MR. BICHITRANANDA ROUT,SHANKARPUR, CUTTACK vs. INCOME TAX OFFICER, WARD-2(1), CUTTACK

O R D E R Per Bench This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld CIT(A), CIT(A), NFAC, NFAC, Delhi Delhi dated dated 12.01.2024 in in Appeal Appeal No. No.CIT(A), Cuttack/10220/2019 Cuttack/10220/2019-20 for the assessment year 2017 assessment year 2017-18.

3. That the Appellant in furnishing the Grounds of Appeal

had already submitted stating inter-alia that the money deposited in the Bank Account at Rs.8,35,500/- out of the sale proceeds should not have been treated as unexplained money U/s69A. of the IT Act and drawn the tax liability under the provisions of Section 115BBE of the IT Act.

4. That the Appellant in addition to submitting the above had categorically stated that the addition was made in mechanical manner holding the amount deposited at Rs.8,35,500/- taxable U/s 69A of the IT Act is totally wrong improper and contrary to the facts of the case. It is submitted that the cash balance available at Rs.24,34,404/- was inclusive of Rs.21,85,500/-which further consisted of Rs.8,35,500/- in SBN (Demonetization amount)The whole transactions derived amounting to Rs.69,79,500/- in the relevant year from business etc., got properly explained and stated in furnishing of the Accounts and section 44AD of the IT Act should have been applied without making separate addition U/s69A of the IT Act, therefore this Hon'ble Forum should appreciate the illegalities caused in the matter.

5. That that the demonetization amount should not have been added in the facts of the case as is most absurd and illegal which got already been considered in the similar Appellate Forums in most preferably by the Hon'ble Tribunal ((C" Bench of Chennai genuine in the case for the Assessment year 20:1,7-18 that is the same year absolutely applicable in the case of the Appellant because in the relevant year in deposing of the appeal vide dated 04.01.2023 the Hon'ble Division Bench held that the amount demonetized with effect from 08.11.2016 against the transaction of "fruits" which found to be perishable was forced to get accepted the demonetization cash which cannot be taxed as unexplained cash credit U/sl15BB of the IT Act.

P a g e 2 | 33

6. That the Hon'ble Division Bench even if found that from SI. No. 7 to 23 prescribed the payments to Central Govt. Account through different institutions commencing from Government hospital, purchase of Railway tickets from counter etc., even if had dealt with the acceptance of the demonetization amount but the relaxation to made have found the goods for transaction was perishable and the amount collected got deposited in the Bank Accounts which, were fully explainable and thus deposited the demonetization money within the period fixed till 31/12/2016 the date finally fixed by the Govt. of India.

P a g e 4 | 33 II. The Hon'ble Income Tax Appellate Tribunal (C) Bench Chennai vide /CHNY /2022 for the Assessment year 2017-18 vide order dated 04.01.2023 for the Assessment year 2017-18 which "squarely relevant to the case of the Appellant" had categorically held that he dealing of the "fruits" since is highly perishable mainly transactions were made for cash deposits of the demonization cash which was acceptable from 08.11.2016 and no addition U/s69 could be made and the acceptance was permissible till the appointed dated i.e.,31.12.2016. III. The Hon'ble SMC Bench, Bangalore ITA No.68/BNG/2023 relying upon the principles of different Benches the Hon'ble Bench as well as the Hon'ble High Court in the case of AGSON Global Pvt. Ltd Vrs. ACIT 325 CTR 001 deleted the additions on the .Grounds of cash deposits during demonization period and the Hon'ble Bench considering the different Instructions and circulars held that no question of addition on the ground of demonetization cash to be made U/s 69/69(A} of the IT Act. IV. The precedent and judicial observations of the different Benches have been drawn the attention of the Hon'ble SMC and may further tested within scope of the provisions. Further the Appellant in this case invokes and brings to the kind consideration of this Hon'ble Bench that the Id. SMC is bound to follow the direction and the decision of the Hon'ble Divn. Bench and it cannot refer to further the Divn. Bench 'unless Regulation 98(A) has been fully complied with Appendix XIX(B) of the Statute which can be sent for the kind accent / approval of the Hon'ble President of the Tribunal which is not done in this case. Further it is explained that this relevant matter since is posted to 10.07.2024 for the adjudication of the Divn. Bench of Tribunal where the Hon'ble Judicial Member may preside over the Bench and with great respect it is submitted that since his goodself is already prejudiced having been acquainted with the case may not adjudicate this matter and the Hon'ble SMC is bound to follow the decisions and principles laid down by the Divn. Benches of Hon'ble Tribunal. Unless the order of the Hon'ble Division Bench is over ruled by the Larger Bench or the Hon'ble Supreme Court. Thus may please be considered with further chance to urge other grounds by the Appellant in the interest of justice and obliged. “

