What defense the assessee should take when the addition is made in AY 2017-18 in relation to Demonetization period

Preamble

On 30/10/16 it was a day of Dipavali Festival. It is the tradition in Gujarat and other states to restart the business after 5 days of Dipavali Festival i.e. on Labhpancham. As the fifth and sixth day after Dipavali were not auspicious, the business was restarted from 07/11/2016.
On 08/11/16 after banking hours, the Prime Minister announced at 8:00 p.m. the decision of his Cabinet to cancel currency notes of Rs.1000/- and Rs.500/- after midnight i.e. after 12 p.m. 09/11/16 was declared to be a bank holiday. The time for deposit of cancelled currency notes was given upto 30/12/16. It was learnt from the news papers that in hurry many persons bought Gold or invested in immovable properties etc. of their cancelled currency notes.
In the beginning people were scared to go to the banks for deposit of the cancelled currency on account of theft of money, long queue in the banks etc.
While framing the assessment order for 2017-18, in most of the cases the addition has been made of the entire amount deposited in the banks during this demonetization period without considering the facts of the case. In many cases assessee could prove the possession of such notes by giving cogent evidences, still the addition has been made i.e.
1. Where there was enough cash on hand on 31/03/16 or 08/11/16.
2. Where there was withdrawal from the bank and redeposit of the withdrawn amount during demonetization.
3. There was enough cash on hand as well as income earned before demonetization but the return of income was filed late for AY 2017- 18.
4. In some cases, cash deposited in the bank during the entire year was added.
5. In some cases, the assessee who is engaged in the business of E-wallet i.e. transfer of money in the cases of small workers who are not having PAN, Aadhar Card and the amount is transferred by charging token commission as per RBI Rules and Guideline, the entire cash deposited was added.
6. In the cases of Assessees engaged in the business of Petrol/ Diesel where there was extension by circulars for accepting cancelled currency notes.
7. Where the assessee was engaged in the business of e-booking i.e. Air ticket, hotel booking, site seeing booking, car rental etc. where the payment was received by cash from the concern parties, which was deposited in the bank account during demonetization period.
8. Amount received as sale consideration on 08/11/16 from 8:00 p.m. to 12:00 p.m. or the sale took place before 08/11/16 and the payment was received on 08/11/16 and deposited in the bank account by cash.
9. Where the assessee is NRI who used to visit India regularly since many years and the foreign currency was exchanged on the Airport (for which there was no proof) and such NRI having no other income except investment income in India and cash was deposited in his absence.
10. Where the assessee was having only salary income but maintaining books of accounts regularly but there being no provision of uploading balance sheet in case of salaried persons and cash available with such person and cash of other family members was deposited in the account of the salaried person.
  There may be other such reasons where the transaction of the person was genuine but cash was deposited on account of demonetization.
Addition has been made u/s.68 where the books of accounts are maintained and u/s.69 where the books of accounts are not maintained.
Relevant decisions are given here under in relation to such addition.
Decisions in relation to various issues
1. Decision in relation to redeposit of amount withdrawn from the bank Where the amount was withdrawn from the bank and redeposited in the bank account during demonetization period the following decisions can be relied.
  1. Jaya Aggarwal v. ITRO 165 DTR 97 Delhi TS-5175-HC-2018(Delhi)-O AY 1998-99 Date of order 13/03/18
    Addition u/s.68 – Withdrawal for acquisition of property returned after seven months was deleted.
    
