Section 115BBE of Income Tax Act would be Applicable for Transactions Undertaken w.e.f. 1/4/2017, Not of Earlier Period, Rules ITAT [Read Order]
The bench cited that the amended rate explicitly applies only from Assessment Year 2017-18 onwards, covering transactions undertaken from 1 April 2017, and cannot be stretched back to cover transactions of earlier financial years.
![Section 115BBE of Income Tax Act would be Applicable for Transactions Undertaken w.e.f. 1/4/2017, Not of Earlier Period, Rules ITAT [Read Order] Section 115BBE of Income Tax Act would be Applicable for Transactions Undertaken w.e.f. 1/4/2017, Not of Earlier Period, Rules ITAT [Read Order]](https://images.taxscan.in/h-upload/2025/07/01/2057402-itat-taxscan.webp)
While clarifying the scope of retrospective taxation under Section 115BBE of the Income Tax Act, 1961 the Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the higher tax rate under this provision cannot be invoked for transactions undertaken prior to 1 April 2017.
The case arose from an appeal by the Revenue challenging the deletion of an addition made under Section 69C, where the Assessing Officer (AO) had sought to apply the enhanced tax rate under Section 115BBE for an unexplained expenditure of ₹3.61 lakh related to Assessment Year 2012-13.
The AO had invoked the amended provisions of Section 115BBE, which were brought in by the Taxation Laws (Second Amendment) Act, 2016 in the wake of demonetisation, to tax unexplained income at an increased rate of 60% plus surcharge and cess.
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However, the ITAT noted that the amended rate explicitly applies only from Assessment Year 2017-18 onwards, covering transactions undertaken from 1 April 2017, and cannot be stretched back to cover transactions of earlier financial years.
The Tribunal, relying on the decision of the Madras High Court in S.M.I.L.E Microfinance Ltd., agreed that the object and purpose of the amendment was to deter future tax evasion and to curb black money generation in the aftermath of the demonetisation exercise.
The bench cited the legislative intent behind the Pradhan Mantri Garib Kalyan Yojana (PMGKY), which clearly targeted undisclosed income declared after 1 April 2017 under a specific tax and penalty regime.
In the present case, the bench of Mahavir Singh ( Vice president) and Amitabh Shukla (Accountant member) noted that the disputed expenditure arose in FY 2011-12 and thus fell entirely outside the scope of the amended provision.
Accordingly, the ITAT directed the AO to recompute the tax liability without applying the enhanced rate under Section 115BBE and instead apply the applicable rate as it stood before the amendment, which was 30%.
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