ITAT Grants Partial Relief on Cash Deposit Addition; 60% Tax Under Section 115BBE Ruled Inapplicable

The assessee, a Chartered Accountant, filed his return for AY 2017–18 declaring income of Rs. 18.75 lakh. During scrutiny, the Assessing Officer noticed cash deposits of Rs. 20.65 lakh in his bank account.

The assessee explained that the deposits represented accumulated past savings from earlier cash withdrawals, allegedly kept with his father. The explanation was rejected, and the entire amount was added as unexplained cash credit under Section 68 and taxed at 60% under Section 115BBE. The CIT(A) upheld the addition and tax rate.

Issue Before ITAT: Whether the cash deposits could be treated as unexplained under Section 68 despite the explanation of past savings, and
whether the enhanced 60% tax rate under Section 115BBE was applicable for transactions before 01.04.2017.

ITAT’s Order: The Tribunal admitted the additional legal ground on the applicability of Section 115BBE. On merits, it held that while the assessee’s claim of long-term cash accumulation was not fully substantiated, it was also unrealistic to assume that a regularly assessed professional had no cash in hand at all. The Tribunal allowed Rs. 5 lakh as reasonable cash in hand and sustained the balance addition of Rs. 15.65 lakh.

The Tribunal held that the amendment enhancing tax under Section 115BBE to 60% applies only to transactions on or after 01.04.2017. Since the deposits related to an earlier period, the sustained addition was directed to be taxed at 30% only. The appeal was thus partly allowed.

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