ITAT Bangalore: ₹11,65,500 Cash Deposit Explained, Section 115BBE Cannot Apply Retrospectively to AY 2011-12

Case Overview

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) delivered a split ruling in the case of Yeslur Gangadharappa Vasanth Kumar Vs ITO (ITAT Bangalore), pertaining to Assessment Year 2011-12. The Tribunal granted partial relief to the assessee in connection with an addition of ₹15,56,000 made on account of unexplained cash deposits in an HDFC Bank account. While ₹11,65,500 of the total deposits was accepted as adequately explained, the remaining balance was sent back to the Assessing Officer for fresh examination. In a separate but significant ruling, the Tribunal categorically held that Section 115BBE of the Income Tax Act, 1961 cannot be applied to AY 2011-12, as the provision was not in existence during that assessment year.

This order carries important implications for assessees facing unexplained cash deposit additions, underscoring two critical principles: the necessity of documentary evidence to connect cash sources with subsequent deposits, and the impermissibility of applying provisions of law that were not in force during the relevant assessment year.

Background: How the Dispute Originated

Return Filing and Reopening

AIR information available with the department revealed that the assessee had earned salary income of ₹13,50,041 but had not filed his income tax return for AY 2011-12. After the assessee failed to respond to a notice issued under Section 148 of the Income Tax Act, 1961, the Assessing Officer issued a fresh notice under Section 142(1) on 16.07.2018. In response, the assessee filed a return declaring total income of ₹11,11,342.

Cash Deposits Come to Light

AIR information sourced from HDFC Bank disclosed cash deposits of ₹15,56,600 in the assessee's account. The Assessing Officer issued multiple notices — dated 17.11.2018, 14.12.2018, and 24.12.2018 — calling upon the assessee to furnish bank statements and supporting documentation explaining the source of these deposits.

The assessee did not comply with any of these notices. In the absence of any satisfactory explanation, the Assessing Officer treated ₹15,56,000 as unexplained income and made an addition to the assessee's total income. The assessment was framed under Section 143(3) read with Section 147 of the Income Tax Act, 1961, vide order dated 27.12.2018.

Assessee's Explanation Before the First Appellate Authority

Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee put forward the following explanations for the cash deposits:

• Withdrawals of ₹15,71,000 made during FY 2009-10 and ₹3,00,000 during FY 2010-11 were redeposited in the account for the purpose of purchasing property
• Sale proceeds from his wife's gold jewellery
• Cash loans received from friends and relatives

Why the CIT(A) Rejected the Explanation

The CIT(A) found these submissions unpersuasive and sustained the entire addition of ₹15,56,000 for the following reasons: