Addition under Section 69 read with Section 115BBE – Cash Deposits During Demonetisation – Rate of Tax Prior to 01.04.2017 – ITAT Chandigarh Decision

 

Shri Dilbag Singh v. ITO Ward-1, Kaithal

ITA No. 924/Chandi/2025

Order dated 01 December 2025 (AY 2018-19)

ITAT Chandigarh Bench

 

The Chandigarh Bench of the Tribunal was called upon to examine the validity of an addition made under section 69 in respect of cash deposited during the demonetisation period and, more importantly, the applicability of the enhanced tax rate under section 115BBE which was amended with effect from 01 April 2017.

 

The assessee had deposited Rs 14.19 lakh in old currency notes during November–December 2016. In the assessment framed under section 144, the Assessing Officer accepted the explanation relating to agricultural income but held that the balance amount of Rs 3.19 lakh remained unexplained. This sum was consequently brought to tax under section 69 read with section 115BBE. The Commissioner (Appeals) sustained the addition after observing that the assessee had failed to substantiate the source of the disputed amount.

 

Before the Tribunal, the assessee did not appear, and no additional evidence or material was furnished to contradict the factual findings of the lower authorities. The Tribunal therefore confirmed the addition of Rs 3.19 lakh as unexplained money under section 69.

 

However, the Tribunal proceeded to consider whether the enhanced tax rate of 60 percent introduced by the amendment to section 115BBE could be applied to transactions representing cash deposits made before 01 April 2017. For this purpose, the Tribunal relied upon the judgment of the Madras High Court (Madurai Bench) in S M I L E Microfinance Ltd v ACIT (WP MD No 2078 of 2020, order dated 19 November 2024). The High Court had examined the legislative history and the Statement of Objects and Reasons of the Taxation Laws (Second Amendment) Bill, 2016, which introduced the higher rate of tax under section 115BBE. After analysing the context of demonetisation and the policy intent underlying the amendment, the Court held that the higher rate of tax of 60 percent is prospective and can only be applied to transactions occurring on or after 01 April 2017. For transactions prior to that date — including deposits made during the demonetisation window of 08 November 2016 to 30 December 2016 — only the pre-existing rate of 30 percent is applicable.

 

The Tribunal noted that the cash deposits of the assessee pertained entirely to the demonetisation period of November–December 2016 and therefore fell before the cut-off date of 01 April 2017. Following the binding reasoning of the Madras High Court, the Tribunal held that although the addition under section 69 was to be sustained, the enhanced rate under section 115BBE could not be applied. The Assessing Officer was accordingly directed to apply only the normal rate of tax as was in force prior to the amendment.

 

The appeal was thus partly allowed, with the quantum addition sustained but the higher tax rate under section 115BBE restricted to 30 percent.