    HC held that addition u/s 68 of amount re-deposited was unjustified, noting that one should not consider and reject an explanation as concocted and contrived by applying the prudent man’s behavior test; Principle of preponderance of probability as a test is to be applied and is sufficient to discharge the onus. Probability here means likelihood of anything to be true.
  2. Moongipa Investment Ltd. v. ITO 70 DTR 132 ITAT Delhi
    While deciding this case, ITAT relied on the decision of ACIT v. Baldevraj Charia & Others ITAT Delhi. The deposit out of withdrawal was within 15 months from the date of withdrawn. The addition was made because there was time gap between the date of withdrawal and date of deposit. It was held that the amount cannot be added.
  3. ACIT v. Baldevraj Charla & ORS 121 TTJ 0366 Delhi TS-5893-ITAT-2008(Delhi)-O Date of order 29/12/08
    ITAT – Merely because there was a time gap between the withdrawals and corresponding cash deposits, the assessee’s explanation cannot be rejected, and hence the addition confirmed by the learned CIT(A) is not correct.
  4. Gurpreet Singh v. ITO 40 ITR 467 Chandigarh ITAT TS-5480-ITAT-2015(Chandigarh)-O
    ITAT noted that nothing was brought on record that the amount was utilized by the assessee which was withdrawan from the bank account. ITAT relied on jurisdictional HC decision reported in in the case of Shiv Charan Dass [1980] 126 ITR 263 (P&H), and restored the issue to the AO’s file with directions to re- decide this issue by giving the assessee a reasonable and sufficient opportunity of being heard and to pass a reasoned order on the assessee’s submissions.
  5. Sudhirbhai Pravinkant Thaker v. ITO 44 ITR 135 Ahmedabad ITAT TS-6605-ITAT-2015 (Ahmedabad)-O
    Addition cannot be made on speculation that the amount might have been utilized for any other purpose and was not available with the assessee for making the deposits. It is not open to the lower authority to make the addition on the basis that the assessee failed to explain the source of deposits.
  6. DCIT v. Veena Avasthi Lucknow ITAT TS-10298-ITAT-2018 (Lukhnow)-O ITAT held that there is no law in the country which prevents citizens from frequently withdrawing and depositing his own money.
2. Where there was time gap of redeposit
  1. Gordhan v. ITO Delhi ITAT TS-6602-ITAT-2015(Delhi)-O
    ITAT held that no addition can be made on the ground of time gap of 5 months between the date of cash withdrawal and re-deposit, unless the AO demonstrates that the amount in question has been utilized for any other purpose.
  2. DCIT v. Nikhil Nanda Delhi ITAT ITA No. 3644/Del/2013
    AY 2009-10 Date of Order 18/03/2015
    
    Relying on the decisions of ACIT vs. Baldevraj Charla, 121 TTJ (Del) 366 and Moongipa Investment Ltd. vs. ITO in ITA No. 2605/Del/2007. The case was decided in favour of the assessee.
3. No law prohibits to keep bank withdrawal in cash
  1. ITO v. Mrs. Deepali Sehgal Delhi ITAT TS-6737-ITAT-2014(Delhi)-O
    Date of order 05/09/14
    
    It was held by ITAT that nothing was mentioned by the AO that the amounts withdrawn were utilized anywhere else. It is not mandatory under any law of the land that an individual has to keep his/ her savings in the bank account only and not as cash in hand.
  2. ITO v. Baburao K Pisal Mumbai ITAT TS-6767-ITAT-2014(Mumbai)-O
    ITAT held that source of deposit in the bank account is important and there is no prohibition to keep cash out of bank withdrawal.
    
    No provision in the Act requiring that cash once withdrawn has to be re- deposited immediately if not utilized. Once the source of these cash deposits is not in doubt, the same cannot be termed as unexplained.
4. Addition in relation to deposit by cash in the bank account out of cash on hand on 01/04/2016
  Judgment in relation to this issue Asst. CIT v. Siddhartha Bhargava ITA No.2508/Kol/2017/ITAT Kolkatta
  
  Assessee made deposit out of cash balance brought forward from earlier year hence the addition was deleted.
5. Addition made when return of income filed late
  1. CBDT issued circular dated 24/11/17 and directed the I T Authorities to keep in mind the issues at the time of framing the assessment order i.e.
    - When cash on hand is increased by filing a revised return by increasing cash sales and reducing closing stock.
    - When the return of income is filed for the year ended on 31/03/15 and 31/03/16 late and in which substantial cash on hand is shown.
  2. In many cases it is noticed that assesses are habitual defaulters in filing their return late every year. In many cases it is noticed that the return is filed before few days of time barring limit. In such cases additions are made on account of this circular.
  Judgment :
  
