ITAT: Deletes ₹8.66 Lakh Section 69A Addition, Rejects 60% Rate for AY 2017-18

Rambabu Varma Lanka Vs ITO (ITAT Hyderabad)

Hyderabad ITAT: Enhanced 60% Tax Rate Under Section 115BBE Cannot Apply to AY 2017-18; Credit Card Payments Through Bank Cannot Be Treated as Unexplained Money

The Hyderabad ITAT dealt with an addition of ₹11.62 lakh under Section 69A representing credit-card payments allegedly not explained by the assessee. The AO had also subjected the addition to the enhanced 60% rate under Section 115BBE.

On merits, the Tribunal found that ₹8.66 lakh of the credit-card payments was admittedly made through the assessee’s bank account. Since these banking transactions were not disputed, the Tribunal held that the source of the credit-card payments stood explained and deleted the addition to that extent. The balance ₹2.96 lakh, stated to represent cancellation/refund entries and payments made by the assessee’s daughter, was remanded to the AO for verification after providing an opportunity of hearing.

More importantly, the ITAT accepted the assessee’s additional legal ground challenging the 60% rate under amended Section 115BBE for AY 2017-18. Following the Rajasthan High Court decision in Deepak Maratha v. Union of India, it held that the enhanced rate introduced by the Taxation Laws (Second Amendment) Act, 2016 became effective only from 01.04.2017. Consequently, for FY 2016-17 / AY 2017-18, the pre-amendment rate of 30% applies and not the enhanced 60% rate.

The Tribunal also noted the contrary Kerala High Court view but, relying on the Supreme Court decision in CIT v. Vegetable Products Ltd., held that where divergent High Court views exist, the interpretation favourable to the assessee should be followed. The issue was accordingly decided in favour of the assessee.

Cases Discussed:

• Deepak Maratha vs. Union of India & two Others (Rajasthan High Court), Civil Writ Petition No.3625 of 2020
• Maruti Babu Rao Jadav vs. ACIT (Kerala High Court), [2021] 430 ITR 504 (Ker)
• CIT vs. Vegetable Products Ltd. (Supreme Court), [1973] 88 ITR 192 (SC)
• National Thermal Power Co. Ltd., vs., CIT (Supreme Court), [1998] 229 ITR 383 (SC)

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal by the assessee is directed against the order dated 07.08.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC”], Delhi, for the assessment year 2017-2018.

2. The assessee has raised the following rounds of appeal

1. “ On the facts and in the circumstances of the case, the order of the ld. CIT(A) is erroneous both on facts and in law.

2. The ld. CIT(A) erred in sustaining the addition made by the AO of Rs.11,62,200 as unexplained money u/s.69A of the Act.

3. The authorities below failed to appreciate the documentary evidences filed to explain the sources for the payments made to credit card.

4. Any other ground that may be urged at the time of hearing.”

3. The solitary issue arises in this appeal is whether in the facts and circumstances of the case, the CIT(A) has erred in sustaining the addition made by the Assessing Officer of Rs.11,62,200/- as unexplained money under section 69A of the Act.

4. The assessee is an individual and has not filed any return of income under section 139 of the Act. On the basis of the information received through inside portal under RMS category, the Assessing Officer noted that the assessee has made transactions totaling to Rs.63,02,424/- during the year and has not filed the return of income. Accordingly, the Assessing Officer reopened the assessment by issuing notice under section 148(A)(b) and Order passed under section 148A(d) and issued notice under section 148 of the Act on 29.03.2024. In response to the notice issued u/sec.148 of the Act, the assessee filed return of income declaring total income of Rs.4,90,950/-. The Assessing Officer passed the assessment order by making an addition of 11,62,200/-on account of the credit card payments by treating the same as unexplained money under section 69A of the Act. The assessee has challenged the action of the Assessing Officer before the learned CIT(A) but could not succeed.

5. Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that out of the total credit card payment of Rs.11,62,200/- a sum of Rs.8,66,200/- was paid by the assessee through banking channel and therefore, the same cannot be added as unexplained money when the deposit in the bank account was not at all questioned or doubted by the Assessing He has further submitted that the balance amount of Rs.2,96,000/- was comprising of certain reversal entries of the credit card itself and the payment made by the daughter of the assessee towards the credit card expenses and therefore, the entire source of the credit card payment of Rs.11,62,200/- stand explained. The learned Authorised Representative of the Assessee has referred to the details of the bank statement at page no.11 of the paper book and submitted that the Assessing Officer has not considered the reversal entries of credit card payment. Thus, he has submitted that the addition made by the Assessing Officer and confirmed by the learned CIT(A) is not sustainable and liable to be deleted.

6. On the other hand, the learned DR has submitted that the assessee is shifting the stand at different stages. Before the Assessing Officer the assessee claimed the source as past savings and now the assessee has taken the plea that the payment is made through banking channel whereas the assessee has not explained the source of the credit in the bank account. Thus, the learned DR has submitted that the assessee has failed to explain the source. He has relied upon the orders of the authorities below.

