1. Appeal against levy of higher tax rate u/s 115BBE on additional income declared during survey. (Para 1 , 2 )
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2026 Supreme(Online)(ITAT) 30901
INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
Manoj Kumar Aggarwal, AM, Rajesh Damodarlal Sharma, JM
Anshul Jain – Appellant
Versus
ITO – Respondent
ITA No.787/CHANDI/2026
Advocates:
For the Appellants/Petitioners: Kartikya Gupta, Manoj Kumar Goyal
For the Respondents: Jaisheere Sharma
For the Appellants/Petitioners: Kartikya Gupta, Manoj Kumar Goyal
For the Respondents: Jaisheere Sharma
The amendment increasing the tax rate under Section 115BBE to 60% is prospective from 01.04.2017; therefore, for AY 2017-18 (FY 2016-17), the normal applicable rates (30%) prevail.
Headnote:(A) Income Tax - Application of Higher Tax Rate - Section 115BBE - Amendment increasing tax rate to 60% effective from 01.04.2017 is prospective in nature and does not apply to Financial Year 2016-17 (AY 2017-18), where the law as it stood on 01.04.2016 (30% rate) governs the assessment. (Para 4)
(B) Rectification of Mistake - Section 154 - AO is not justified in invoking rectification to apply an enhanced tax rate retrospectively for periods prior to the amendment's effective date. (Para 3, 4)
Issues: Whether the higher rate of tax under Section 115BBE is applicable to additional income offered during survey for the Assessment Year 2017-18.
Legal Category Hierarchy
Table of Contents
2. Assessee argued income taxable at normal rate; Revenue applied higher rate under section 115BBE as amended. (Para 3 , 4 )
3. Amendment enhancing tax rate to 60% effective from 01.04.2017, applying prospectively from FY 2017-18. (Para 4 )
4. Amendment to section 115BBE enhancing tax rate applies prospectively from assessment year 2018-19. (Para 4 )
5. Appeal allowed; directed to levy tax on declared income at normal applicable rates. (Para 4 , 5 )
6. Does the enhanced tax rate under section 115BBE apply to assessment year 2017-18?
No, the amendment enhancing the rate to 60% came into force from 01.04.2017 and applies only prospectively from FY 2017-18 onwards. (Para 4 )
आदेश / O R D E R
RAJESH DAMODARLAL SHARMA (Judicial Member)
1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 13-01-2026 in the matter of rectification order passed by Ld. AO u/s 154 r.w.s 143(3) of the Income Tax Act,1961 on 15.03.2021. The sole grievance of the assessee is application of higher rate of tax u/s 115BBE. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
2. The assessee is resident individual carrying on a proprietary business under the name and style of M/s Navkar Furniture Palace. The business premises was subjected to survey u/s 133A on 14.09.2016 wherein the assessee offered additional income of Rs.61.19 Lacs which include Rs.5.10 Lacs for excess cash, Rs.36 Lacs for expenditure on construction / improvement of building and Rs.20 Lacs for stock discrepancy. The said surrender was incorporated in the return of income and Ld. AO accepted the returned income of Rs.72.52 Lacs without making any further additions.
3. However, Ld. AO initiated rectification u/s 154 on the ground that the additional income of Rs.61.10 Lacs was covered under the provisions of Sec.68 r.w.s. 115BBE and accordingly, the same would be taxable at higher rates as prescribed u/s 115BBE. The Ld. CIT(A) upheld the action of Ld. AO against which the assessee is in further appeal before us.
4. We find that this issue is covered in assessee's favor by the decision of Hon'ble Rajasthan High Court in the case of Deepak Maratha vs. Union of India [2026] 187 taxmann.com 27 (Rajasthan). In the said decision, the Hon'ble High Court held that the amendment enhancing the rate of tax under section 115BBE to 60% came into force with effect from 01.04.2017. Consequently, for the Financial Year 2016-17 (A.Y. 2017-18), the law as it stood on 01.04.2016 (prescribing a rate of 30%) governs the assessment. The enhanced tax rate of 60% applies only prospectively from F.Y. 2017-18 onwards. Similar is the decision of Hon'ble High Court of Madras in the case of S.M.I.L.E. Microfinance Ltd. V. ACIT W.P.(MD) No. 2078 of 2020 dated 19-11-2024 (Madras) wherein the Hon'ble Court held that the impugned statutory provision would come into effect on the transaction done on or after 01-04-2017 only. The aforesaid view has consistently been followed across various Benches of the Tribunal. Respectfully, following the same, we would hold that Ld. AO was not justified in applying higher rate of tax to impugned additional income. We order so. The Ld. AO is directed to levy tax on the declared income at the normal applicable rates.
5. The appeal stands allowed.
Order pronounced on 06.10.2026