  Nand Kumar Taneja v. ITO TS-8479-ITAT-2019(Delhi)-O
  
  Cash deposit during demonetization period but returns were filed in time. ITAT held in assessee’s favour, it held that mere cash deposit in bank account after the date of demonetization, i.e., 08.11.2016 does not mean that the cash- in-hand as on 31.3.2015 and 31.03.2016 duly shown in the balance sheet and disclosed to the department in the respective income tax returns filed much earlier, is unexplained.
  
  Note : As per my view even if the returns for earlier years and current year (AY 2017-18) were late, it can be said that the assessee is a habitual defaulter but when the source of income is accepted, cash deposited out of the income cannot be rejected.
6. Addition out of cash receipt from business and cash on hand
  1. Cash available out of cash sales before Dipavali and cash sales on 7th and 8th of November as well as on the date of announcement of cancellation of currency notes i.e. on 8th November. Many assesses opened the shop from 8:00 p.m. to 12:00 p.m. still additions were made.
  2. When the assessee furnished necessary proof in the form of bill of sales for the period before Dipavali and after Dipavali, proof of payment of VAT on such sales and also furnished quantity account which proved that the stock was reduced on account of sales, still additions were made.
    As per section 285BA if the sale consideration is less than Rs.2 Lakh, the assessee is not required to furnish the information to the I T Department. In such circumstances how the sales can be denied? Comparison of sales by the assessing officer with the sales made in the previous year and current year and if the sales were higher than previous year, the additions were made.
  3. It is known that in cash sales / cash memo, name and address of the purchaser is not required to be mentioned. This was held in the case of 75 ITR 33 Bombay
    Jessaram Fetehchand (R.B.) (Sugar Dept.) v. CIT
    