7. I have considered the rival submissions as well as relevant material on record. The Assessing Officer has made addition of11,62,200/- on account of credit card payment treating the same as unexplained money in para no.3.4.2 as under:

“3.4.2. In view of the unsatisfactory reply submitted by the assessee, the source of aggregated amount of Rs.11,62,200/- paid as credit card bills has remained unexplained on part of assessee and hence, the same is to be taxed as “Income from Other Sources within the meaning of unexplained money u/s 69A of the Income Tax Act, 1961 in the hands of assessee. The same shall be assessed to tax at the Maximum Marginal Rate as provided u/s 115BBE of the Income Tax Act, 1961. ADD: Rs. 11,62,200/-”

7.1 The addition made by the Assessing Officer was confirmed by the CIT(A) on similar reasoning. However, before the Tribunal the learned Counsel for the Assessee has explained that the payment to the extent of 8,66,200/- out of the Rs.11,62,200/- is made through banking channel and has referred the bank account statement of the assessee and the payments on various dates. The details of these payments are summarized as under:

Payment from SBI bank to Citibank Credit Card

–

Dated: 30.07.2026

Counsel for Appellant

7.2 The transaction in the bank account of the assessee towards payment of the credit card as given in the above table are not in dispute therefore, to the extent of the payment of Rs.8,66,200/- the source stand explained as payment was made through bank account of the assessee. Hence, the addition to the extent of Rs.8,66,200/- stand

8. As regards the balance payment of Rs.2,96,000/-the assessee has referred to various cancellation transactions like booking of tickets etc., and refund of the money. However, the said details and facts were not considered by the Assessing Officer may be for want of proper explanation on behalf of the assessee. Further the assessee has also claimed that the remaining payment was made by the daughter of the assessee through her bank account, which was also not explained before the authorities below and therefore remained unverified. Accordingly, the addition to the extent of Rs.2.96,000/- is remanded to the record of the Assessing Officer for verification of the relevant facts and material to be produced by the assessee to show that the payment was made by the daughter of the assessee through her bank account and also the transaction of credit card payment got cancelled and refund is received. The Assessing Officer is directed to decide this issue, after giving proper opportunity of hearing to the assessee.

9. The assessee has also raised additional ground which reads as under:

“On the facts and circumstances of the case, the AO is not justified in levying tax at increased rate of 60% u/s.115BBE of the Act in as much as the amendments made by the Taxation (Second Amendment) Act, 2016 to Finance Act, 2016 are made effective from the 1st day of April 2017 and are applicable for asst. year 2018-19 onwards. The authorities below ought not to have applied the same to the asst. year 2017-18”.

10. I have heard the learned Authorised Representative of the Assessee as well as learned DR. The additional ground raised by the assessee is purely legal in nature as to whether the provisions of sec.115BBE of the Act are applicable on the additions made by the Assessing Officer or Therefore, in order to adjudicate the issue raised in the additional ground no new fact or record is required to be verified or examined but the same can be adjudicated on the basis of the facts available on record. Accordingly, in view of the Judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT [1998] 229 ITR 383 (SC), I admit the additional ground raised by the assessee for adjudication.

11. Since the additional ground raised by the assessee goes to the root of the matter, I take up the additional ground for hearing and adjudication.

12. The learned Authorised Representative of the Assessee has submitted that the amendment inserting section 115BBE has come into force w.e.f. 01.04.2017 therefore, it is applicable for the assessment year 2018-19 and not for the assessment year 2017-2018. He, therefore, submitted that the Assessing Officer is not justified in levying tax at increased rate of 60% u/sec.115BBE of the Act and pleaded that applying the higher rate of tax is not sustainable and liable to be deleted. In support of his contention, the learned Authorised Representative of the Assessee has relied upon the Judgment of Hon’ble Rajasthan High Court dated 05.2026 in the case of Deepak Maratha vs. Union of India & two Others in Civil Writ Petition No.3625 of 2020. 

13. On the other hand, the learned DR submitted that though the assessee has taken the plea that the payment is made through banking channel whereas the assessee has not explained the source of the credit in the bank account and therefore, the Assessing Officer has rightly made the addition on account of unexplained money u/sec.69A read with amended provisions of sec.115BBE of the Act. In support of his contention, he has relied upon Judgment of Hon’ble Kerala High Court in the case of Maruti Babu Rao Jadav vs. ACIT [2021] 430 ITR 504 (Ker).

14. I have considered the rival submissions as well as relevant material on record. At the outset, it is noted that the Hon’ble Rajasthan High Court in the case of Deepak Maratha vs. Union of India & two Others (supra), has considered the Judgement of Kerala High Court in the case of Maruti Babu Rao Jadav vs. ACIT (supra), and then held that the amendment inserting in section 115BBE has come into force on 01.04.2017 therefore, it is applicable for the assessment year 2018-19 and not for the assessment year 2017-2018 under consideration. The concluding part of the Judgement of Hon’ble Rajasthan High Court in Para nos.17 and 18 as under:

“17. SUMMARY/CONCLUSION

As an upshot of the discussion and analysis, as above, in our opinion, the Correct Legal Position which emerges is summarized as below:-

(i) The law applicable to an assessment year is the law in force on the first day of that year i.e., 01st A provision coming into force after that date, without express retrospective language, cannot be applied to assessments for that year.

(ii) Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made 

(iii) The amendment to Section 115BBE came into force on 01.04.2017 i.e. the first day of financial year 2017-18. For FY 2016-17, the law in force on 01.04.2016, prescribing a rate of 30%, must The enhanced rate of tax @ 60% came into force on 01.04.2017 and can apply only from that date, i.e. for financial year 2017-18 onwards.

(iv) The Taxation Laws (Second Amendment) Act, 2016 contains no express language for it’s retrospective effect of section 1158BE.

18. We thus hold that the Taxation Laws (Second Amendment) Act, 2016 is prospective in effect as specified therein (from 15.12.2016 except the amendment of Section 115BBE, which is effective from 01.04.2017). The question framed in para 8.1, in the preceding part, is answered accordingly.”

15. Even otherwise in view of Judgement of Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., [1973] 88 ITR 192 (SC) has held that when two divergent views are expressed by the Hon’ble High Courts, the view in favour of the assessee has to be followed. Accordingly, by following the Judgement of Hon’ble Rajasthan High Court in the case of Deepak Maratha vs. Union of India & two Others (supra), this issue is decided in favour of the assessee.

16. In the result, appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 07.08.2026.