P a g e 5 | 33

5. The second issue is on merits. It was the submission that the assessee had cash balance of Rs.24,34,404/- as on 1.11.2016 and the assessee had deposited Rs.21,85,500/-, which included Specified Bank Notes (SBNs) of Rs.8,35,500/-. It was the submission that the Assessing Officer had treated the SBNs deposited by the assessee in his bank account as unexplained investment of the assessee and out of balance of the turnover the Assessing Officer had estimated the income of the assessee at 8%. It was the submission that as the SBNs are deposited out of the cash available with the assessee, the addition of Rs.8,35,500/- representing the SBNs was not liable to be made. It was the further submission that the assessee is not challenging the addition made by the Assessing Officer representing 8% of the balance of the turnover. It was the submission that the addition as made by the Assessing Officer of Rs.8,35,500/- is liable to be deleted.

6. It was the submission that in regard to first issue of transfer of file from the SMC Bench to Division Bench without the speaking order is invalid that the SMC Bench was bound by the order of the Division Bench in the P a g e 6 | 33 case of Mr Ganapathy Palaniyappan vs DCIT in for A.Y.2017-18 order dated 4.1.2023, wherein, the Co-ordinate Bench of this Tribunal has held as follows:

“10. Having said so, let us come back to the source for cash deposits. The assessee has explained source for cash deposits out of sale receipts. In fact, the AO and CIT(A) never disputed fact that source for cash deposits is out of sale proceeds for the month and for earlier months. In fact, the CIT(A) has accepted the arguments of the assessee and also directed the AO to assess cash deposits under the head income from other sources, by considering explanation offered by the assessee. But, the only objection of the AO and CIT(A) was that the assessee has accepted specified bank notes, even though RBI has prohibited dealing with specified bank notes from 08.11.2016 onwards except for certain emergency services. We do not find any merit in the reasons given by the AO and CIT(A) for simple reason that no doubt from 08.11.2016 midnight onwards demonetized currency notes of Rs. 500 and Rs. 100 was legally barred. Further, the RBI has issued various guidelines and SOPs for dealing with specified bank notes from 08.11.2016 onwards till the bill Specified Bank Notes (Cessation of Liabilities) bill, 2017 was notified by the Government. As per said bill, from the appointed date, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note. Further, as per section 3 of said bill, on or from the appointed date notwithstanding anything contained in the Reserve Bank of India Act, 1934 or any other law for the time being in force, the specified bank notes which have ceased to be legal tender, in view of the notification of the Government of India dated 08.11.2016 shall cease to be liabilities of the RBI u/s. 34 and shall cease to have the guarantee of the Central Government under sub-section (1) section 26 of the said Act. From the above bill, it is very clear that, on or from the appointed date, no person shall hold, transfer or receive any specified bank notes because said note does not have guarantee of the RBI. In other words, up to appointed date i.e., 31.12.2016 there is no restriction in holding or receiving specified bank notes, even though its legal tender was banned from 08.11.2016 onwards. Since, there is no blanket prohibition on receiving demonetized currency notes up to 31.12.2016, we are of the considered view that, when the assessee has explained reasons for accepting specified bank notes even after 08.11.2016, the AO ought to have accepted the explanation furnished by the assessee when he is not disputing the nature of business and source for cash deposits. In our considered view, what is relevant to decide the issue is, whether the assessee is able to explain source for cash deposits or not. In case, the assessee explains the source for cash deposits, even though there is certain violation of any other Acts or Rules, the AO cannot make addition towards cash deposits.

