Rama Rao Nallamothu Vs ITO (ITAT Visakhapatnam)
Summary: The assessee’s reassessment for AY 2017-18 resulted in additions of ₹6.04 lakh under Section 69A, ₹17.35 lakh under Section 68 and ₹23,176 as undisclosed interest income. Before the Tribunal, the assessee did not press the challenge to the additions and restricted the dispute to the application of the enhanced tax rate of 60% under Section 115BBE. Following the Rajasthan High Court’s decision in Deepak Maratha v. Pr. CIT, the Visakhapatnam ITAT held that the enhanced rate introduced by the Finance Act, 2016 came into force only from 1 April 2017 and, therefore, applies from FY 2017-18 corresponding to AY 2018-19 onwards. Since the disputed income related to FY 2016-17, the law prevailing on 1 April 2016 applied. Accordingly, the Tribunal directed the Assessing Officer to tax the unexplained income at 30% instead of 60% and partly allowed the assessee’s appeal.
Visakhapatnam ITAT: Enhanced 60% Tax Rate Under Section 115BBE Not Applicable to AY 2017-18
The assessee’s reassessment for AY 2017-18 resulted in additions of ₹6.04 lakh under Section 69A, ₹17.35 lakh under Section 68 and ₹23,176 as undisclosed interest income. Before the Tribunal, the assessee did not press the challenge to the additions and restricted the dispute to the application of the enhanced tax rate of 60% under Section 115BBE.
Following the Rajasthan High Court’s decision in Deepak Maratha v. Pr. CIT, the Visakhapatnam ITAT held that the enhanced rate introduced by the Finance Act, 2016 came into force only from 1 April 2017 and, therefore, applies from FY 2017-18 corresponding to AY 2018-19 onwards. Since the disputed income related to FY 2016-17, the law prevailing on 1 April 2016 applied. Accordingly, the Tribunal directed the Assessing Officer to tax the unexplained income at 30% instead of 60% and partly allowed the assessee’s appeal.
List of Cases Discussed / Relied Upon
- Deepak Maratha v. Pr. CIT- II, Jodhpur, Civil writ Petition No. 3625/2020 dated 27.05.2026 — relied upon by the Tribunal on the applicability of the enhanced 60% rate under Section 115BBE to AY 2017-18.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN: ITBA/NFAC/S/250/2025 -26/1085848034(1) dated 10-Feb-2026 for the Assessment Year 2017-18.
2. The Assessee has raised the following grounds of appeal:
“1. That under the facts and circumstances of the case, the order passed u/s 147 r.w.s 144B IT Act dt:20.03.2025, Which was upheld by the Ld.CIT(A), FAC vide order passed u/s 250 of the IT. Act dt:10.02.2026 is not in accordance with the facts of the case and the provisions of law.
2. The Ld. CIT(A) is not correct in upholding the deposits made in the bank account Rs.6,04,025/- , as unexplained cash deposits invoking provisions of sec 69A of the IT Act.
3. The Ld. CIT(A) is not correct in upholding the AO action in bringing to tax the deposits made in the bank account of Rs. 17,37,500/- , as unexplained, without any source, and taxing such amount u/s 68 of the IT Act is against the facts of the case and provisions of law.
4. Without prejudice to Ground No. 2 – 4 the Ld. CIT (A) ought to have appreciated the fact that when assessee has explained the sources before the AO for the deposits made in bank account, with cogent reasons, the learned CIT(A) should have deleted the addition ma de under section 69A of the IT Act of Rs.6,04,025/- and addition made u/s. 68 of the IT Act of Rs. 17,37,500/-
5. The learned CIT (A) erred in confirming the addition of Rs.23,176/- as undisclosed interest income.
6. For these and other reasons that are to be urged at the time of hearing of the case, the assessee prays that the addition made by the assessing officer and sustained by learned CIT(A) may be deleted in the interest of Justice.”
3. The assessee is an individual and has not filed any return of income for the year under consideration. Based on the information, available with the Ld.Assessing Officer [hereinafter in short “Ld.AO”], that the assessee has made time deposits of Rs.1,19,08,000/- during the financial year 2016-17, the Ld.AO issued notice under section 148 of the Act on 29.02.2024. In response, assessee filed return of income. Subsequently, Ld.AO issued notices under section 142(1) on various dates calling for certain information. In response, assessee filed his submissions on 24.07.2024 and furnished bank account statement, computation of income, reconciliation of all term deposits, interest certificate considering the submissions of the assessee, the assessment has been completed by the Ld.AO under section 147 r.w.s. 144B of the Act on 20.03.2025 and determined total income at Rs.27,23,321/- by making additions towards unexplained money under section 69A of the Act & 68 of the Act of Rs.6,04,025/ & Rs.17,35,500/-, respectively, and addition towards undisclosed income of “income from other sources of Rs.23,176/-.
