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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi, dated 11.03.2022 and pertains to assessment year 2017-18.
:-2-: ITA. No:280/Chny/2022 2. The assessee has raised the following grounds of appeal: “1] The Learned Assistant Commissioner of National Faceless Appeal Centre, Delhi is not justified in confirming the Addition of Rs.37,34,000/made U/s.69A of the Act by D.C.1.T/CIRCLE-1/SALEM/TAMIL NADU. 2] The Appellant is maintaining Books of Accounts wherein the Labour Charges received from Silver Leg Chains making Business and Rental Receipts are credited and the Gross Income amounted to Rs.12,43,500 /- 3] The Appellant has been regularly filing the return of income for the earlier Years and the Sundry Debtors available as on 31.03.2016 to an extent of Rs.34,00,000 /- along with the other debtors realization in the accounting Year Ended 31.03.2017 has been deposited in the Bank Account during the demonetization period, which has not been accepted by the Assessing Officer and confirmed by the N.F.A.C, CIT(Appeal) also. 4] For the earlier Years the Appellant has filed the Returns of Income as per the details given here under in which the Sundry Debtors outstanding are as Under:- Asst. Date of filing e-filing number Income Sundry Year of return returned debtor available 2015-16 23.07.2015 618258960230715 6,11,350 25,50,000 2016-17 30.07.2016 346822230300716 8,85,440 34,00,000 2017-18 20.06.2017 813414770200617 10,85,210 20,00,000 5] From the above Tabular Column it can be seen that the Assessee's investment comprises of stock of Silver Leg Chains, Bank Balance, Sundry Debtors and other investments which is proved by the Balance Sheet filed for each Year. 6] Even though the above details furnished to the First Appellate Authority were discussed by them, they have rejected the said realization of Sundry Debtors on a single ground that the Assessee did not bring any material on record in support of the realization of Sundry Advances of Rs.34,00,000 /- and also :-3-: ITA. No:280/Chny/2022 collections from the sales made during the Year Ended 31.03.2017 7] After filing all the information through online, no such questions were asked by the Assessing Authorities to bring in the material on record to support the "Realization of Sundry Advances'. 8] Normally in any trading activity the advancement of Money to the workers and realization of the said amount in the subsequent year is an inevitable transaction and hence it cannot be considered as false one. 9] In fact in Page.No.12 of the Appellate order the Appellate Authorities are discussing about the Cash summery filed for the Month of November 2016 & October 2016 which are as Under:- Month Realization of Sundry Debtors October 2016 Rs. l, 7 4,58,027 November 2016 Rs. 1,22,90,526 10] When the appellant was able to produce the cash book wherein there are realization of Sundry Debtors as per the figures mentioned above the possibility of deposit of Rs.37,34,000/- out of the realization from Sundry debtors cannot be dis-believed. 11] After the announcement of the demonetization on 08.11.2016 when the outstanding debtors insisted for accepting the Cash given by them, the Appellant could not negative the same. When the Debtors re-paying in old currencies are not accepted by Appellant he was likely to loose the entire capital amount and hence he was forced to accept the demonetized currencies which were deposited in the Bank account during the period from 28.11.2016 to 28.12.2016, since the Government itself allowed time upto 31.12.2016 for depositing the SBN currencies. 12] When the Appellant is maintaining books of accounts there is no scope for making addition U / s.69A of the Act by invoking the Provisions of Section. 115BBE of the Act. Hence the Tax levied at 60% with :-4-: ITA. No:280/Chny/2022 corresponding sur-charge of 25% may also be deleted and justice rendered. (Tax effect= Tax : 22,40,400/- & Sur-charge= Rs.5,60,100) & E.C.84015 13] There is no implied or direct Provision in the Income Tax Act to treat the deposit of SBN currencies as Income U/s.69A of the Act when the source for said deposits were explained and also recorded in the Books of accounts. Hence the application of Section.69A is "Not Legally maintainable". 14] The Appellant relies on the decision of Income Tax Appellate Tribunal, Visakhapatnam dated 17.05.2021, in the case of HIRAPANNA JEWELLERS (TS-36 1-ITAT- 2021(VIZ). Wherein it has been held that once the Books of Accounts are accepted by the Assessing Officer there cannot be any addition U / s.69A of the Act to Tax the Deposit of Demonetized currencies U / s.115BBE and hence taxing it at 60% may kindly be deleted. 15] The Appellant relies on the GAZETTE notification issued by the Ministry of Law and Justice on the specified Bank notes "(Cessation of Liabilities) Act 2017 dated 28.02.2017. As per Section.2(1)(a) of the said Act which informs about the appointed day means 31Day of December 2016:" As per the said specified Bank notes (Cessation of Liabilities) Act 2017 published by the Ministry of Law and Justice, as per Section.5 "on and from the appointed Day, no person shall, knowingly or voluntarily hold, transfer or receive any specified Bank note". 16] From the said definition contained in Sec.2(1)(a) & Sec.5 of the above Act, the deposit of demonetized currencies upto the appointed Day 31st Day of December 2016 is permissible. For the reasons stated above and further grounds to be adduced at the time of hearing the addition of Rs.37,34,000/- confirmed by the N.F.A.C., Delhi may be Cancelled and justice rendered.”
