My demonetisation cash deposit was added for the year ended 31 March 2017 and taxed at 60% under section 115BBE. Can that rate reach income of that year?
The Rajasthan High Court held that it cannot. The rate in section 115BBE was raised from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016, which received assent on 15 December 2016 and came into force at once - but the amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. The law applicable to an assessment year is the law in force on the first day of that year, and a change made after a financial year has begun cannot govern the tax liability for that year unless it is expressly made retrospective. Nothing in the 2016 Act says section 115BBE is retrospective. Doubling a rate alters existing rights and is not a procedural or clarificatory change. So for the financial year 2016-17 the law in force on 1 April 2016 governs, at 30%, and the 60% rate applies from the financial year 2017-18 onwards; section 271AAC, which depends on section 115BBE, is prospective in the same way.
Decided by the High Court (High Court of Judicature for Rajasthan at Jodhpur, Division Bench - Arun Monga and Sunil Beniwal JJ) on 2026-05-27, reported as Neutral citation [2026:RJ-JD:26319-DB]. It bears on section 115BBE, section 68, section 271AAC, section 4, section 246A, section 195 (Act of 2025) of the Income Tax Act 1961, in Cash Credits & Unexplained Money, Penalty and How Tax Law Is Read matters.
The 60% rate is what turns a demonetisation addition from painful into ruinous, and once section 271AAC is added on top the charge on the addition approaches two-thirds of it. Thousands of assessments for the assessment year 2017-18 applied that rate to cash deposited between 8 November and 31 December 2016, on the footing that the amending Act had the President's assent on 15 December 2016 and so caught the year in which the deposits were made. This judgment says the assent date is not the test. The amending Act gave the rate change its own commencement of 1 April 2017, the law that governs an assessment year is the law in force on the first day of it, and doubling a rate is not the sort of change that can be read back into a year already under way. If you are still in appeal on an assessment year 2017-18 addition, the rate ground is worth taking whether or not the addition itself survives, because the two are separate and a reduction from 60% to 30% on a seven-figure addition is worth more than most of the arguments on the merits. Read it with Hirapanna Jewellers, which attacks the same assessments from the other end by showing that recorded cash sales should not have been added at all.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner's assessment for the assessment year 2017-18, the financial year 2016-17, added Rs 66,17,500 of cash deposited during demonetisation as an unexplained cash credit under section 68, and the assessment order dated 21 December 2019 charged it at 60% under section 115BBE as amended by the Taxation Laws (Second Amendment) Act, 2016. He came to the High Court by D.B. Civil Writ Petition No. 3625/2020, challenging the retrospective application and the constitutional validity of that amending Act so far as it raised the rate in section 115BBE from 30% to 60% and inserted section 271AAC, which carries a further penalty at 10%. The respondents' answer was that Parliament may legislate retrospectively in fiscal matters, and that since the amending Act received the President's assent on 15 December 2016, before the financial year 2016-17 ended on 31 March 2017, it governed that year. The matter was heard with a batch of other writ petitions raising the same question. Judgment was reserved on 23 March 2026 and pronounced on 27 May 2026 by a Division Bench of Arun Monga and Sunil Beniwal JJ at Jodhpur.
The Court set out seventeen numbered conclusions, the last of which states the correct legal position in four propositions. The law applicable to an assessment year is the law in force on the first day of that year, that is 1 April. Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made retrospective. The amendment to section 115BBE came into force on 1 April 2017, the first day of the financial year 2017-18; for the financial year 2016-17 the law in force on 1 April 2016, prescribing a rate of 30%, must govern, and the enhanced rate of 60% came into force on 1 April 2017 and can apply only from that date, that is for the financial year 2017-18 onwards. The Taxation Laws (Second Amendment) Act, 2016 contains no express language giving section 115BBE retrospective effect. The Court held that the amendment to section 115BBE and the insertion of section 271AAC are prospective and applicable with effect from 1 April 2017, and cannot be applied retrospectively to any transaction which took place before that date.
