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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
आदेश / O R D E R PER MANJUNATHA.G, AM: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Income Tax Department, National Faceless Appeal Centre (NFAC), Delhi, dated 24.02.2023, and pertains to assessment year 2017-18.
The brief facts of the case are that the assessee is an individual and is a dealer in petroleum products. The assessee is running a petrol bunk under the name and style of M/s.Subramaniam Agencies. The assessee filed its return of income for AY 2017-18 on 01.11.2017 declaring total income of Rs.10,02,650/-. The case was selected for scrutiny to verify the cash during demonetization period. During the course of assessment proceedings, the AO noticed that the assessee has deposited cash deposits into bank account in Specified Bank Notes (in short “SBNs") beyond reasonable period of time in Rs.500/- & Rs.1000/- denominations.
Therefore, considering relevant facts made addition of Rs.63,500/- towards cash deposits in SBNs from 07.12.2016 to 30.12.2016 u/s.69A of the Income Tax Act, 1961 (in short “the Act"). The assessee carried the matter in appeal before the First Appellate Authority, but could not succeed. The Ld.CIT(A) for the reasons stated in their appellate order dated 24.02.2023, dismissed the appeal filed by the assessee. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.
The Ld.AR for the assessee submits that the assessee is engaged in the business of dealer in petroleum products, which is an exempted category for acceptance of SBNs of Rs.1000/- & Rs.500/- denominations during demonetization period. The AO has accepted cash deposits in SBNs up to 05.12.2016, however, the small balance amount of Rs.63,500/- has been disallowed, and added u/s.69A of the Act, on the ground that said cash deposits have been made after a reasonable period, even though, the assessee comes under exempted category dealer.
The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submits that the AO has allowed relief to the assessee wherever the assessee deposited cash up to date allowed by the RBI. However, cash deposits beyond specified date, has been treated as unexplained income of the assessee. Therefore, he submitted that there is no error in the reasons given by the AO to make addition towards cash deposits of Rs.63,500/- u/s.69A of the Act, and their orders should be upheld.
We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee comes under exempted category person as per the notifications/guidelines issued by the RBI with respect to SBNs of Rs.500/- & Rs.1000/- denominations. In fact, the AO has allowed credit for cash deposits in SBNs up to 05.12.2016 as per the government notification. However, the balance amount of Rs.63,500/- deposited from 07.12.2016 to 31.12.2016, has been treated as unexplained income and taxed u/s.69A of the Act. We find that there is no finding with regard to source for cash deposits of the assessee from the AO whether said deposit is out of sales made before 03.12.2016 or after 05.12.2016, but the only observation of the AO to make addition towards cash deposits is cash deposited after a reasonable period. In our considered view, when assessee comes under exempted category person and has source for cash deposits, then, the AO cannot make additions towards cash deposits on the ground of reasonable period of cash deposits.
In this case, the AO except giving a reason that cash deposits have been made after reasonable period, there is no finding with regard to source for said cash deposits. Since, the assessee is a petroleum dealer and also comes under exempted category as per the notifications issued by the government, in our considered view, the AO ought to have accepted explanations of the assessee that source for cash deposits is out of sales.
Therefore, we are of the considered view that the AO and the Ld.CIT(A) are erred in making addition towards cash deposits of Rs.63,500/- u/s.69A of the Act, and thus, we direct the AO to delete the addition made towards cash deposits u/s.69A of the Act.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 28th day of June, 2023, in Chennai.