    Thus assessee committed no mistake in not writing the name of the buyer if the sale amount was less than Rs.2 Lakh.
  4. When the assessee is liable to audit and there is no qualification by the Chartered Accountant in the Audit report, then why the addition should be made rejecting such books of account?
  5. In many cases it is noticed that VAT assessment orders are received in which sales and purchases of the assessee are accepted. Thus, when the purchases and sales of the assessee have passed through Lab Test of VAT, then the assessing officer has to accept the trading result of the assessee.
  6. ACIT v. M/s. Hirapanna Jewellers Visakhapatnam Bench ITA No. 253/ Viz/2020 AY 2017-18
    Facts of this case are given in details as it is relevant in many cases.
    - In this case the appellant deposited Rs.5720000/- of high denomination notes in the bank.
    - The amount represented cash sales
      + advance received on 08/11/16 on the day of demonitisation before 12:00 pm.
    - No KYC was obtained because the bills amount was less than Rs. 2 Lakh.
    - As per plea of the department even on the day of Dhanteras, Akshaytritya and Ughadi festival,the cash sales were between 1.5 to 2 Crore.
    - The assessee issued 270 bills on 08/11/16 between 7:50 to 11:58 am
  which was of about Rs.4.71 Crore.
  - CCTV footage was not available as the search was after 15 days of deposit of money.
  - It was the view of the department that bills prepared were black money of assessee and his friends.
  - It was the plea of the assessee that on account of demonetization there was tremendous rise in sale.
  - In appeal it was plea of the assessee that in entire Vishakhapatnam there was tremendous rush in the shops of Goldsmiths on account of demonetization. Everybody was interested in exchanging old currency notes against gold.
  - Assessee disclosed the receipts as business receipt which was offered for tax hence section 68 was not applicable. If addition was made u/s.68, it would amount to double taxation.
  - The assessee was not having any other income except business income.
  - The assessee relied on the following decisions
    1. CIT v. Vishal Export Overseas Ltd Gujarat High Court
      ITA No.2471/2009 dated 03/07/12
    2. CIT v. Kailash Jewellers House ITA No.613/2010
  - The assessee produced newspaper cutting and stated that he was a reputed dealer in the city.
  - It was revenue receipt and offered for tax.
  - CIT(A) relied on the above two Gujarat High Court decision and held against the department stating that decision given in the case of Durgaprasad More and Sumati Dayal were not applicable in the case of the assessee. The amount was credited in the books of the assessee so it cannot be said that it was unexplained deposit. Thus, the addition was deleted by CIT(A).
  - In the appeal by the department in ITAT, it was the argument of the department that it was not possible to prepare 270 bills of 4.71 Crore in a short span of time.
  - It was a sham transaction.
  - Dr. relied on the following decisions
    1. S L Kale Khan 50 ITR 1 SC
    2. P Mohankala 161 Taxman 169
    3. Deviprasad 72 ITR 194 SC
    4. Oceanic Products Exporting Co. v. CIT 241 ITR 495 Kerala
    5. Anil Kumar Singh v. CIT 84 ITR 307 Calcutta
  - Assessee reiterated the argument that it was double taxation of income and the books of accounts were accepted.
  - Section 68 explain
  - In this case the assessee explained source which was in the form of
  sales. Bills of sales were prepared. This amount was offered as revenue receipt. Stock register was maintained by the assessee and no difference was found even at the time of survey. Stock will increase on account of purchases and decrease on account of sales. If no mistake is found in the stock register, then sales have to be accepted. AO accepted sales. AO as well as DDIT accepted books of accounts of the assessee. Audit u/s.44AB was carried out in which details of stock was mentioned.
  - Finding of ITAT on page 12
  - There was sufficeint cash balance on hand on account of sales. Reliance was placed on the judgement of CIT v. Associated Transport Pvt Ltd 212 ITR 417. As per this judgement there was sufficient cash than the amount deposited in the bank so it is not undisclosed source. It cannot be called concealed income.
  - Another case of cash on hand reported in Lalchand Bhagat Ambica Ram v. CIT 37 ITR 288 SC was
    considered. It was held inthis case that when the books of accounts are not challenged and books of accounts are genuine no addition can be made.
  - Laxmi Rice Mills v. CIT reported in 97 ITR 258 Patna (High denomination notes decision)
    As held in this case, when it is not proved that the books of accounts of the assessee are not genuine then the source of income is well disclosed.
    - Decision relating to opening stock
      PCIT 20 Delhi v. Ashitkumar reported in 124 Taxman.com 123 Delhi
      
      In this case ITAT decided that when the sales are made out of opening stock then the amount cannot be considered as income from other sources. In this case even in the previous years stock purchases and sales were accepted.
    - Judgements given in the case of Durgaprasad More and Sumati Dayal were decided on the basis of circumstancial evidences and in absence of direct evidence, the decisions were given in favour of the department. While in the case of the assessee, assessee produced proof of stock, sales and proved that there was sufficient stock with the assessee. Thus, the case of the assessee was different from the above two cases and distingvisable.
  In the case of P Mohankala 161 Taxman 169 and Deviprasad Vishwanath 72 ITR 94 SC, in both the cases cash was not offered for income hence both the cases were decided against the assessee but these cases were not applicable in the case of the assessee.
  
  Thus the judgment was given in favour of the assessee.
  