4. Aggrieved by the Assessment Order, the assessee preferred an appeal before the Ld. CIT(A) and challenged the additions made by the Ld.AO towards Income from Other Sources and argued that the source of cash deposited into bank account is out of his known source of income. Ld.CIT(A), after considering the submissions of the assessee and after taking note of relevant facts, sustained the additions made by the Ld.AO.
5. Being aggrieved by the Ld. CIT(A) order, the assessee is now in appeal before the Tribunal.
6. Learned Counsel for the assessee, Shri C. Subrahmanyam, CA, referring to various grounds of appeal file d by the assessee, including additional grounds submitted that, the assessee has raised additional ground on the issue of validity of assessment passed by the Assessing Officer in light of notice issued by the Jurisdictional Assessing Officer (in short “JA O”) and argued that since the issue is sub- retrospective amendment by insertion of section 292BC of the Act, the ground on JAO/FAO may be kept open to decide at appropriate stage.
7. Learned Counsel for the assessee, further submitted that, the assessee has also filed additional ground challenging levy of higher rate of interest at 60% tax on income computed under the head “Income from Other Sources” towards unexplained money under sect ion 69 of the Act, in light of the decision of the Hon’ble Rajasthan High Court in the case of Deepak Maratha v. Pr. CIT- II, Jodhpur in Civil writ Petition No. 3625/2020 dated 27.05.2026 and argued that since the amendment to section 115BBE came into effect from 01.04.2017 which is applicable for the A.Y.2018- 19, the additional rate of tax cannot be applied for the assessment year under consideration. In other words, the assessee has not challenged the additions made by the Ld.AO towards unexplained money under section 69A of the Act and addition of Rs.23,176/- as undisclosed interest income but only argued the higher rate of tax computed by the Ld.AO in terms of section 115BBE of the Act.
8. Learned Senior AR for the Revenue, Shri A.P.Babu, Sr.AR, relied upon the order of the Ld.CIT(A) and argued that the amendment to provisions of section 115BBE of the Act came into effect from 01.04.2017 and is applicable for the A.Y. 2017- 18 and therefore the Ld.AO has rightly computed tax @60% on income assessed under the head “Income from other sources”. Therefore, he submitted that the order of the Ld. CIT(A) should be sustained.
9. We have heard both the sides, perused the material available on record and had gone through the orders of the authorities below. The assessee although had taken various grounds challenging the additions made by the Ld.AO towards unexplained cash deposits under section 69A of the Act, but restricted his arguments to the computation of tax in terms of section 115BBE of the Act @60% on the total in come assessed under the head “Income from other sources” and claimed that this issue is covered in favour of the assessee, by the decision of the Hon’ble Rajasthan High Court in the case of Deepak Maratha v. Pr. CIT- II, Jodhpur in Civil writ Petition No. 3625/2020 dated 27.05.2026. We find that the Hon’ble Rajasthan High Court had considered the similar issue in the case of Deepak Maratha v. Pr. CIT- II, Jodhpur in Civil writ Petition No. 3625/2020 dated 27.05.2026, where the Hon’ble High Court, after cons idering the relevant provisions of section 115BBE of the Act and amendment by the Finance Act, 2016 which is applicable from 01.04.2017 held that the amendment to section 115BBE came into force on 01.04.2017 i.e., first day of F.Y.2017- 18 and therefore, for F.Y. 2016- 17, the law in force on 01.04.2016 prescribed a rate of 30% must govern. The enhanced rate of tax @60% came into force on 01.04.2017 and can apply only from the date i.e., for F.Y. 2017- 18 onwards. In other words, the Hon’ble High Court held that higher rate of tax as per section 115BBE of the Act @60 can be charged only from A.Y.2018- 19 but not prior assessment years. In the present case, the assessment year involved is A.Y.2017 -18 and as per the provisions of section 115BBE of the Act, the applicable upon impugned assessment year is @30%, and, therefore, we direct the Ld.AO to compute the tax @30% on the additions made towards unexplained money under section 69A of the Act under section 115BBE of the Act.
10. In the result, appeal filed by the assessee by the assessee is partly allowed.
Order pronounced in the open court on 21st August, 2026.