P a g e 7 | 33

11. We further noted that a similar issue has been considered by the co- ordinate bench of ITAT, Visakhapatnam in the case of ITO vs Sri Tatiparti Satyanarayana (Supra), where the Tribunal after considering cash deposits out of specified bank notes after 08.11.2016 and also by considering Specified Bank Notes (Cessation of Liability) bill, 2017 held that the AO is incorrect in treating receipt of specified bank notes from cash sales as illegal and thereby, by invoking provisions of section 69 of the Act. The relevant findings of the Tribunal are as under: “9. We have heard both the parties and perused all the documents on record. We find that there was sufficient cash balance with the assessee as detailed in page No.30 of the paper book. The Specified Bank Notes (Cessation of Liabilities) Act, 2017, defines "appointed day" vide Section 2(1)(a). As per Section 2(1)(a), "appointed day" means the 31 Day of December 2016. Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 also deals with prohibition on holding, transferring or receiving specified bank notes. Section 5 states that "On and from the appointed day, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note". We therefore, find that the specified bank notes can be measured in monetary terms since the guarantee of the Central Government and the liability of Reserve Bank of India does not cease to exist till 31.12.2016. In view of the above, the contention of the Ld. DR, treating the receipt of SBNs from cash sales as illegal and thereby invoking the Provisions of section 69A is not valid in law. Therefore, we dismiss this ground of the Revenue.”

12. In this view of the matter and by following the decision of the co- ordinate bench of ITAT, Visakhapatnam in the case of ITO vs Sri Tatiparti Satyanarayana (Supra), we are of the considered view that the AO as well as the CIT(A) has erred in sustaining addition towards cash deposits to bank account u/s. 69 of the Act and also levied tax u/s. 115BBE of the Act. Hence, we direct the AO to delete addition made towards cash deposits u/s. 69 of the Act. 13. In the result, appeal filed by the assessee is allowed.” 7. The addition as made by the Assessing Officer and confirmed by the ld CIT(A) is liable to be deleted. Ld AR further relied upon the decision of the ITAT ‘SMC’ Bench Bangalore in the case of Shri Krishnamurthy Nagaraj vs ACIT in for A.Y. 2017-18 order dated 30.10.2023, wherein, it has been held as follows:

P a g e 8 | 33 “7. I have heard the rival submissions and perused the material on record. The AO and the CIT(A) had made the impugned addition solely for the reason that assessee was not authorized person to accept the SBNs subsequent to the demonetization. Since the SBNs were not legal tender, it was concluded by the AO and the CIT(A) that the source of cash deposit cannot be accepted. The AO and the CIT(A) have not examined / verified the source of the cash deposits. On identical facts, I have, in the case of Smt. Malapur Mounika Vs. ITO in (order dated 30.10.2023), held that SBNs are though not legal tender, assessee is not precluded from accepting the same upto the “appointed day” mentioned in SBN (Cessation of Liabilities Act, 2017) and accepting of the SBNs upto the appointed date i.e., 31.12.2016 in discharging of a debt, the person concerned cannot be penalized. The relevant finding of the Bangalore Bench of the Tribunal in the case of Smt. Malapur Mounika Vs. ITO (supra) read as follows: “7. I have heard the rival submissions and perused the material on record. During the demonetization period, a sum of Rs.25,41,000/- was deposited in SBN in the bank account of the assessee. The assessee had explained the said source of cash deposit of Rs.8,13,384/- as made out of the closing cash balance as per books of account on 08.11.2016, which has been accepted by the AO. The balance sum of Rs.17,28,000/- was explained by the assessee to be from out of amounts realized from debtors vide her reply dated 29.07.2018. The AO held that the assessee has violated the notification No.S.O.3408(E) dated 08.11.2016 issued by the RBI wherein the legal tender character of old bank notes in the denomination of Rs.500 and Rs.1000 was withdrawn w.e.f. 08.11.2016 and assessee was not authorized by the Government of India to collect the SBNs. Therefore it was concluded by the AO that a sum of Rs.17,28,000/- is to be added under section 69A of the Act. The CIT(A) dismissed the appeal of the assessee also for the same reason by holding that assessee was not allowed to accept the SBNs.