  There was no name, phone no. or address of the purchaser as the same was below Rs.2 Lakh and not mandatory as per I T Act.
7. Business transaction only GP addition
  1. When the assessing officer disagree with the amount of cash deposit during demonetization period by the assessee, then at the most, he can reject the trading result and make GP addition by passing a speaking order. This was held in the case of Subhash Chand Sharma v. ITRO Agra ITAT TS-8323- ITAT-2019
  2. When the assessee sales his stock in trade and the assessing officer disagree with the sale consideration, in such cases, the entire sale consideration cannot be added. This was held in the case of ITO v. Diplomat Leasing & Finance Pvt Ltd, ITA No.5929/2010 Delhi, Date of pronouncement: 09.12.2011.
  3. When the assessing officer disagree with the sales of the assessee, the entire sale consideration cannot be added. The sale consideration includes cost of purchase. When it is not proved that even the purchases were made out of unaccounted money, only element of net profit out of such sales can be added. It was held in the case of Man Mohan Sadani v. Commissioner of Income-Tax reported 304 ITR 52 (MP). While giving this decision the MP High Court considered the decision given in the case of CIT v. President Industries [2002] 258 ITR
  654 (Guj) (para 4).
  - Thus when the assessee is able to prove that it was business transaction, then the assessee will not be required to pay tax as per section 115BBE.
Concept of Real Income Section 5 of the Income Tax Act
1. As per section 5 of the Income Tax Act which deals with scope of total income. As per wording of this section, income is taxable at the time of accrual, receipt or at the time of receivable.
2. Income Tax is levied on income earned by the assessee and not on sales.
3. Land mark decision given by Honorable Supreme Court in this regard can be relied by the assessee are given here under.

i. 46 ITR 144 S.C. CIT v. Shoorji Vallabh

As per this judgment, if the income does not result at all, there cannot be tax, even though book keeping entry is made about a “hypothetical income”, which does not materialize. A mere book keeping entry cannot be income, unless income has actually resulted.

ii. 225 ITR 746 S.C. Godhra Electricity Co. Ltd. v. CIT

As held in this case,no real income had accrued to the assessee-company in respect of those enhanced charges of electricity. As held by Tribunal that the claim at the increased rate as made by the assessee-company in the books represented only hypothetical income but not represent income which had really accrued to the assessee-company during the relevant previous years.

8. Courts decisions in relation to cancellation of currency notes

Mehta Parikh & Co v. CIT 30 ITR 181 SC
Supreme Court allowed the appeal of the assessee. Supreme Court found that on 12/01/1946 the assessee was having cash balance of Rs.69891/-. ITAT rejected explanation of the assessee for 30 notes on pure surmises. ITAT committed mistake while giving the judgment when it was not having any evidence and also failed to give any logic for confirming addition of Rs.30000/-. As the assessee gave reasonable explanation, addition of Rs.30000/- was deleted.
Kanpur Steel Co Ltd v. CIT 32 ITR 56 Allahabad
While giving the judgment High Court held that when the assessee accepted Rs.1000/- notes it did not know that it will be required to give explanation hence it failed to maintain records of such notes received. As the ordinance of cancellation of notes was issued, assessee was required to explain receipt of these notes. Explanation of the assessee was satisfactory. ITAT rejected explanation of the assessee for Rs.25000/- on the basis of doubt and presumption but it had no material to reject the claim of assessee. The addition was deleted and decision was given in favor of the assessee.
Gur Prasad Hari Das v. CIT 47 ITR 634 Allahabad
While giving this judgment, Allahabad High Court held that if the department presumed that it was the income of the assessee from other sources, the department has to give evidences for that. Either ITAT should accept the explanation of the assessee or give reasons for not accepting the explanation of the assessee. Thus the ITAT committed mistake while deciding this case.

The High Court gave judgment in favour of the assessee and deleted the remaining amount confirmed by ITAT.
Madhuri Das Narian Das v. CIT 67 ITR 368 Allahabad
This case pertains to AY 1946-47. By

ordinance of 1946 currency notes of Rs.1000/- were demonetized. Assessee deposited 28 notes of Rs.1000/- in the bank. Assessing officer added Rs.28000/- in the income of the assessee. CIT(A)

confirmed the order of assessing officer. ITAT accepted explanation of the assessee for 22 notes and confirmed addition of Rs.6000/-.

