Section 115BBE not applicable to Undisclosed Assets Deposited in Bank Post-Demonetization when Assets found in premises prior to Demonetization: ITAT

The Surat Bench of Income Tax Appellate Tribunal (ITAT) has held that Section 115BBE of the Income Tax Act 1961 would not be applicable as the undisclosed assets deposited in the bank accounts in the post demonetisation and assets were found in the premises prior to the demonetisation period.

The solitary grievance of the assessee, Samir Shantilal Mehta, in this appeal was that whether provisions of section 115BBE of the Income Tax Act would be applicable to tax the unexplained money being undisclosed gold, Jewellery found during the course of search, when the date of search is 16.08.2016.

Vartik Choksi on behalf of the assessee submitted that, subsequently enacted tax rate should be applicable on those cases where undisclosed assets in the form of cash are deposited in the bank account, in post demonetization. As the assets were found in the premises of the assessee prior to demonetization, the provisions of section 115BBE of the Income Tax Act were not applicable to the case of the assessee

Ashok B. Koli, on behalf of the revenue submitted that the provisions of section 115BBE of the Income Tax Act as amended were brought into the Act by Taxation, Laws (Second Amendment) Act, 2016.

However, the said amendment had been made effective from 01.04.2017 and hence applicable to the impugned assessment year, AY.2017-18. Therefore, the amendment in question was not retrospective in nature.

He further submitted that, the intention of the Legislature was to bring the amendment was to tax the unexplained assets after demonetization but the amendment covered all Sections from 68 to 69D of the Income Tax Act irrespective of whether the undisclosed assets found were prior to or after the demonetization period.

Therefore, if any income from AY 2017-18 was taxed under Section 68 to 69D of the Income Tax Act, the provision of section 115BBE of the Income Tax Act would apply to all such incomes. 

The two-member Bench of Pawan Singh, (Judicial Member) and A L Saini, (Accountant Member) held that the amendment in section 115BBE of the Income Tax Act came into force only on 15.12.2016 whereas the search was conducted on 16.08.2016 and the assessee had paid tax at 30%.

Since the search in the case of the assessee was carried out before the amendment the addition ought to had been made in terms of the prevailing provision, the addition made by the assessing officer invoking Section 115BBE of the Income Tax Act, provision of which came into force only on 01.04.2017, would not be sustainable, the Tribunal ruled.

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