S. 115BBE : Taxation of unexplained income-Amendment enhancing tax rate from 30% to 60% w.e.f. 01.04.2017 cannot be applied retrospectively to income of F.Y. 2016-17-Law applicable on the first day of the assessment year governs assessment-Enhanced tax and consequential penalty provisions are prospective-Demonetisation- Cash deposited in Bank-Charge of tax- The enhanced rate of tax @60% came into force on 01.04.2017 and can apply only from that date, i.e. for financial year 2017-18 onwards. [S. 4, 68, 69 to 69D, 271AAC, Taxation Laws (Second Amendment) Act, 2016, Art. 226)
The Rajasthan High Court held that the amendment made by the Taxation Laws (Second Amendment) Act, 2016, enhancing the rate of tax under section 115BBE from 30% to 60% and introducing section 271AAC for the levy of penalty, though enacted on 15.12.2016, could not be applied to unexplained income relating to F.Y. 2016-17. The assessee, engaged in the jewellery business, had deposited cash during the demonetisation period, and the Assessing Officer treated the deposits as unexplained income under section 68 and subjected the same to tax at 60% under the amended section 115BBE along with a consequential penalty. Allowing the writ petition on the constitutional challenge, the Court held that under section 4 of the Act, the law applicable for an assessment year is the law in force on the first day of that assessment year and, in the absence of express retrospective operation, a substantive amendment creating a higher tax burden cannot be applied to transactions or income of an earlier period. Relying on the principle laid down by the Supreme Court in Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC), the Court observed that amendments coming into force after the commencement of the relevant assessment year do not govern that year’s assessment unless the legislature expressly provides otherwise. The enhanced rate of tax @60% came into force on 01.04.2017 and can apply only from that date, i.e. for the financial year 2017-18 onwards. The Taxation Laws (Second Amendment) Act, 2016, contains no express language for its retrospective effect of section 115BBE. Accordingly, the enhanced rate under section 115BBE and the consequential penalty provisions were held to be prospective and not applicable to unexplained income relating to F.Y. 2016-17 (AY. 2017-18) (DB CWP 3625 of 2020, dt. . 27 -5 -2026 )
Deepak Maratha v. UOI (Raj.)(HC) [2026:RJ-JD:26319-DB]. www.itatonline.org .
(Coram : Hon’ble Mr. Justice Arun Monga and Hon’ble Mr. Justice Sunil Beniwal)