:-5-: ITA. No:280/Chny/2022 3. The brief facts of the case are that, the appellant claims to have engaged in the business of job work of manufacturing silver leg chains and also derives rental income. The assessee had filed his return of income for the assessment year 2017- 18 on 20.06.2017, declaring taxable income of Rs. 10,85,210/-. During the course of assessment proceedings, the AO noticed that the assessee had made total cash deposits of Rs. 34 lakhs after demonetization in specified bank notes to his bank account maintained with Tamilnadu Mercantile Bank with account no. 028100050300170. The AO, called upon the assessee to explain source of cash deposits, for which the assessee filed a written submission and argued that source of cash deposits is out of realization of sundry advances of earlier years, for which the assessee has filed necessary evidences including financial statements along with ITR filed for earlier financial years. The AO, however was not convinced with the explanation furnished by the assessee. According to the Assessing Officer, the assessee could not satisfactorily explain source for cash deposits, although claims to have realized sundry advances appearing in the balance sheet. The AO has discussed the issue in light of decision of Hon’ble Supreme Court in the case of Smt Srilekha Banerjee and others vs CIT, :-6-: ITA. No:280/Chny/2022 Bihar & Orissa reported in 1964 AIR 697, and argued that when the Government has withdrawn legal tender of specified bank notes of Rs. 500/- & Rs. 1000/-, then the assessee accepting said notes from his customers and depositing into bank account is under violation of guidelines issued by the RBI and thus, rejected arguments of the assessee and made addition of Rs. 37,34,000/- u/s. 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) and levied tax u/s. 115BBE of the Act.
Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the ld. CIT(A), the assessee has submitted that source for cash deposits is out of realization of sundry advances as on 31.03.2016 and also out of the collections from sales made during the year ended 31.03.2017. The assessee, filed tabular chart explaining source for cash deposits with known source of income and further, argued that when the Government itself has allowed deposits of specified bank notes to bank up to 31.12.2016, then there is no reason for the AO to treat said cash deposits as unexplained income, when the assessee has explained source for cash deposits. The ld. CIT(A), after :-7-: ITA. No:280/Chny/2022 considering relevant submissions of the assessee and also taken note of various facts, rejected arguments and sustained additions made by the AO towards cash deposits, on the ground that the assessee did not bring any material on record in support of the realization of sundry advances of Rs. 34 lakhs and collection from sale made during the year end 31.03.2017. The relevant findings of the CIT(A) are as under: “5. I perused the grounds of appeal, Assessment Order, AR's submission and material available on record. My observations in respect of the grounds raised by the appellant are as follows: 6.1 A.0 asked the assessee to explain the sources for cash of Rs 37,34,000/ deposited in the bank account during demonetization period. Assessee did not furnish any explanation. Hence the A.0 added Rs.37,34,000/- u/s 69A. 6.2 In the grounds of appeal, the appellant contested that the said deposit of Rs.37,34,000/- was made out of the realization of Sundry Advances of Rs.34,00,000/- appearing in the Balance sheet as on 31.03.2016 for which year the ITR was filed on 30.07.2016 before demonetization announced on 08.11.2016. 6.3 In the written submission the appellant stated that the said cash deposit of Rs.37,34,000/- was made out of the realization of Sundry Advances of Rs.34,00,000/- as on 31.03.2016 and out of collections from the sales made during the year ended on 31/3/2017.”
:-8-: ITA. No:280/Chny/2022
The Ld. Counsel for the assessee, submitted that the ld. CIT(A) erred in sustaining additions made towards cash deposits inspite of fact that the assessee has explained source for cash deposits and also filed necessary evidences. He further submitted that, as per the specified bank notes (cessation of liability) Act, 2017, which comes into effect from 31.12.2016, no person is allowed in dealing with specified bank notes on or after 31.12.2016. Therefore, the AO cannot treat cash deposits as unexplained money, just because the assessee has received cash in specified bank noted after 8th November, 2016. In this case, he relied upon the decision of ITAT, Chennai in the case of M/s. Umamaheswari vs ITO in dated 14.10.2022.
The ld. DR, on the other hand supporting the order of the CIT(A) submitted that, the assessee has failed to follow guidelines issued by the Government and RBI from time to time to deal with specified bank notes. Further, the assessee could not satisfactorily explain source for cash deposits, although he claims to have realized sundry advances appearing in balance sheet. Therefore, the AO and CIT(A) has :-9-: ITA. No:280/Chny/2022 rightly sustained additions made towards cash deposits and their order should be upheld. In this regard, he relied upon the decision of ITAT, Hyderabad bench in the case of M/s. Vaishnavi Bullion Private Limited vs ACIT in dated 28.11.2022.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. In so far as legal proportion is concerned, as per the specified bank notes (Cessation of liability) Act, 2017, it comes into effect from 31.12.2016, on or from the appointed date, no person shall knowingly or voluntarily hold, transfer or receive any specified bank notes. From the above it is clear that up to 31.12.2016, person can deposit specified bank notes into bank accounts and this proportion is supported by the decision of ITAT Vishakhapatnam Benches in the case of Sri Tatiparti Satyanarayana in ITA No. 76/Viz/2021.
Having said so, let us come back to the facts of the present case. As per the explanation of the assessee source for cash deposits is out of realization of sundry advances :-10-: ITA. No:280/Chny/2022 shown in the balance sheet as on 31.03.2016. We have gone through various evidences filed by the assessee including ITR filed for earlier three years and financial statements of the assessee and we find that the assessee has declared substantial income for earlier years and also maintained books of accounts. The assessee has shown sundry debtors in his books of accounts and said return have been filed before demonetization. From the above explanation of the assessee it is very clear that source for cash deposits is out of realization of sundry debtors appears to be genuine and bonafide. In fact, the assessee has filed cash book explaining date wise receipts from various parties and deposited into bank account. Therefore, we are of the considered view that the AO is completely erred in making additions towards cash deposits into bank account as unexplained money u/s. 69A of the Act and levied tax u/s. 115BBE of the Act, when the assessee has explained source for said cash deposits. The ld. CIT(A), without considering relevant facts simply sustained additions made by the AO. Thus, we direct the AO to delete additions made towards cash deposits u/s. 69A of the Act.