The Court began with the rule that fixes which law applies. Under section 4 the charge is on the total income of the previous year at the rate for the assessment year, and the settled position, taken from Karimtharuvi Tea Estate, is that the Act as it stands amended on the first day of a financial year must apply to the assessments of that year. That rule is what makes the assent date beside the point. It then read the amending Act's own commencement. The Taxation Laws (Second Amendment) Act, 2016 said it came into force at once, on 15 December 2016. But the operative amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. Parliament thus gave the Act one commencement date and the rate change another, and the Court took that as deliberate. A statute is presumed to operate prospectively unless a contrary intention clearly appears, and here the intention that appears is the opposite of retrospective. The Court then answered the argument that the change was merely clarificatory or procedural, and so could attach to a year already running. Raising the rate from 30% to 60% doubles the burden. A provision that doubles the tax plainly affects or alters existing rights, and a change of that kind cannot be treated as procedural or clarificatory, which is the only route by which it could have reached transactions completed before 1 April 2017. Section 271AAC followed the same course. The penalty is a penal provision operating in conjunction with section 115BBE; it cannot operate in isolation and is entirely dependent on a prior determination under that section. If the rate does not reach the year, neither does the penalty built on it. Two further strands of the judgment are worth carrying into an argument. The Court distinguished surcharge from the principal rate. Surcharge is derivative and consequential, a percentage addition to tax already computed, with no independent existence; an enhancement of the surcharge rate may therefore not create a new liability but only alter an existing one in quantum. An enhancement of the principal rate certainly does create a new liability. That distinction is the department's best foothold and it should be met rather than ignored. The Court also drew an inference from the drafting history. The Finance Act 2018 amendment to section 115BBE(2) was expressly given retrospective effect from 1 April 2017; the absence of any comparable declaration in the Taxation Laws (Second Amendment) Act, 2016 must be read as a conscious legislative choice in favour of prospective operation.
The amendment to Section 115BBE came into force on 01.04.2017 i.e. the first day of financial year 2017-18. For FY 2016-17, the law in force on 01.04.2016, prescribing a rate of 30%, must govern. 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
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Handle my notice → Ask a CA on WhatsAppThe Rajasthan High Court held that it cannot. The rate in section 115BBE was raised from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016, which received assent on 15 December 2016 and came into force at once - but the amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. The law applicable to an assessment year is the law in force on the first day of that year, and a change made after a financial year has begun cannot govern the tax liability for that year unless it is expressly made retrospective. Nothing in the 2016 Act says section 115BBE is retrospective. Doubling a rate alters existing rights and is not a procedural or clarificatory change. So for the financial year 2016-17 the law in force on 1 April 2016 governs, at 30%, and the 60% rate applies from the financial year 2017-18 onwards; section 271AAC, which depends on section 115BBE, is prospective in the same way. This was decided by the High Court (High Court of Judicature for Rajasthan at Jodhpur, Division Bench - Arun Monga and Sunil Beniwal JJ) and bears on section 115BBE, section 68, section 271AAC, section 4, section 246A, section 195 (Act of 2025) of the Income Tax Act 1961. It is reported as Neutral citation [2026:RJ-JD:26319-DB]. The 60% rate is what turns a demonetisation addition from painful into ruinous, and once section 271AAC is added on top the charge on the addition approaches two-thirds of it. Thousands of assessments for the assessment year 2017-18 applied that rate to cash deposited between 8 November and 31 December 2016, on the footing that the amending Act had the President's assent on 15 December 2016 and so caught the year in which the deposits were made. This judgment says the assent date is not the test. The amending Act gave the rate change its own commencement of 1 April 2017, the law that governs an assessment year is the law in force on the first day of it, and doubling a rate is not the sort of change that can be read back into a year already under way. If you are still in appeal on an assessment year 2017-18 addition, the rate ground is worth taking whether or not the addition itself survives, because the two are separate and a reduction from 60% to 30% on a seven-figure addition is worth more than most of the arguments on the merits. Read it with Hirapanna Jewellers, which attacks the same assessments from the other end by showing that recorded cash sales should not have been added at all. If it applies to you, the first step is this: Check the year before you argue about the rate. The decision is about income of the financial year 2016-17 and earlier - assessment year 2017-18 and before. For later years the 60% rate applied on its own terms until the Finance Act 2026 brought it down.