Allahabad High Court decided the case in favour of the assessee and held that, ITAT passed the order on the basis of suspicious and conjecture which was not proper.
Mathurdas Gokuldas v. CIT 102 ITR 425 Bombay
In this case,assessee deposited 238 such

notes in the bank. Assessing officer added Rs.138000/- in the income of the assessee under the head income from other sources. Accounting year of the assessee was calendar year i.e. from 1st January to 31st December. As per provision in the I T Act, for making such addition, the accounting year to be considered was financial year.

The assessee deposited notes of Rs.1000/- on 19/01/46 which can be added for the FY 1945-46 relevant to AY 1946-47 while considering the accounting year of the assessee being calendar year, the assessing officer added this amount in AY 1947-48. Thus on technical ground the addition made in AY 1947-48 was deleted.
Nareshkumar Tulshan v. Fifth ITO 11 ITD 537 Bombay
This case was decided against the

assessee because the facts of the case were very bad. Assessee deposited

102 notes of Rs.1000/- in the bank. Explanation of the assessee was that it was out of cash balance of the company in which he was a managing director and the amount pertained to business activities of previous years.

Survey operation was carried out on 23/09/80 in the business premises of the assessee and his statement was recorded during survey operation. In the statement he explained that the amount was withdrawn from the firm in which he was a partner. Statement of the assessee was not consistent hence appeal was dismissed by CIT(A) and ITAT. Even during hearing before ITAT assessee could not prove that the amount belonged to the firm.
Narendra G Goradia v. CIT 234 ITR 571 Bombay HC
In this case the assessing officer accepted

36 notes and remaining 164 notes were not accepted and made addition of Rs.164000/- u/s.68. CIT(A) reduced the addition from Rs.164000/- to Rs.104000/-.

It was plea of the assessee before ITAT that he was a commission agent he was required to pay freight on behalf of different parties which was reimbursed by his clients. This explanation was not found satisfactory by ITAT and it confirmed the order of CIT(A).

High court accepted the plea of the assessee on the basis of facts of this case and decided the case in favour of the assessee.

There is no provision in the law or in practice of business to maintain list of currency notes received against sales and its denomination. This is also not practicable. Such amount cannot be added u/s.68.
Sreelekha Banerjee and Others v. CIT 49 ITR 112 SC
The assesseewas a colliery and a coal raising contractor. The assessee

deposited 51 notes of Rs.1000/-. In her explanation she stated that she was required to pay 30000/- to 40000/- exps. every week hence this amount was kept cash with her. This amount was out of cash on hand which was kept at the head office of the assessee.

This explanation of the assessee was not accepted by the AO.
1. There was contradiction in the statement of the assessee that this amount was cash on hand.
2. There was no detail regarding withdrawal from different banks and payments made from such withdrawals.
3. Bank accounts were not furnished by the assessee.
4. No details were maintained for personal exps. by the assessee.
5. Assessee was having business at different places and having her bank account there, still why the cash was kept at head office. There was no reply by the assessee of this query.
  In appeal proceedings it was noticed that when the amount of Rs.51000/- was deposited in the bank, on the same day she withdrew Rs.45000/- from the bank. Thus the addition of the assessing officer was confirmed.
  
  The Supreme Court decided the case against the assessee and held in its judgment that there were not enough evidences regarding assessee having Rs.51000/- demonetized notes in her cash on hand and looking to the facts of the case the addition was confirmed and the case was decided against the assessee.
Sri Sri Nilkantha Narayan Singh v. Commissioner Of Income-Tax, Bihar And Orissa
20 ITR 8 PATNA

In this case the assessee furnished details of withdrawal for last 7 years and explained that the high denomination notes were out of withdrawal which was available with him. It was held that in such circumstances, explanation of the assessee should be accepted.

