date, the normal tax rate should apply.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778573 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 04-03-2022
• Other Referred Cases: S.M.I.L.E. Microfinance Ltd. vs. ACIT (WP (MD) No.2078 of 2020)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETINDER MANN LD
• Assessee Lawyers: PARIKSHIT AGGARWAL LD
• Section: 143(3); 132

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No. 273/CHANDI/2022 (िनधाŊरणवषŊ / Assessment Year: 2017-18) Shri Deepak Aggarwal (C/o Parikshit Aggarwal (CA) H.No. 3035, Sector 27D Chandigarh-160019 बनाम/ Vs. DCIT-Central Circle-1 Sector-17 Chandigarh-160017 ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AEXPA-3768-G (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri Parikshit Aggarwal (CA) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Smt. Geetinder Mann (CIT) - Ld. DR सुनवाईकीतारीख/Date of Hearing : 09-10-2025 घोषणाकीतारीख /Date of Pronouncement : 13/10/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals)- 3, Gurgaon [CIT(A)] dated 28-12-2021 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 153B(1)(b) of the Act on 24-12-2018. The sole grievance of the assessee is application of higher rate of tax @60% u/s 115BBE. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Printed from counselvise.com 2 2. The assessee was subjected to search action u/s 132 on 13-07- 2016. The assessee filed return of income u/s 139(1) on 31-10-2017 declaring income of Rs.13.30 Lacs. The returned income includes Rs.9 Lacs of cash as found and seized during search. Against the same, Ld. AO applied higher tax rate of 60% u/s 115BBE which was upheld by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us. 3. We find that this issue stand covered in assessee’s favor by the decision of Hon’ble High Court of Madras (Madura Bench) in S.M.I.L.E. Microfinance Ltd. vs. ACIT (WP (MD) No.2078 of 2020 dated 19-11- 2024) as under: - 16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder: Press Information Bureau Government of India Ministry of Finance 28-November-2016 15:56 IST Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill. Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs. 1000 [Specified Bank Notes (SBN)] have been recently withdrawn the Reserve Bank of India. Concerns have been raised that some of the existing provisions of the Income tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Printed from counselvise.com 3 Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy. In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality. An overview of the amendments proposed in the Bill are placed below; xxxxx xxxxx 17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax. The Hon’ble Court held that the revenue is empowered to impose 60% rate of tax for the transactions from 01-04-2017 onwards and not prior to the said cut-off date and for prior transaction, the revenue is empowered to impose only 30% rate of tax. Printed from counselvise.com 4 4. Secondly, it emerges that the search has happened on the assessee on 13-07-2016 whereas notification prescribing higher rate of tax has come into force vide Taxation Laws (Second Amendment) Bill, 2016, notification dated 28-11-2016. In other words, the higher rate has been prescribed later on whereas the unaccounted cash has been earned by the assessee prior to that date. 5. For both the above reasons, the application of higher tax rate of 60% as prescribed u/s 115BBE could not be held to be justified. Therefore, Ld. AO is directed to charge normal rates of tax on surrendered income. 6. The appeal stands partly allowed. Order pronounced on 13/10/2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 13/10/2025 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "