Retd IAS officer’s Demonetization Cash Deposit Addition of ₹23.33 Lakh Cut to 50%: ITAT applies 30% Tax u/s 115BBE [Read Order]
ITAT restricted the demonetization cash deposit addition to 50% and applied the 30% tax u/s 115BBE instead of 60%.
Retd IAS - Demonetization Cash Deposit - ITAT applies - Tax us 115BBE
Retd IAS - Demonetization Cash Deposit - ITAT applies - Tax us 115BBE
The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) has allowed the appeal by the assessee by restricting the addition of demonetization cash deposits to 50% and held that the applicable rate of tax is 30% under section 115BBE of the Income Tax Act, 1961, not 60%.
The assessee, Comal Ramachandran Gayathri, is a retired IAS officer and for the Assessment Year(AY) 2017-18, the assessee has filed her return of income on 29.07.2017 admitting total income of ₹2,64,53,180. The assessee’s income consists of pension income, rental income and income from bonds and deposits. The assessment was selected for limited scrutiny to examine the source of cash deposits made during the demonetization period.
The assessee had deposited a sum of ₹30,00,000 in bank account and had deposited ₹23,33,000 in Specified Bank Notes (SBNs) during the demonetization period of November-December 2016.
On scrutiny, the Assessing Officer (AO) treated the entire sum as unexplained cash credits under section 68 and added it to the income. The AO also applied the tax rate of 60% under section 115BBE on relying on the Taxation Laws (Second Amendment) Act, 2016.
The assessee explained that the deposits represented collections made from the tailoring and embroidery business, as well as cash received from family sources, and argued that not all deposits were unexplained.
On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the addition in full and upheld the AO’s application of 60% tax u/s 115BBE.
Before the Tribunal, the assessee reiterated that the entire cash deposit could not be treated as unexplained and also challenged the rate of tax applied.
The Bench comprising George George K(Vice President) and Padmavathy S (Accountant Member) noted that the assessee could not substantiate the entire claim with evidence, but some part of the business was acknowledged.
The Tribunal held that a reasonable estimate would be to sustain 50% of the cash deposit as unexplained, thereby restricting the addition to ₹11,66,500, that is 50% of ₹23,33,000.
The Tribunal observed that the amendment to section 115BBE, enhancing the rate from 30% to 60% took effect from 01.04.2017, which was applicable from AY 2017-18 onwards. Since the case is concerned with AY 2017-18, the applicable rate was 30% and not 60%.
Accordingly, the ITAT partly allowed the appeal, restricting the addition to 50% of the deposits and applying 30% tax under section 115BBE.
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The assessee was represented by G. Sitharaman along with Veerabaghu S, while the Revenue was represented by Dr.M.Shanmuga Priya.
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