The petitioner's assessment for the assessment year 2017-18, the financial year 2016-17, added Rs 66,17,500 of cash deposited during demonetisation as an unexplained cash credit under section 68, and the assessment order dated 21 December 2019 charged it at 60% under section 115BBE as amended by the Taxation Laws (Second Amendment) Act, 2016. He came to the High Court by D.B. Civil Writ Petition No. 3625/2020, challenging the retrospective application and the constitutional validity of that amending Act so far as it raised the rate in section 115BBE from 30% to 60% and inserted section 271AAC, which carries a further penalty at 10%. The respondents' answer was that Parliament may legislate retrospectively in fiscal matters, and that since the amending Act received the President's assent on 15 December 2016, before the financial year 2016-17 ended on 31 March 2017, it governed that year. The matter was heard with a batch of other writ petitions raising the same question. Judgment was reserved on 23 March 2026 and pronounced on 27 May 2026 by a Division Bench of Arun Monga and Sunil Beniwal JJ at Jodhpur. The matter was decided on 2026-05-27 by the High Court (High Court of Judicature for Rajasthan at Jodhpur, Division Bench - Arun Monga and Sunil Beniwal JJ). On those facts the High Court held as follows. The Court set out seventeen numbered conclusions, the last of which states the correct legal position in four propositions. The law applicable to an assessment year is the law in force on the first day of that year, that is 1 April. Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made retrospective. The amendment to section 115BBE came into force on 1 April 2017, the first day of the financial year 2017-18; for the financial year 2016-17 the law in force on 1 April 2016, prescribing a rate of 30%, must govern, and the enhanced rate of 60% came into force on 1 April 2017 and can apply only from that date, that is for the financial year 2017-18 onwards. The Taxation Laws (Second Amendment) Act, 2016 contains no express language giving section 115BBE retrospective effect. The Court held that the amendment to section 115BBE and the insertion of section 271AAC are prospective and applicable with effect from 1 April 2017, and cannot be applied retrospectively to any transaction which took place before that date.
The Court began with the rule that fixes which law applies. Under section 4 the charge is on the total income of the previous year at the rate for the assessment year, and the settled position, taken from Karimtharuvi Tea Estate, is that the Act as it stands amended on the first day of a financial year must apply to the assessments of that year. That rule is what makes the assent date beside the point. It then read the amending Act's own commencement. The Taxation Laws (Second Amendment) Act, 2016 said it came into force at once, on 15 December 2016. But the operative amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. Parliament thus gave the Act one commencement date and the rate change another, and the Court took that as deliberate. A statute is presumed to operate prospectively unless a contrary intention clearly appears, and here the intention that appears is the opposite of retrospective. The Court then answered the argument that the change was merely clarificatory or procedural, and so could attach to a year already running. Raising the rate from 30% to 60% doubles the burden. A provision that doubles the tax plainly affects or alters existing rights, and a change of that kind cannot be treated as procedural or clarificatory, which is the only route by which it could have reached transactions completed before 1 April 2017. Section 271AAC followed the same course. The penalty is a penal provision operating in conjunction with section 115BBE; it cannot operate in isolation and is entirely dependent on a prior determination under that section. If the rate does not reach the year, neither does the penalty built on it. Two further strands of the judgment are worth carrying into an argument. The Court distinguished surcharge from the principal rate. Surcharge is derivative and consequential, a percentage addition to tax already computed, with no independent existence; an enhancement of the surcharge rate may therefore not create a new liability but only alter an existing one in quantum. An enhancement of the principal rate certainly does create a new liability. That distinction is the department's best foothold and it should be met rather than ignored. The Court also drew an inference from the drafting history. The Finance Act 2018 amendment to section 115BBE(2) was expressly given retrospective effect from 1 April 2017; the absence of any comparable declaration in the Taxation Laws (Second Amendment) Act, 2016 must be read as a conscious legislative choice in favour of prospective operation. In the words reproduced by the source cited on this page: "The amendment to Section 115BBE came into force on 01.04.2017 i.e. the first day of financial year 2017-18. For FY 2016-17, the law in force on 01.04.2016, prescribing a rate of 30%, must govern. 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"
