Soma Sekhar Bingumalla Vs ITO (ITAT Hyderabad)
Summary: The Hyderabad Bench of the Income Tax Appellate Tribunal considered the appeal filed by Soma Sekhar Bingumalla for Assessment Year 2017-18 against the order of the Additional/JCIT (Appeals), Faridabad, dated 16-07-2025, arising from the assessment order passed under Section 143(3) of the Income-tax Act, 1961 dated 18-12-2019.
The assessee had filed his return of income on 31-03-2018 declaring income of Rs.2,65,500/-. The return was initially processed under Section 143(1), after which the case was selected for limited scrutiny through CASS and notice under Section 143(2) was issued. During assessment proceedings, the Assessing Officer noticed that the assessee had availed two personal loans from Central Bank of India. Loan Account No.3330811036 for Rs.3,72,000/- was sanctioned on 19-03-2014, while Loan Account No.3554133608 for Rs.4,80,000/- was sanctioned on 27-07-2016. The loans, together with interest, were repaid during the demonetization period on 12-11-2016.
The AO called upon the assessee to explain the source of cash deposits used for repayment. The assessee did not furnish a satisfactory explanation concerning cash deposits aggregating to Rs.5,07,481/- used towards repayment of the loan availed on 19-03-2014 and interest. The AO consequently treated Rs.5,07,481/- as unexplained money under Section 69A and determined the income at Rs.7,72,981/-. The Additional/JCIT (Appeals) upheld the assessment.
Before the Tribunal, the assessee’s appeal was delayed by 104 days. The assessee submitted that his earlier counsel had failed to inform him about dismissal of the first appeal. According to the assessee, he became aware of the dismissal only after HDFC Bank Ltd. informed him through an email dated 22-12-2025 and communication dated 03-01-2026 that the balance in his bank account had been remitted to the Income-tax Department pursuant to attachment proceedings under Section 226(3). The Revenue opposed condonation of delay.
The Tribunal found no reason to disbelieve the assessee’s explanation, while also observing that a litigant is expected to exercise reasonable diligence. Relying on the principle of a liberal and justice-oriented approach in condonation matters, as referred to in Vidya Shankar Jaiswal v. CIT [(2024) 166 taxmann.com 37 (SC)], the Tribunal condoned the 104-day delay subject to payment of Rs.5,000/- to the Prime Minister National Relief Fund within 15 days and furnishing the receipt to the Registry. Subject to compliance, the appeal was admitted for adjudication on merits.
On the Section 69A addition, the Tribunal observed that the assessee had not placed documentary evidence explaining the source of the cash deposits. Therefore, the adverse inference drawn by the AO for want of supporting evidence could not be faulted. However, the Tribunal did not agree with the lower authorities that the entire Rs.5,07,481/- necessarily represented unexplained money. Considering the totality of circumstances, normal human conduct and the likelihood of some cash-in-hand being available with the assessee for day-to-day requirements, the Tribunal considered it fair and reasonable to accept cash availability of Rs.1,00,000/-. Consequently, the addition under Section 69A was restricted to Rs.4,07,481/-.
The Tribunal then considered the applicability of the enhanced tax rate under Section 115BBE. The assessee contended that the amendment made by the Taxation Laws (Second Amendment) Act, 2016 was prospective and could apply only from Assessment Year 2018-19 onwards. The Tribunal found substance in this contention.
The Tribunal relied upon Deepak Maratha v. Union of India & Ors., CWP No.3625 of 2020, dated 27-05-2026, in which the Rajasthan High Court had held that the enhanced rate under the amended Section 115BBE operated prospectively from Financial Year 2017-18, corresponding to Assessment Year 2018-19 onwards, since the amending enactment contained no express provision giving retrospective operation. The Tribunal also noted the contrary view of the Kerala High Court in Maruti Babu Rao v. ACIT, W.A. No.984 of 2019, which held that the enhanced rate applied from Assessment Year 2017-18.
In view of the divergent High Court views and the absence of an authoritative pronouncement of the jurisdictional High Court or Supreme Court directly resolving the controversy, the Tribunal applied the principle stated in CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), namely that where two reasonable constructions of a taxing provision are possible, the construction favourable to the assessee should ordinarily be preferred. Following the Rajasthan High Court’s view, the Tribunal held that the enhanced rate prescribed under the amended Section 115BBE was not applicable to Assessment Year 2017-18 and directed the AO to compute tax liability on the sustained addition of Rs.4,07,481/- at the rate applicable under the unamended Section 115BBE.
The appeal was accordingly partly allowed in terms of the Tribunal’s observations.
Cases Discussed
- Vidya Shankar Jaiswal v. CIT, [(2024) 166 taxmann.com 37 (SC)] — referred to for the proposition that a liberal and justice-oriented approach should be adopted while considering an application for condonation of delay.
- Deepak Maratha v. Union of India & Ors., CWP No.3625 of 2020, dated 27-05-2026 — followed on the prospective applicability of the enhanced rate under Section 115BBE from Assessment Year 2018-19 onwards.
- Maruti Babu Rao v. ACIT, W.A. No.984 of 2019 — referred to as the contrary Kerala High Court view that the enhanced Section 115BBE rate applies from Assessment Year 2017-18.
- CIT v. Vegetable Products Ltd., (1973) 88 ITR 192 (SC) — relied upon for adopting the construction favourable to the assessee where two reasonable constructions of a taxing provision are possible.
FULL TEXT OF THE JUDGMENT/ORDER OF INCOME TAX APPELLATE TRIBUNAL, HYDERABAD
The present appeal filed by the assessee is directed against the order passed by the Additional/JCIT (Appeals), Faridabad, dated 16-07-2025, which in turn arises from the order passed by the AO under Section 143(3) of the Income-tax Act, 1961 (for short, “Act”), dated 18-12-2019 for Assessment Year 2017-18.
The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. The order of the Learned First Appellate Authority in not correct either on facts or in law and in both.
2. The Learned First Appellate Authority in the facts and circumstances of the case is not justified in confirming the addition of Rs. 5,07,481/- made by the assessing officer u/s 69A of the I.T. Act being repayment of Gold loan taken on 19.03.2014, from out of explainable sources.
3. Without prejudice to ground no. 2 filed, the Learned First Appellate Authority in the facts and circumstances of the case is not justified in confirming action of the AO in bringing Rs.5,07,481/- to tax@60% uls 115BBE ignoring the legal position that such levy is applicable from 01.04.2017 only.
4. The Appellant prays for leave to add or amend or alter any of the grounds at the time of hearing of appeal.”
2. Succinctly stated, the assessee had filed his return of income for Assessment Year 2017-18 on 31-03-2018, declaring an income of Rs.2,65,500/-. The assessee’s return of income was initially processed under Section 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under the “Limited Scrutiny” category through the Computer Assisted Scrutiny Selection (CASS), and a notice under Section 143(2) of the Act was issued.
3. During the course of the assessment proceedings, the AO, on verification of the bank loan schedules of the assessee, observed that the assessee had availed two personal loans from the Central Bank of India, viz, (i). Loan Account No.3330811036 for Rs.3,72,000/-, sanctioned on 19-03-2014; and (ii). Loan Account No.3554133608 for Rs.4,80,000/-, sanctioned on 27-07-2016. It was further observed by the AO that the aforesaid loans had been repaid by the assessee, together with the interest payable thereon, during the demonetization period on 12-11-2016.
4. The AO called upon the assessee to explain the source of the cash deposits utilized towards repayment of the aforesaid loans. However, the assessee, despite having been afforded sufficient opportunity, failed to furnish any satisfactory explanation regarding the source of the cash deposits aggregating to Rs.5,07,481/- utilized towards repayment of the loan availed on 19-03-2014 together with the interest thereon. Accordingly, the AO, being of the view that the assessee had failed to satisfactorily explain the source of the aforesaid cash deposits, treated the amount of Rs.5,07,481/- as having been sourced out of his unexplained money under Section 69A of the Act. Accordingly, the AO vide his order passed under Section 143(3) of the Act, dated 18-12-2019, determined the income of the assessee at Rs.7,72,981/-.
5. Aggrieved with the assessment order, the assessee carried the matter in appeal before the Additional/JCIT (Appeals), who, however, finding no merit in the contentions advanced by the assessee, upheld the action of the AO.
6. The assessee, being aggrieved with the order of the Additional/JCIT (Appeals), has carried the matter in appeal before us.
7. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them.
8. Shri K A Sai Prasad, CA, Ld. Authorized Representative (for short, “AR”) for the assessee, at the threshold of hearing, submitted that the present appeal has been filed with a delay of 104 days. Elaborating on the reason leading to the delay, the Ld. AR has drawn our attention to the affidavit of the assessee dated 22-04-2026. The Ld. AR submitted that the delay had occurred solely because of the failure on the part of the assessee’s earlier counsel to inform the assessee about the dismissal of his appeal by the CIT(A), as a result whereof he had remained totally unaware of the same.