8. The RBI had permitted the assessee to deposit SBN into the bank account on or before ‘appointed date’. The banks were asked to accept the same before the ‘appointed date’. The SBNs (Cessation of Liabilities Act, 2017) defines ‘appointed day’ vide section 2(1)(a) of the Act. “Appointed Day” means 31st day of December, 2016. Section 5 of the SBNs Cessation of Liabilities Act, 2017 also deals with prohibition of holding, transferring or receiving SBNs. Section 5 states as under : “5. On and from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note: Provided that nothing contained in this section shall prohibit the holding of specified bank notes—

P a g e 9 | 33 (a) by any person— (i) up to the expiry of the grace period; or (ii) after the expiry of the grace period,— (A) not more than ten notes in total, irrespective of the denomination; or (B) not more than twenty-five notes for the purposes of study, research or numismatics; (b) by the Reserve Bank or its agencies, or any other person authorised by the Reserve Bank; (c) by any person on the direction of a court in relation to any case pending in the court.”

9. Therefore, the bar on holding and transferring or receiving SBNs is only after the ‘appointed day’ which is 31.12.2016. In view of the above, there is no violation by the assessee of any law in accepting SBNs for the purpose of cash sales and considering it to be a due discharge of debt. Furthermore, even the CBDT had issued various Standard Operating Procedures (SOPs) instructing the AOs on the nature of verification to be made in cases where cash has been deposited in SBNs. The following instructions have been issued: [a] Instruction No. 03/2017 dated 21/02/2017 [b] Instruction No. 04/2017 dated 03/03/2017 [c] Circular in F No. 225/363/2017-ITA.II dated 15/11/2017; [d] Circular in F No. 225/145/2019-ITA.II dated 09/08/2019 10. On perusal of Circular F.No.225/145/2017-ITA 11 dated 09.08.2019 (enclosed as Annexure – 6 to the written submission), it is evident that AO has to examine the cash deposits made during the demonetization period in the case of businesses in accordance with the SOP laid down in the aforesaid circular. Only in cases where the assessee is unable to explain the source of the cash deposits made, can the said sum be treated as unexplained. In the instant case, it was claimed by the assessee that the entire sales made by her are recorded in the books of accounts and offered to tax. The sole reason for both AO and CIT(A) for making / sustaining the addition under section 69A of the Act was that subsequent to 08.11.2016, the SBNs were not legal tender and assessee was not person authorized to collect SBNs. The AO and the CIT(A) has not examined the veracity of source of cash deposits.

P a g e 10 | 33

11. The Bangalore Bench of the Tribunal in the case of Anantpur Kalpana in held that accepting SBNs subsequent to 08.11.2016 cannot be sole reason for making addition under section 69A of the Act. The relevant arguments raised before the Bangalore Bench of the Tribunal and the findings read as follows: “4. Aggrieved by the aforesaid addition, assessee preferred appeal before the CIT(A) and submitted that the cash deposits of Rs. 4,50,500/- in question was the cash collection from the small and medium class traders collected on various dates out of the business of the Assessee which were deposited in the bank account of the Assessee between 10/11/2016 and 19/12/2016 in CBS Bank and Axis Bank. Since the deposit of Rs. 4,50,500/- in her bank account are from the sale proceeds from distribution of FMCG goods relating to her concern 'M/s. Mahalakshmi Enterprise' from small and medium class traders collected on various dates in discharge of their liability in 1000 rupee and 500 rupee notes. It was submitted that old demonetized notes could be accepted till 30-12-2016 and a payee can continue to accept old demonetized notes of Rs 500 or Rs 1000 since those notes can be accepted as valid tender and there is no prohibition or lawful direction not to pay or accept old notes. The old notes still continue to be convertible into money since any person who is validly in possession of the old notes can get them converted into Legal tender from banks or can tender it for payment to specified transactions. There are no rules forbidding the payments in old notes. Therefore it is not correct to say that the old notes do not carry any value. It was submitted that the Assessee’s nature of business involves dealing with small and medium class traders and is predominantly cash oriented. The Assessee is maintaining regular books of accounts and the said books are subject to compulsory audit under the provisions of section 44AB of the Act. The Assessee is also filing its VAT Returns in connection to the purchases and sales made by it to the concerned authority. It was submitted that the impugned addition made is nothing but the sales made by the Assessee. The Assessee relied on decision of ITAT Indore Bench in the case of DEWAS SOYA LTD, UJJAIN v/s Income Tax (Appeal No 336/Ind/2012 wherein on identical facts of the case it was held that the claim of the assessee that such addition resulted into double taxation of the same income in the same year because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. 5. The CIT(A) however did not accept the contention of the assessee. He held that once the Rs.500 and Rs.1000 notes are declared as not valid legal tender on 09.11.2016, the assessee

P a g e 11 | 33 cannot accept cash payments after 09.11.2016 that are demonetized and doing so was patently illegal. The CIT(A) therefore held that the plea of the asessee cannot be accepted and accordingly dismissed the appeal of the assessee. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal.

