DCIT , CHENNAI vs M/S PRAKASH SILKS & SAREES PRIVATE LIMITED , KANCHIPURAM

Income Tax Appellate Tribunal, “B” BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकर अपीलीय अिधकरण “बी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा ! एवं माननीय �ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ (िनधा*रण वष* / Assessment Year: 2017-18) DCIT M/s. Prakash Silks & Sarees Pvt. Ltd. बनाम Central Circle-3(1), 87, Gandhi Road, / Vs. Chennai. Kanchipuram-631 501. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAHCP-5774-A (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri V. Nandakumar (CIT)-Ld. DR � थ�कीओरसे/Respondent by : Shri G. Baskar (Advocate) - Ld. AR सुनवाईकीतारीख/Date of Hearing : 16-10-2023 घोषणाकीतारीख /Date of Pronouncement : 19-12-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 11.07.2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143 of the Act on 25.12.2019. The grounds taken by the Revenue are as under:

1. 1. The order of the Id. Commissioner of I.T. (Appeals} is erroneous on facts of the case and in law.

2. The learned CIT(A) erred in directing the AO to delete the additions made u/s. 69A of the IT Act, to the extent covered by Non- SBN, after verification of the bank certificate, without appreciating the fact that the assessee had not explained the source for the cash deposits of Rs.12.55 Crores into the bank account during the demonetization period, with documentary evidence, during the course of assessment proceedings. 2.1 The learned CIT(A} erred in directing the AO to delete the additions made u/s. 69A of the IT Act, to the extent covered by Non-SBN, after verification of the bank certificate, without appreciating the fact that the assessee had not filed any explanation for the huge cash deposits in the bank accounts during the demonetization period, and the explanation offered by the assessee before the CIT(A} that the same represents cash sales of sarees during demonetisation period is beyond human probabilities, since, such huge cash was never freely available with the public during demonetization period. 2.2 The learned CIT(A) erred in directing the AO to delete the additions made u/s. 69A of the IT Act, to the extent covered by Non- SBN, after verification of the bank certificate, by drawing comparison between the sales turnover for the F.Ys. 2014-15, 2015-16 and 2016- 17, and coming to the conclusion that the· cash deposits during the demonetization period were out of cash sale of sarees, whereas such a comparison cannot be made in as much as the cash sales during demonetization period shall be much less than the cash sales during the earlier corresponding period, and the parties from whom such money was received were not identifiable.

The learned CIT(A) erred in directing the AO to delete the additions made u/s. 69A of the IT Act, to the extent covered by Non- SBN, after verification of the bank certificate, without calling for a remand report from the Assessing Officer, as mandated under Rule 46A of the IT Rules, and admitting the assessees' claim of cash deposits in the bank accounts, as cash sales and also the certificate of the Bank, on deposit of SBN and Non- SBN, which amounts to admission of fresh evidence, since no documents proving such claims were submitted during the course of assessment proceedings, before the Assessing Officer.

For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of Id. CIT(A) may be set aside and that of the Assessing Officer be restored.” As is evident, the sole issue that arises for our consideration is addition made by Ld. AO u/s 69A on account of cash deposited by the assessee during demonetization period.

The Registry has noted delay of one day in the appeal, which stands condoned. Accordingly, we proceed for adjudication of the appeal on merits.

