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
