Dr. Satish Kumar Midha Vs PCIT (ITAT Ranchi)
60% Tax Under 115BBE Not for AY 2017-18 & Applies Only from AY 2018-19 -115BBE Amendment Prospective- – ITAT Ranchi Quashes 263 Orders
A survey was conducted on 14.09.2016, wherein assessees admitted undisclosed income. AO completed assessments but did not apply the amended provisions of section 115BBE, which increased the tax rate from 30% to 60% w.e.f. 01.04.2017. PCIT invoked revisionary powers u/s 263, holding that AO erred in not applying the higher tax rate of 60% for AY 2017-18.
Tribunal, however, noted that the amendment to section 115BBE, introduced via Taxation Laws (Second Amendment) Act, 2016, became effective from 01.04.2017, i.e., applicable from AY 2018-19 onwards. For AY 2017-18, the law as on 01.04.2016 applied, i.e., the pre-amendment rate of 30%. Reliance was placed on SC in Reliance Jute Industries (120 ITR 912) & Madras HC in Smile Microfinance Ltd. (W.P.(MD) No.2078/2020, order dated 19.11.2024), holding that amendments effective from 01.04.2017 are prospective & cannot apply to AY 2017-18. Accordingly, tribunal held that PCIT’s exercise of revision u/s 263 was unsustainable, since AO’s assessment applying 30% tax rate was correct in law. Thus, both appeals were allowed & 263 orders quashed
FULL TEXT OF THE ORDER OF ITAT RANCHI
ITA No.19/Ran/2022 is filed by the assesse against the order u/s 263 of the Act of ld Pr. CIT, Ranchi dated 30.3.2022 in DIN & Order No. ITBA/Rev/F/Rev 5/2021-22/1042043650(1) for the assessment year 2017-18.
2. ITA No.20/Ran/2022 is filed by the assesse against the order u/s, 263 of the Act of ld Pr. CIT, Ranchi dated 30.3.2022 in DIN & Order No. ITBA/Rev/F/Rev 5/2021-22/10421168150(1) for the assessment year 2017-18.
3. In this case, the appeals have been filed on 6.5.2022. The appeals have been posted on multiple occasions nearly 21 times. None appeared on behalf of the assessee. The notice had also been sent through Regd.post, email and also served through Department. Still, the assessees have not represented in these cases. However, the assessee has filed written submissions, which read as follows:
Further submissions for I. T. A. No. —19/RAN/2022 in the matter of Dr. Satish Kumar Midha for the Assessment Year — 2017-18 bearing PAN No. — ABGPM4998Q
Submissions
To,
The Honourable Members,
Income Tax Appellate Tribunal,
Ranchi Bench.
Ranchi.
Your Honours,
As per your honours’ instructions please find attached herewith the Assessment Order passed u/s 143 r.w.s. 263 of the Income Tax Act, 1961 attached as Annexure — 1. The Ld. Assessing Officer has elaborately considered the submission of the assessee and at point no. 5 in page no. 25 of the Assessment Order has commented “In fact In fact they were his unaccounted income, the source of which may be its business and profession. The deciding factor is they were unaccounted income of the assessee.” He has simply changed the rate of tax. From the abstract of the panchnama attached as Annexure — 2 it is clear that whatever documents were impounded on the basis of which disclosure were given were fully out of profession of medicine.
Hence the source of the disclosure is from medical profession about which the first Ld. Assessing Officer, Ld. Principal Commissioner of Income Tax and second Ld. Assessing Officer are agreeing. No income is from undisclosed sources as has been argued earlier. Copy of statement of oath is attached as Annexure – 3 which was taken in the premises of the Hospital of the assessee.
It has been held in the case of Principal Commissioner of Income Tax v Dharti Estate (2024) 163 taxmann.com 179 (Guj-HC) attached as Annexure — 4 “Where Assessing Officer had made due inquiries and allowed assessee’s claim by treating indisclosed income found during survey as assessee’s business income, commissioner erred in initiating revision proceeding on basis that disclosed amount must be taxed under section 115BBE rather than being shown as business income”. This covers the issue.
The physical copy of the impounded documents are produced before your honour.
Kindly let us know which documents your honour wants to peruse.
The originals are still lying with the Ld. Assessing Officer.
Without prejudice to above:-
As per Section 158BA(7) states that as follows :-
The total income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates.”
Now, section 113 reads as follows :-
“The total undisclosed income of the block period, determined under section-158BC, shall be chargeable to tax at the rate of sixty per cent.]”
This makes it clear that due to the various judicial pronouncements, the Government of India has made it clear that w.e.f. 1.4.2024 disclosures in Search shall be taxed @ 60%. Survey u/s 133A is not covered till date.
Hope that this shall serve the purpose. Kindly let us know what further documents and informations are required by your honour to allow the appeal.
Thanking You,
Yours’ faithfully,
P. S. Paul
( Authorised Representative )
End :- As stated above.
4. Ld CIT DR has vehemently supported the order of the Pr. CIT. The facts in the present case show that there was a survey on the premises of the assessee on 14.9.2016. In the course of survey, the assessee has accepted undisclosed income. The Assessing Officer while completing the assessment has not applied the provisions of section 115BBE, which was brought into the Act w.e. f 1.4.2017. A perusal of the facts in the present case further shows that the Pr. CIT himself recognizes that the provisions of section 115BBE was amended by the Gazette Notification No.57 dated 15.12.2016 and the amendment was effective from 1.4.2017. However, Pr. CIT has taken the stand that the amendment would apply to the assessment year 2017-18. When an amendment is made effective from 1st April of a particular year that relates to the said accounting year. The assessment year in this case would be next year. Thus, the assessment year would be for an amendment which has taken effect from 1.4.2017 will be assessment year 2018-19. Ld Pr. CIT has also referred to the decision of the Hon’ble Supreme Court in the case of Reliance Jute Industries, 120 ITR 912 (SC), wherein, the Hon’ble Supreme Court has held that the law as on the beginning of the year is the law that has to be applied for the assessment year. The survey in the impugned case appeals took place on 14.9.2016, the Gazette Notification in respect of Section 115 BBE was on 15.12.2016. The effective date for the amendment was 1.4.2017 that is after end of the financial year 31.3.2017, the survey has taken place during the financial year 1.4.2016 to 31.3.2017, relevant to assessment year 2017-
18. The amendment has taken place w.e.f. 1.4.2017. This amendment would be applicable to assessment year 2018-19. As the amended provisions of section 115 BBE does not apply to the impugned assessment year, we are of the view that the provisions of section 115 BBE cannot be made applicable in the case of the assesses for the impugned assessment year 2017-18. This view of our finds the support from the judgment of Hon’ble Madras High Court in the case of Smile Microfinance Ltd.,in W.P.(MD) No.2078/2020 order dated 19.11.2024, wherein, the Hon’ble High Court has held as under:-
“16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder:
…….
……
17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax.”
This being so, we are of the view that the orders of Pr. CIT, Ranchi are unsustainable and consequently, we quash the same.
5. In the result, appeals of the assessees stand allowed.
Order dictated and pronounced in the open court on 21/08/2025.