It was decided by the High Court on 2026-05-27 and is reported as Neutral citation [2026:RJ-JD:26319-DB]. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 115BBE, section 68, section 271AAC, section 4, section 246A, section 195 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Court set out seventeen numbered conclusions, the last of which states the correct legal position in four propositions. The law applicable to an assessment year is the law in force on the first day of that year, that is 1 April. Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made retrospective. The amendment to section 115BBE came into force on 1 April 2017, the first day of the financial year 2017-18; for the financial year 2016-17 the law in force on 1 April 2016, prescribing a rate of 30%, must govern, and the enhanced rate of 60% came into force on 1 April 2017 and can apply only from that date, that is for the financial year 2017-18 onwards. The Taxation Laws (Second Amendment) Act, 2016 contains no express language giving section 115BBE retrospective effect. The Court held that the amendment to section 115BBE and the insertion of section 271AAC are prospective and applicable with effect from 1 April 2017, and cannot be applied retrospectively to any transaction which took place before that date. It arises in Cash Credits & Unexplained Money, Penalty and How Tax Law Is Read matters, on section 115BBE, section 68, section 271AAC, section 4, section 246A, section 195 (Act of 2025) of the Income Tax Act 1961, and was decided by High Court of Judicature for Rajasthan at Jodhpur, Division Bench - Arun Monga and Sunil Beniwal JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Know the other side of the conflict before you take the ground. A Division Bench of the Kerala High Court held the opposite in Maruthi Babu Rao Jadav, and that is the decision the department will put to you. This judgment answers it in terms, but it does not displace it outside Rajasthan. Take the rate ground and the addition ground separately in the appeal. This judgment does not say the addition was wrong; it says the rate was. Both grounds have to be pleaded. Quote the commencement clause, not just the assent date. The department's case is that assent on 15 December 2016 caught the whole of the financial year 2016-17, and the answer is that the amendment to section 115BBE(1) was separately given effect from 1 April 2017. Anchor it in section 4 and the settled rule that the Act as it stands on 1 April of a financial year governs the assessments of that year - which is where the Court started. Argue section 271AAC along with it. The penalty is triggered by a determination under section 115BBE and cannot operate on its own, so if the rate does not apply the penalty has nothing to attach to. Expect to be sent to the appellate route rather than given relief on the writ. The batch of petitions heard with this one was disposed of with liberty to file appeals under section 246A, with the time spent before the High Court excluded from limitation.
High Courts differ on this point. The question this judgment decides is one on which High Courts differ, and no later treatment of this judgment itself was found. A search for an appeal to the Supreme Court, and for High Court or Tribunal decisions following, distinguishing or doubting it, returned nothing. That is the result of a search made on 23 September 2026, not a citator report, and it should be read as an absence of findings rather than as a finding of absence. Whether a special leave petition has been filed is not known; nothing was traced either way. There is a direct conflict of High Court authority on this question. A Division Bench of the Kerala High Court held the opposite in Maruthi Babu Rao Jadav v ACIT, W.A. No. 984 of 2019, reported at 430 ITR 504, holding that no new liability was created and that the enhanced rate applies from the commencement of the assessment year. This Court expressly, and respectfully, differs from that view. Outside Rajasthan, and particularly within Kerala, expect the Revenue to rely on Maruthi Babu Rao, and cite this judgment knowing that the question is unsettled between High Courts and has not been resolved by the Supreme Court. The Court decided this as a lead matter. A batch of writ petitions raising the same question was heard with it and disposed of the same day by a single separate order following this judgment - Manak Chand Soni, Latika Jain, Manglaram, Lalit Kumar Chouhan, Hardik Hundia, Parwan Ali, Purnima Jain, Than Chand Loonker and others - and that order reproduces the four concluding propositions in the same words. The decision binds the authorities within Rajasthan and is persuasive elsewhere. Tribunal orders reaching the same result by their own routes are reported from several benches, but none was read for this entry and none was found adopting this judgment. The Income-tax Act, 1961 was repealed on 1 April 2026 by section 536(1) of the Income-tax Act, 2025, and section 536(2)(c) continues it for tax years beginning before that date, which is why a 2026 judgment still decides a 2016-17 question. Section 115BBE became section 195 of the 2025 Act, and the Finance Act 2026 substituted 30% for 60% in section 195(1)(i). The 1 April 2026 date is the general commencement in section 1(2)(a) for sections 2 to 129; the tax year 2026-27 limb comes from the Explanatory Memorandum, and the substituting clause itself has not been read. The same Act omitted section 443, the counterpart of section 271AAC. Neither change reaches the years this judgment is about. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read twice, on two independently published copies: the text carried on a public judgment database, and a copy of the judgment PDF published by a legal news service. Both break off in the closing passage, the fuller of the two part-way through the third of the Court's four concluding propositions, which is why the final direction is recorded on this page as not read rather than paraphrased. The Court's four concluding propositions appear word for word in the single order disposing of the batch heard with this matter, decided the same day by the same Bench - D.B. Civil Writ Petition No. 3970/2020, Manak Chand Soni v Union of India, with ten connected petitions including Latika Jain v Union of India, D.B. Civil Writ Petition No. 8407/2020. That order records that counsel on both sides were agreed the controversy was the same as in D.B. Civil Writ Petition No. 3625/2020, that this judgment was delivered separately, and that the batch was disposed of with liberty to file appeals under section 246A, with the time before the High Court excluded from limitation. The sentence quoted on this page falls after the point at which both available copies of this judgment break off, and is therefore quoted from that companion order rather than from the judgment itself. That is two readings of it, not the three this library prefers, and it is why the quotation is sourced as it is. The procedural details - neutral citation [2026:RJ-JD:26319-DB], D.B. Civil Writ Petition No. 3625/2020, reserved 23 March 2026 and pronounced 27 May 2026 by Arun Monga and Sunil Beniwal JJ - are printed on the judgment itself. Two cautions. The first is about what the case decides. It decides the rate, not the addition. An assessee who wins on this point still faces the addition at 30%, and the two grounds have to be run separately. The second is about relief. The batch heard with this matter was not given substantive relief on the writ; it was sent to the appellate route under section 246A with limitation protected. A reader planning around this judgment should assume that the practical outcome is a strong ground in appeal rather than a quashed demand, and should check the final page of the judgment for what was actually ordered in this petition. One further point on dates. The petition was filed in 2020 against an assessment order of December 2019 and decided in May 2026, by which time the Income-tax Act, 1961 had been repealed. Section 536(2)(c) of the Income-tax Act, 2025 keeps the old Act alive for proceedings about earlier tax years, which is why a 2016-17 question was still being decided under it. Both copies of the judgment that could be read broke off in the closing passage, so its own final direction has not been read - whether the writ petition was allowed, what was done with the assessment order dated 21 December 2019, and whether costs were awarded. What is known is how the batch heard with it ended: those petitions were disposed of with liberty to the petitioners to seek their remedy by filing appropriate appeals under section 246A, with the time spent before the High Court not to be counted for limitation, and pending applications disposed of. It is likely but not established that this judgment ended the same way, and a reader who needs the exact relief should read the last page of the judgment itself. The constitutional challenge to the validity of the amending Act was part of the prayer, and how far the Court dealt with validity as distinct from applicability could not be established from the passages read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court set out seventeen numbered conclusions, the last of which states the correct legal position in four propositions. The law applicable to an assessment year is the law in force on the first day of that year, that is 1 April. Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made retrospective. The amendment to section 115BBE came into force on 1 April 2017, the first day of the financial year 2017-18; for the financial year 2016-17 the law in force on 1 April 2016, prescribing a rate of 30%, must govern, and the enhanced rate of 60% came into force on 1 April 2017 and can apply only from that date, that is for the financial year 2017-18 onwards. The Taxation Laws (Second Amendment) Act, 2016 contains no express language giving section 115BBE retrospective effect. The Court held that the amendment to section 115BBE and the insertion of section 271AAC are prospective and applicable with effect from 1 April 2017, and cannot be applied retrospectively to any transaction which took place before that date.
TaxSphere, “Deepak Maratha v Union of India”, https://taxnotice.vittsphere.com/caselaw/case/deepak-maratha-v-uoi-115bbe-60-per-cent-not-before-1-april-2017/ (validity last checked 2026-09-23)
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My cash sales are already in my books and already in my turnover. The officer has added the same money again under section 68 and taxed it at 60%. Can he?
The addition under the s.68 group has been confirmed and I never showed the income in my return. Is there any discretion left to the AO not to levy the s.271AAC penalty?
I disclosed the seized cash and paid the s.115BBE tax, but my return was a belated one under s.139(4). The AO says the proviso to s.271AAC(1) only saves a return under s.139(1). Is he right?
I left the surrendered cash out of my original return and brought it in only by a revised return under s.139(5). Does the proviso to s.271AAC(1) still protect me?