9. Elaborating on his submissions, the Ld. AR submitted that the assessee had been forwarding all the communications and documents received by him to his then counsel and was under a bona fide belief that the matter was being duly pursued. However, the said counsel neither informed the assessee about the dismissal of the appeal by the Additional/JCIT (Appeals) nor advised him to avail the statutory remedy of filing a further appeal before the Tribunal.
10. The Ld. AR submitted that it was only upon receipt of an email dated 22-12-2025 and a communication dated 03-01-2026 from HDFC Bank Ltd., informing the assessee that the balance lying in his bank account had been remitted to the Income-tax Department pursuant to attachment proceedings initiated under Section 226(3) of the Act by the ITO, Ward-1, Nandyal, that he became aware that his appeal before the first appellate authority had already been dismissed. The Ld. AR submitted that immediately thereafter the assessee consulted one of his customers, viz., Shri Anil Kumar, Chartered Accountant, who advised him to approach a tax consultant at Hyderabad for filing an appeal before the Tribunal. Acting upon the said advice, the assessee promptly engaged another counsel, who filed the present appeal before the Tribunal on 12-01-2026. The Ld. AR submitted that as the delay in filing the present appeal was neither deliberate nor attributable to any negligence or lackadaisical conduct on the part of the assessee but had occurred solely because of the lapse on the part of his earlier counsel, the same, in all fairness and in the interest of justice, be condoned.
11. Per contra, Shri K Prasad, Ld. Senior Departmental Representative (for short, “DR”) opposed the seeking of condonation of the delay by the assessee appellant. It was submitted that the assessee had failed to furnish any justifiable cause explaining the delay of 104 days in filing the present appeal and, therefore, the same did not merit condonation.
12. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives of both parties on the issue of delay involved in filing of the present appeal and perused the material available on record.
13. Admittedly, the present appeal has been filed with a delay of 104 days. As observed by us hereinabove, it is the assessee’s claim that after disposal of his appeal by the Additional/JCIT (Appeals), his then counsel failed to intimate him about the dismissal of the appeal and, consequently, no appeal could be filed before the Tribunal within the period prescribed under the Act. The assessee had deposed in his affidavit that it was only upon receipt of an email dated 22-12-2025 and a communication dated 03-01-2026 from HDFC Bank Ltd., informing him that the amount lying in his bank account had been remitted to the Income-tax Department pursuant to attachment proceedings initiated under Section 226(3) of the Act by the ITO, Ward-1, Nandyal, that he came to know about the dismissal of his appeal. Further, it is stated by the assessee that immediately thereafter, he consulted another professional and, acting on the advice so received, filed the present appeal before the Tribunal.
14. In our view, on consideration of the explanation furnished by the assessee, duly supported by his affidavit, we find no reason to disbelieve the same. The Revenue has also not placed any material on record to demonstrate that the averments made in the affidavit are incorrect or that the delay was deliberate or intentional. We are, therefore, satisfied that the delay had occurred primarily because of the omission on the part of the assessee’s earlier counsel to intimate him about the dismissal of the appeal within the prescribed period and not because of any mala fide or deliberate conduct on the part of the assessee. At the same time, we are of the considered view that a litigant is expected to exercise reasonable diligence in pursuing his legal remedies. Although the assessee before us cannot be held solely responsible for the delay occasioned by the lapse on the part of his earlier counsel, but he too ought to have remained vigilant regarding the status of his appeal. Therefore, some degree of lack of vigilance on his part also cannot be completely ruled out.
15. Considering the totality of the facts and circumstances of the case, and bearing in mind that a liberal and justice-oriented approach ought to be adopted while dealing with an application seeking condonation of delay, as observed by the Hon’ble Supreme Court in Vidya Shankar Jaiswal v. CIT [(2024) 166 taxmann.com 37 (SC)], we are of the considered view that the delay of 104 days involved in filing the present appeal deserves to be condoned. However, keeping in view the lack of due vigilance on the part of the assessee, we deem it appropriate to condone the delay subject to payment of costs of Rs.5,000/-. Accordingly, the delay of 104 days in filing the present appeal is condoned subject to the condition that the assessee shall deposit a sum of Rs.5,000/- with the Prime Minister National Relief Fund within a period of 15 days from the date of receipt of this order and furnish a copy of the receipt before the Registry of the Tribunal. Subject to compliance with the aforesaid direction, the appeal is admitted for adjudication on merits.