9. Taxing of income u/s.115BBE by Circular in the middle of the year. How far it is legal ?

For the first time from AY 2013-14 section 115BBE was introduced. AS per this section when the addition is made u/s.68 and 69A to 69D, tax will be levied at 30%.
On 15/12/16 by noitification this rate was increaded from 30% to 83.25% (I T + Surchage etc.)
If the material / goods were sold before 15/12/16 but the payment was received in cash after 15/12/16 whether the assessee will be hit by this section ?
When the bill was issued, VAT was recoved from the buyer and deposited in the account of Government and the stock was reduced.
In many case VAT assessment orders are passed and all the sales and purchased of the dealer are accepted. Thus, it has passed the testing laboratory of Government Department.
When one department has accepted the transactions of the assessee, whether the other Government department can reject such transactions?
Certain decisions in this regard are given here under :

CIT, West Bengal v/s. Isthmian Steamship Lines 20 ITR 572 SC
Date of Decision: 12 November 1951

In this case the issue was regarding carry forward of unabsorbed depreciation. Unabsorbed depreciation for AY 1938- 39 was carried forward and claimed to be allowed to be carried forward for subsequent years.

Amendment made in the ACT wef 01/04/1940 in relation to carry forward of depreciation was applicable for AY 1940-41. Thus, it was held that unabsorbed depreciation from year 1939-40 could be carried forward for subsequent assessment years. Appeal of the department was dismissed.
CIT, Bombay v. SCINDIA Steam Navigation Co Ltd. 42 ITR 589 SC
Date of Decision: 06 April 1961

In this case the issue was regarding section 10(2)(vii) of the I T Act 1922. Excess compensation was received for the loss of machinery or plant in respect of which depreciation was allowed. The question was regarding applicability of section 10(2)(vii) whether the amendment made was retrospective?

It was held by Honorable Supreme Court that the fourth proviso to section 10(2)(vii) inserted by the Income-tax (Amendment) Act, 1946, which came into force on May 5, 1946, was not retrospective and was not in force on April 1, 1946, and, therefore, did not apply to the assessment for the assessment year 1946-47.
Karimtharuvi Tea Estates Ltd Kottayam v. State of Kerala 60 ITR 262 SC
Date of Decision: 15 December 1965

The issue in this case was relating to Section 1(3) of Kerala Surcharge on Taxes Act, 1957. It was held that any amendment in the Act which come into force after the first day of April of a Financial year do not apply to the assessment for that year, even if the assessment is actually made after the amendment come into force. Act came into force on 1-9-1957. Act not being retrospective in operation, it cannot be regarded as law in force at the commencement of the year of assessment 1957-58. Act not applies to assessee in assessment year 1957-58.
CIT(CENTRAL)-I, New Delhi v. Vatika Township Private Limited 367 ITR 466 SC
Date of Decision: 15 September 2014

In this case the issue was regarding charging surcharge in block assessments which was introduced by Finance Act 2002 for the first time. The levy was not applicable to block assessments pertaining to period prior to 01/06/2002. The amendment was not retrospective and levy could not be imposed for the period prior to 01/06/2002.
Gautam Sarabhai and Others v. Commissioner Of Income-Tax, Gujarat 52 ITR 921 (Guj)
December 7, 1962

In this case the issue was regarding taxing dividend income. Definition of dividend u/s. 2(6A)(C) was amended by Finance Act 1955. As per amendment distribution of dividend to shareholders out of accumulated profit was considered as dividend and made subject to tax.

Thus, this provision was applicable for AY 1955-56. Accounting year of the assessee was calendar year 1954. It is a settled law that the Income Tax Act as amended at the date of the relevant Financial act, applies for the purpose of assessment and any alteration which comes into force on the 1stof April of a Finance year must apply to the assessment for that year.

Conclusion

In this article I have tried to cover only certain issues and limited decisions due to constrain of space. Decision against the assessee may be there. Every case is to be looked from the fact of each case.

I am thankful to the organizers for giving me this opportunity to share my views. I specially thank my dear friend Mr. Samir Jani to write the article which will be useful in the appellate proceedings as most of the appeals relating to demonitisation period are not heard or partly heard.