Application of S. 115BBE without Linking to Proper Charging Provision u/s 68-69D is Not Valid: ITAT deletes Rs. 1cr Addition [Read Order]
The bench observed that the AO had “fallen into palpable error” in jumping straight to Section 115BBE without fixing the addition under a charging section.
income - tax - addition - Taxscan
income - tax - addition - Taxscan
The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has struck down an addition of ₹1 crore made under Section 115BBE of the Income Tax Act, 1961, holding that the Assessing Officer (AO) erred in directly invoking the special tax provision without first identifying the proper charging section, such as Sections 68 to 69D.
Pradeep Tyagi HUF, the appellant-assessee which had deposited ₹1 crore in cash on 23 November 2016 during the demonetisation period. The assessee explained that the cash represented business receipts from horticulture, supply of sand, and related activities, with income consistently declared under the presumptive scheme of Section 44AD. Gross receipts of ₹1.01 crore for AY 2017-18 were reported, and presumptive income at 8% was duly offered to tax.
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The AO, however, doubted the genuineness of the business, observing absence of documents such as government registrations, employees, and transport details. Concluding that no real business was carried out, the AO treated the cash deposit as unexplained and taxed it under Section 115BBE at 60%. The National Faceless Appeal Centre (NFAC) upheld the addition, branding the assessee’s explanation as a concocted story.
On appeal, the appellate found merit in the assessee’s arguments. The Tribunal noted that Section 115BBE does not independently tax income but merely prescribes a special tax rate for incomes falling within Sections 68 (unexplained cash credits), 69 (unexplained investments), 69A (unexplained money), 69B (undisclosed investments), 69C (unexplained expenditure), or 69D (borrowings on hundi). In the present case, the AO had not specified any of these provisions before applying Section 115BBE.
The Bench of Judicial Member Madhumita Roy and Accountant Member Khettra Mohan Roy, observed that the AO had “fallen into palpable error” in jumping straight to Section 115BBE without fixing the addition under a charging section.
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Accordingly, the Tribunal held, was fatal to the assessment. Since neither the AO nor the CIT(A) could justify the proper charging provision, the ITAT deleted the entire ₹1 crore addition.
The bench noted that “The order of the ld. CIT(A) is mainly reiterating the order of the Assessing Officer and he has glossed over the fact that in absence of charging provision is fatal to the finality of the assessment order. Accordingly, the entire addition of Rs.1 Crore is directed to be deleted. Since, we have deleted the addition in entirety, we need not answer about the applicability of section 115BBE of the Act at this juncture.”
Accordingly, the appeal of the assessee is allowed.
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