16. Coming to the merits of the case, we find that the AO had treated the cash deposits of Rs.5,07,481/-, utilized by the assessee towards repayment of the loan obtained from the Central Bank of India, as the assessee’s unexplained money under Section 69A of the Act on the ground that he had failed to explain the source thereof.
17. We find that, as it is a matter of fact borne from record that neither before the authorities below nor before us has the assessee placed on record any documentary evidence explaining the source of the aforesaid cash deposits, therefore, to the extent the AO had drawn adverse inference for want of supporting evidence, his action cannot be faulted. However, we are unable to persuade ourselves to subscribe to the view taken by both the lower authorities that the entire amount of Rs. 5,07,481/- was sourced out of the unexplained money of the assessee. Although the assessee has failed to substantiate the precise source of the cash deposits with cogent documentary evidence, it would be equally unrealistic and unreasonable to proceed on the premise that he had absolutely no cash available with him to source the said deposit. Considering the totality of the facts and circumstances of the case, as well as the normal course of human conduct and the likelihood of the assessee having some cash-in-hand available with him for meeting his day-to-day requirements, we consider it fair and reasonable to accept the availability of cash to the extent of Rs.1,00,000/-. Accordingly, the addition made by the AO under Section 69A of the Act is restricted to Rs.4,07,481/-.
18. We shall now deal with the grievance of the assessee that the AO had erred in subjecting the addition made under Section 69A of the Act to tax at the enhanced rate prescribed under the amended provisions of Section 115BBE of the Act.
19. We find that it is the contention of the Ld. AR that the amendment made to Section 115BBE by the Taxation Laws (Second Amendment) Act, 2016, enhancing the rate of tax, is prospective in nature and would, therefore, apply only from Assessment Year 2018-19 onwards. Consequently, according to the Ld. AR, the enhanced rate could not have been applied to the case of the assessee for the year under consideration, i.e., Assessment Year 2017-18.
20. We find substance in the Ld. AR’s contention, as the said issue is squarely covered by the judgment of the Hon’ble High Court of Rajasthan in the case of Deepak Maratha v. Union of India & Ors., CWP No.3625 of 2020, dated 27-05-2026. The Hon’ble High Court, after examining the scheme of the Taxation Laws (Second Amendment) Act, 2016 and the amended provisions of Section 115BBE of the Act, had concluded that although the amendment came into force with effect from 01-04-2017, the enhanced rate of tax could operate only prospectively and would, therefore, apply from Financial Year 2017-18, corresponding to Assessment Year 2018-19 onwards. The Hon’ble High Court further observed that the amending enactment does not contain any express provision conferring retrospective operation upon the amended provisions of Section 115BBE of the Act. At this stage, we deem it apposite to observe that the Hon’ble High Court of Kerala in Maruti Babu Rao v. ACIT, W.A. No.984 of 2019, has taken a contrary view and held that the enhanced rate of tax under the amended provisions of Section 115BBE would apply from Assessment Year 2017-18 itself.
21 We, thus, find that there are divergent views expressed by two Hon’ble High Courts on the issue before us. As per the settled position of law, in such a situation, and in the absence of any authoritative pronouncement of the Hon’ble jurisdictional High Court or the Hon’ble Supreme Court directly on the controversy involved, the view favorable to the assessee deserves to be adopted. We draw support for the aforesaid proposition from the judgment of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), wherein it was held that where two reasonable constructions of a taxing provision are possible, the one favorable to the assessee should ordinarily be preferred. We respectfully follow the view taken by the Hon’ble High Court of Rajasthan in the case of Deepak Maratha v. Union of India & Ors. (supra), being the view favorable to the assessee, and hold that the enhanced rate of tax prescribed under the amended provisions of Section 115BBE of the Act is not applicable to the assessment year under consideration. Accordingly, we direct the AO to compute the tax liability of the assessee on the addition of Rs.4,07,481/- sustained by us hereinabove by applying the rate of tax as applicable under the unamended provisions of Section 115BBE of the Act.
22. In the result, the appeal filed by the assessee is partly allowed in terms of our aforesaid observations.
Order pronounced in the open court on 29th July, 2026.