10. The assessee filed cross objections supporting the order of the Id. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, hence, dismissed.

11. In the result, appeal of the revenue as well as the cross objection of the assessee are dismissed."

8. Learned DR reiterated the stand of the Revenue as reflected in the order of the CIT(A).

9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble

P a g e 13 | 33 Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.”

P a g e 14 | 33 currency in violation of circular/notification issued by the Government of India, the source explained by the assessee cannot be accepted. In other words, the Assessing Officer never disputed fact that the assessee has made sales in cash before demonetization period and also realized cash from debtors against cash sales made before demonetization period. Therefore, to decide the issue whether the assessee can accept specified bank notes even after it was banned for legal tender after 09th November, 2016 and further, the same can be added u/s. 69 of the Act as unexplained investment and also can be taxed u/s. 115BBE of the Act, it is necessary to examine the case in light of business model of the assessee, and evidence filed during the course of assessment proceedings.

9. The provisions of section 69 of the Act, deals with unexplained investment, where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of accounts, if any, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory, then the value of the investments may be deemed to be the income of the assessee of such financial year. In order to invoke provisions of section 69 of the Act, two conditions must be satisfied. First and foremost condition is there should be an investment and second condition is the assessee could not explain source for said investment. In this case, if you through evidence filed by the assessee including comparative details of amount collected out of sales for financial year 2015-16 & 2016-17 and details of cash deposit into bank for above financial years, we find that there is no abnormal deviations from its normal course of business. Further, on verification of analysis of cash sales and cash deposits to bank account there is no deviation of cash sales and cash deposits when compared to earlier financial year and demonetization period. Further, the assessee is dealing in essential commodities like medicines, surgical and diagnostics equipment through medical shops, hospital, doctors etc. The agents of the assessee come and collect cash from parties and directly deposit to bank account of the assessee. It is also not in dispute, in this line of business the majority of sales is in cash, because doctors, hospitals and medical shops mainly deals with cash. Therefore, from the business model of the assessee and trade practice there is no doubt of what so ever with regard to the explanation offered by the assessee that it has collected cash from debtors towards sales made in cash before demonetization period. Further, the appellant has also regularly availing GST/VAT returns and there is also being no change or deviation in the VAT returns field for the earlier months i.e., before the announcement of demonetization. The assessee had also declared sales made in cash in their books of accounts and filed

P a g e 15 | 33 necessary return of income and paid taxes on said income. The appellant has also made cash deposits regularly before and during that period including thenotes which are not banned and therefore, it is not a case of amount of deposit in specified bank notes has came out of undisclosed source or under any circumstances only to change the colour of the money. From the details filed by the assessee, it is evident that during the month of November and December, the assessee has made almost more than 5 crores cash deposit which includes various demonetized currency and regular notes. Further, the Assessing Officer has accepted fact that out of total cash deposits, only a sum of Rs. 1,82,37,000/- is in specified bank notes. From the above, it is very clear that there is no significant change in the pattern of cash sales, cash collection and cash deposit during demonetization period, when compared to earlier period in the same financial year and also during immediate preceding financial year. Therefore, we are of the considered view that the assessee has satisfactorily explained source for cash deposit made during demonetization period in specified bank notes and thus, the Assessing Officer is completely erred in making additions u/s. 69 of the Act.

10. Coming back to the observations of the Assessing Officer with regard to GO/notification issued by the RBI and Government of India, to deal with specified bank notes. The Assessing Officer is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argued that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 has been withdrawn from circulation from 09th November, 2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31st December, 2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31st December, 2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31st December, 2016. Therefore, under those circumstances, some persons continued to accept and transact the specified banknotes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the Assessing Officer makes out a case

P a g e 16 | 33 that the assessee has deposited unaccounted cash into bank account in specified bank notes.