3. The Ld. CIT-DR supported the assessment framed by Ld. AO whereas Ld. AR supported the findings given by Ld. CIT(A) in the impugned order. Our attention has been drawn to various documents as placed on record to support the findings rendered by lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in sale of handloom silks and sarees in wholesale and retail. Assessment Proceedings 4. During assessment proceedings, it transpired that the assessee deposited cash of Rs.1403.91 Lacs during demonetization period in Indian Overseas Bank during the period from 09.11.2016 to 31.12.2016. In the cash transaction statement 2016, the assessee submitted that cash of Rs.1249.46 Lacs was received from unidentifiable persons. The assessee did not furnish the complete details of denominations of specified bank notes (SBN) as well as non-specified bank notes (non- SBN) deposited during the demonetization period. The assessee disclosed amount of Rs.148.72 Lacs under Prime Minister Garib Kalyan Yojana (PMGKY) scheme and paid due taxes. Therefore, the balance cash of Rs.1255.18 Lacs was held by Ld. AO to be unexplained money u/s 69A of the act and accordingly, added back to assessee’s income. Appellate Proceedings 5.1 During appellate proceedings, the assessee submitted that it had deposited amount of Rs.1398.18 Lacs during the stated period. Out of this, specified bank notes were for an amount of Rs.167.53 Lacs whereas the balance of Rs.1230.65 Lacs was non-specified bank notes. The assessee further submitted that closing cash balance as on 08.11.2016 was Rs.168.08 Lacs and deposit of SBN was out of this cash balance only. The deposit of non-SBN was out of sale proceeds of the assessee during the period from 09.11.2016 to 30.12.2016 which was already recognized as sales and corresponding income was admitted in the return of income. The assessee further submitted that a survey action was conducted at business premises of assessee on 29.12.2016 within the period of closing window of demonetization scheme. Since the submissions made to survey team on the question of deposits during demonetization period was not acceptable, the assessee declared an amount of Rs.148.72 Lacs under Pradhan Mantri Garib Kalyan Yojana 2016 and paid due taxes on it. In support of the submission that the deposit of Rs.1230.65 Lacs was in non-SBN, the assessee furnished certificate from Senior Manager, Indian Overseas Bank, Ennaikara Street Branch, Kancheepuram. In the said background, the assessee assailed the conclusions of Ld. AO and prayed for deletion of impugned addition. 5.2 The Ld. CIT (A) concurred that the opening cash balance as on 09.11.2016 was Rs.168.08 Lacs out of which Rs.167.53 Lacs was deposited in the bank after demonetization date. Therefore, there could be no doubt that this cash must be only in demonetized currency i.e., SBN. The money was deposited within few dates from the date of demonetization. Therefore, the deposit so made was to be taken as explained money. Regarding the balance Rs.1230.64 Lacs, the Ld. CIT(A) observed that the assessee’s claim was evident from the bank certificate (extracted on Page No. 7 of appellate order) and therefore, the impugned addition would be unsustainable. The final adjudication of Ld. CIT(A) was a under: - 4.9 Though this information was not made available by the assessee to the Assessing Officer at the time of passing the assessment order, this certificate is an important factor in considering this appeal, as assessment has been made on the basis of the information of bank deposit details furnished by the bank. Now, this leaves to the issue whether cash deposits are genuine given the shortage of monetized notes at the relevant period. In this connection, the following are taken into consideration. The assessee is a wholesale and retail trader in sarees especially silk sarees in Kancheepuram and has been showing huge turnover. The cash sales and credit sales during the period are comparable over the period. The turnover for FY 2014-15 FY 2015-16 and FY 2016-17 are Rs.224,76,62,623/-, Rs,279,95,59,358/- and Rs.307,21,76,895/- respectively. The sale turnover for the months of October, November and December, 2016 are Rs.31,97,82,093/-, Rs.24,56,52,638/- and Rs.29,06,70,280/- respectively. The assessee furnished details of cash sales and credit sales for about one month prior to the demonetized period and also for the succeeding month after demonetization. On comparison of the same, it is seen that cash sales are comparable for the demonetized period also. Another important factor is that during the demonetized period, a survey action was undertaken on 29.12.2016 after which, the assessee declared Rs.1,48,72,000/- under PMGKY out of Rs.2,87,11,500/- (cash deposits from 08.11.2016 to 17.11.2016). Thus, no adverse inference had been drawn in the survey in respect of sales during demonetization period is apparent. In the circumstances, there is no cause to treat the cash deposited through Non-SBN notes as unexplained money and the addition cannot be sustained. Since the Assessing Officer did not have the opportunity of the certificate of IOB, the AO is directed to get confirmation of the certificate issued by IOB and if it is found correct, then addition may be deleted to the extent of deposits covered by the Non-SBN notes after due verification.

Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication 6. From the fact, It emerges that the assessee is a resident corporate assessee and engaged in sale of handloom silks and sarees in wholesale and retail. It has deposited an amount of Rs.1398.18 Lacs in Bank account during the period from 09.11.2016 to 31.12.2016. In the cash transaction statement 2016, the assessee has submitted that cash of Rs.1249.46 Lacs was received from unidentifiable persons. During assessment proceedings, the assessee did not furnish the complete details of denominations of specified bank notes (SBN) as well as non- specified bank notes (non-SBN) deposited during the demonetization period. Another fact is that the assessee has disclosed an amount of Rs.148.72 Lacs under Prime Minister Garib Kalyan Yojana (PMGKY) scheme and paid due taxes. The same is apparently due to the fact that the assessee was subjected a survey action on 29.12.2016 and the assessee made the declaration under the scheme to make up for the discrepancies.

During appellate proceedings, it transpired that deposit in SBN was to the extent of Rs.167.53 Lacs whereas the balance deposit was in non- SBN. It also transpired that the assessee had closing cash balance as on 08.11.2016 to the extent of Rs.168.08 Lacs which was used to make deposit in SBN. Considering the fact that the assessee had sufficient closing cash balance as on 08.11.2016, the deposit made in SBN to the extent of Rs.167.53 Lacs could be said to have been explained by the assessee and there remain no reason to doubt the source of the same. We concur with the adjudication of Ld. CIT(A), to that extent.

So far as the remaining deposit is concerned, we find that these deposits have been made in non-SBN which is evidenced by the certificate issued by the assessee’s banker. These deposits are stated to be sourced by the assessee out of sale proceeds during the period from 09.11.2016 to 30.12.2016. The sales have duly been recognized in the books of accounts and corresponding income has been admitted in the return of income. The Ld. CIT(A) has rendered factual finding that the assessee is having huge turnover out of wholesale and retail trade. The turnover of the assessee for financial years 2014-15, 2015-16 & 2016-17 are in the range of Rs.224.76 Crores, Rs.279.59 Crores and Rs.307.21 Crores. The sale turnover for the months of October, November and December, 2016 stood at Rs.31.97 Crores, Rs.24.56 Crores and Rs.29.06 Crores. Further, the assessee duly furnished details of cash sales and credit sales for about one month prior to the demonetized period and also for the succeeding month after demonetization. On comparison of the same, it has been found that cash sales are comparable during demonetized period and no abnormal sales have been noted. The survey team has not pointed out any discrepancy in the sales of the assessee. All these factors would lead to inevitable conclusion that there was no reason to treat the cash deposit in non- SBN as unexplained money and therefore, the impugned addition has rightly been deleted by Ld. CIT(A). We find no infirmity in the same. By confirming the adjudication of Ld. CIT(A), we dismiss the grounds raised

by the revenue.

9. The appeal stand dismissed. Order pronounced on 19th December,2023

DCIT , CHENNAI vs. M/S PRAKASH SILKS & SAREES PRIVATE LIMITED , KANCHIPURAM