Case Law Details
Periyasamy Arunachalam Vs ITO (ITAT Chennai)
U/s 115BBE Amendment Not Retrospective – ITAT Chennai Restricts Tax to 30% for Pre-01.04.2017 Transactions
In this case, the assessee faced additions under Section 68 for cash deposits during the demonetization period, and the Assessing Officer applied tax @ 60% under Section 115BBE. The CIT(A) upheld this higher rate.
However, before the ITAT Chennai, the assessee argued that the amended higher rate of 60% under Section 115BBE (introduced w.e.f. 15.12.2016) is applicable only from A.Y. 2018-19 onwards, and not for A.Y. 2017-18.
The Tribunal relied on the jurisdictional Madras High Court decision in SMILE Microfinance Ltd., which clearly held that the enhanced tax rate applies only to transactions after 01.04.2017. Since the impugned transactions pertained to an earlier period, the amendment could not be applied retrospectively.
Accordingly, the ITAT held that only the pre-amended rate of 30% under Section 115BBE is applicable, and directed the AO to recompute the tax. The appeal was thus partly allowed in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order dated 12.09.2025, passed by the Learned Commissioner of Income Tax (Appeal), NFAC, Delhi (in short “ld.CIT(A)”) for the assessment year (A.Y) 2017-18 against the order u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the AO, Ward 1, Pudukkottai dated 31.12.2019.
2. Brief facts of the case are that the assessee is an individual and had filed her return of income for A.Y.2017-18 admitting total income of Rs.5,81,250/-. The case was selected for scrutiny under CASS for verification of ‘cash deposits during demonetization period and agricultural income’. Accordingly, the statutory notices were issued, and the assessment was completed u/s.143(3) of the Act dated 31.012.2019 by the Assessing Officer by making an addition of Rs.28,03,500/- on account of SBNs deposited during the demonetization period u/s.68 r.w.s 115BBE of the Act and Rs.7,89,600/- by disallowing the agricultural income.
3. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi on 28.01.2020, challenging the levy of tax @ 60% u/s.115BBE of the Act on the additions made u/s.68 of the Act. The assessee submitted that the amendment to section 115BBE of the Act came only on 15.12.2016 and hence it is applicable from the A.Y. 2018-19. However, the ld.CIT(A) dismissed the appeal of the assessee confirming the order of the AO by holding that the levy of tax @ 60% u/s.115BBE is in order by passing an order dated 12.09.2025.
4. Aggrieved by the impugned orders of the Ld.CIT(A), the assessee is in appeal before us.
5. The ld.AR submitted that the ld.CIT(A) has erred in confirming the rate of tax @ 60% u/s.115BBE of the Act for the A.Y. 2017-18. The ld.AR relied on the decision of the Hon’ble Jurisdictional High Court, in the case of SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.), wherein the Hon’ble High Court ruled that amendment made to Section 115BBE of the Act will apply for transactions after 01.04.2017 and not prior to it. In light of the above, the ld.AR prayed for setting aside the order of the ld.CIT(A) and direct the AO to levy the rate of tax @ 30%.
6. Per contra, the ld.DR fairly agreed for the ld.AR argument.
7. We have heard the rival parties and perused the material available on record and gone through the orders of the lower authorities. We note that the AO has passed an order by making certain additions u/s.68 of the Act and levied the tax @ 60% as per the provisions of section 115BBE of the Act, which was later confirmed by the ld.CIT(A). The ld.AR relied on the decision of the Hon’ble Jurisdictional High Court, in the case of SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.), the Hon’ble High Court ruled that amendment made to Section 115BBE of the Act will apply for transactions after 01.04.2017 and not prior to it.
8. We note that, as per the decision of the Hon’ble Jurisdictional High Court, in the case of SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.), the Hon’ble High Court ruled that amendment made to Section 115BBE of the Act will apply for transactions after 01.04.2017 and not prior to it. It is pertinent to note that the Assessing Officer has made the addition u/s.68 of the Act at the rate of 60% u/s.115BBE of the Act for the A.Y.2017-18. For the year under consideration, tax rate of 30% will apply, since the amendment for increasing the tax rate came into effect from 01.04.2017, meaning they will apply from the Assessment Year 2018-19 and not for the impugned Assessment Year 2017-18 as per the decision rendered by the Hon’ble Madras High Court. As it can be seen in this case, the additions were made on the transactions pertaining prior to 01.04.2017 and therefore, the ratio of this judgment squarely applies to the facts of the present case. Therefore, the rate of tax that can be applied u/s.115BBE of the Act is only 30% and not 60% on the sustained additions.
9. We, accordingly, direct the Assessing Officer to reduce the tax rate u/s.115BBE to 30% and recompute the demand by setting aside the order of the ld.CIT(A) and allow the grounds of the appeal of the assessee. Since, the assessee had challenged the only issue of rate of tax before the ld.CIT(A), the other fresh grounds raised before us, is not maintainable and hence not adjudicated.
10. In this result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 01st April, 2026 at Chennai.
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