KRISHN MANI PANDEY,NOIDA vs. INCOME TAX OFFICER, NOIDA

The appeal of assessee is against order dated 27.03.2024 of Learned Commissioner of Income-Tax (Appeals)/National Faceless Appeal Centre (National Faceless Assessment Centre (NFAC)), Delhi (hereinafter referred as “Ld. CIT(A)” under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of order dated 31.12.2019 by the Income Tax Officer, Ward 5(2)(1), Ghaziabad (hereinafter referred as “Ld. AO") under Section 143(3) of the Act for assessment year 2017-18.

Brief facts of case are that on 28.07.2017, assessee filed his return of income declaring taxable income of Rs.4,69,200/-. The case was selected for scrutiny through CASS. Notice under Section 143(2) of the Act dated 20.08.2018 was issued. Notice under Section 143(1) of the Act along with questionnaire was issued. Assessee submitted e-reply from time to time. On completion of assessment proceeding, Ld. AO vide order dated 31.12.2019 made addition of Rs.1,55,96,870/-.

That the learned Assessing Officer fails to understand that the appellant is a Business Correspondent (BC) whose an assigned facilitator of 2 banking services duly authorized by the Punjab National Bank. Enclosed here with the copy of certificate issued by Punjab National Bank whereby he is duly authorized by the bank for acceptance of cash deposit, cash withdrawal and other banking services.

That the learned Assessing officer fails to understand that legal tender character of old bank notes in the denominations of Rs. 500 and Rs. 1000/ issued by the Reserve Bank of India till November 8, 2016 (herein after referred to as Specified Bank Notes) stands withdrawn. In consequences thereof these Bank Notes cannot be used for transacting business and or store value for future usage. The Specified Bank Notes (SBNs) were allowed to be exchanged for value till December 30,2016. The said notes can be deposited at any of the bank branches, regional rural banks, co- operative banks, post office 5. That the learned Assessing Officer fails to appreciate the fact to control the rush of overwhelmed customer and public chaos in the local bank branches during the enthralled demonetization period in the country. Demonetization has brought huge operational issues at Bank and distributed the bank employees. They were put under pressure and overtime work environment.

The Banks were authorized to allow Business Correspondents to collect and accept old currency notes of Rs.500/- and Rs. 1000/- till the entire period of demonetization starting 9% November, 2016 till 31 December, 2016 on their behalf. Enclosed here with the photocopy of circular issued by Punjab National Bank in this behalf.

That the Learned Assessing Officer in his order wrongly treated the cash deposited from general public on behalf of Punjab National Bank at his location as an unexplained money under Section 69A of the Income Tax Act, 1961. The cash to the tune of Rs. 1, 55, 96,870/- is not an unexplained money of the appellant.

That the appellant provided the Learned Assessing Officer with all the documents and proof of his being Business/Banking Correspondent Agent of the Punjab National Bank. Still the Learned AO ignored the facts placed before him and passed the impugned order unfairly and without much application of mind.

That the learned Commissioner failed to appreciate the circular no 31/2016 of Punjab National Bank in its full spirit. In the said circular the Punjab National Bank itself suggests to accept cash notes with Aadhar Enabled Payment System only. That means the Bank already has full 3 KYC of the customer and does not want the Business Correspondent Agent to waste unnecessary time in KYC activity and rush the process as it was time bound in nature. The working of the BC during demonetization was fixed for 12 hours daily from 8.am to 8: pm at his location to collect old currency notes of Rs.500/- and Rs.1,000/- and disbursal of new currency note in its exchange. As per bank guidelines the Business Correspondent Agent was allowed to collect cash of Rs.25, 000/-only from bank customer. He was not required to do any KYC of the customer.

The Leaned Commissioner fails to apprehend the details, documents and written submission provided during the course of hearing and confirmed the impugned demand order.”

Learned Authorized Representative for appellant/assessee submitted that Ld.CIT(A) erred in upholding the addition of Rs.1,55,96,870/- without appreciating that appellant/assessee is a business correspondent agent of Punjab National Bank. The business correspondent agent (BC) was an extended arm of the Bank Branch who was providing doorstep banking and its services to customers in remote and rural areas. They are retail agents engaged by banks for providing banking services at locations other than a bank branch/ATM Banks take full responsibility for the use of omission and commission of the Business Correspondents (BC) whom they are engaged. BC’s enabled a bank to expand its outreach and offer limited range of banking services at low cost as setting up a brick and mortar branch may not be viable in all cases. It is a cost effective route to serve the existing customers of the bank, and the unserved and unbanked especially in developing countries like India. This has been possible due to changes in the legislative and regulatory framework for provision of financial / banking services supported by appropriate technology solutions. The Government of India initiated the National Mission for Financial Inclusion (NMFI), namely Pradhan Mantri Jan Dhan Yojna (PMJDY) in August 2014 by Prime Minister, Shri Narender Modi to provide universal banking services for every unbanked household, based on the guiding principle of "banking the unbanked, securing the secured, and funding the unfunded." PMJDY is a National Mission for Financial Inclusion to ensure access to financial services to every citizen. Business Correspondent (BC) is key player in the implementation of the said Yojna. Due to increase competition and reducing margins Banks are hesitant to opt for increasing their physical presence in up country /remote location entailing considerable capital and operating costs. As a consequences under the present dispensation small value clients (depositors) residing in 6 lakh plus villages in the country with remote locations get very little preference in accessing financial services. It is therefore, imperative to have in place an arrangement which can cater to a large number of clients having irregular and low value transactions ensuring at the same time full protection of the interest of depositors. Such an arrangement is possible only by having a Business Correspondents (BC) at each of these remote locations serving as a customer interface at the front end and backed by appropriate technology for its integration with the main frame banking at the bank level.