11. We further, noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Assessing Officer to verify cash deposits during demonetization period in various categories of explanation offered by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the Assessing Officer needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the Assessing Officer needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if you go through analysis furnished by the assessee in respect of total sales, cash sales realisation from debtors and cash deposits during financial year 2015-16 & 2016-17, there is no significant change in cash deposits during demonetization period. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. In our considered view, to bring any amount u/s. 69 of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also beenduly included in the return of income filed in relevant assessment year. Therefore, we are of the considered view that, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account.

12. At this stage, it is relevant to consider certain judicial precedents relied upon by the ld. Counsel for the assessee. The Ld. Counsel for the assessee relied upon the decision of Delhi High Court in the case of Agson Global Pvt Ltd vs ACIT [2022] 325 CTR 001. The Hon’ble Delhi High Court held that additions made on the sole ground of deviation in the ratio of cash sales and cash deposits during the demonetization period with that of earlier period, is improper and unlawful.

P a g e 17 | 33

13. The assessee had also relied upon the decision of ITAT Indore Bench in the case of Dewas Soya Ltd, Ujjain vs ITO in where it has been held as under: The Hon'ble Indore ITAT Bench in the case of DEWAS SOYA LTD, UJJAIN vs. Income Tax (Appeal No. 336/lnd /2012 has held that," the claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit 8: loss account) and on the other hand amounts received from above parties has also been added u/s 68 of the Act. This view has been held by the Hon'ble Supreme Court in the case of CIT vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194(SC) that "It is for the assessee to prove that even if the cash credit represents income, it is income from as source, which has already been taxed." The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again."

14. The ld. DR, has relied upon the decision of ITAT, Hyderabad Benches, in the case of Vaishnavi Bullion Pvt Ltd vs ACIT Taxsutra 914/ITAT/2022 (Hyd). We, find that in the said case, the Tribunal noted that CFSL report, books and statement are contrary to assessee’s claim which are of post demonetization period. Under these facts, the Tribunal came to the conclusion that additions made towards cash deposits during demonetization period, assessee could not explain proper source. In this case, on perusal of details and records, we find that the assessee has filed all details to explain source for cash deposits and on the basis of details filed by the assessee, the Assessing Officer never disputed fact that source for cash deposit is not out of ordinary business receipts, which has been accounted in the books of accounts of the assessee and further, there is no deviation in cash deposits duringdemonetization period when compared to earlier period in same financial year and in earlier financial year. Therefore, we reject the case laws relied upon by the ld. DR. 15. In this view of the matter and by considering facts and circumstances of this case, we are of the considered view that the Assessing Officer erred in making additions towards cash deposits during demonetization period u/s. 69 of the Act. The ld. CIT(A), without appreciating relevant facts simply sustained additions made by the Assessing Officer. Thus, we set aside the order passed by the CIT(A) and direct the Assessing Officer to delete additions made towards cash deposits u/s. 69 r.w.s. 115BBE of the Act.” 13. The Visakapatnam Bench of the Tribunal in the case of ITO Vs. Sri Tatiparti Satyanarayana in ITA No.76/Viz/2021, C.O.

P a g e 18 | 33 No.42/Viz/2014 (order dated 16.03.2022) held that dealing in SBNs prior to the appointed day i.e., 31.12.2016 cannot be prohibited and the source of deposit needs to be examined. The relevant finding of the Visakapatnam Bench of the Tribunal reads as follows: “9. We have heard both the parties and perused all the documents on record. We find that there was sufficient cash balance with the assessee as detailed in page No.30 of the paper book. The Specified Bank Notes (Cessation of Liabilities) Act, 2017, defines "appointed day" vide Section 2(1)(a). As per Section 2(1)(a), "appointed day" means the 31st Day of December 2016. Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 also deals with prohibition on holding, transferring or receiving specified bank notes. Section 5 states that "On and from the appointed day, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note". We therefore, find that the specified bank notes can be measured in monetary terms since the guarantee of the Central Government and the liability of Reserve Bank of India does not cease to exist till 31.12.2016. In view of the above, the contention of the Ld.DR, treating the receipt of SBNs from cash sales as illegal and thereby invoking the provisions of section 69A is not valid in law. Therefore, we dismiss this ground of the Revenue.”

14. In view of the aforesaid reasoning and judicial pronouncements cited supra, we hold that both the AO and the CIT(A) have erred in holding that assessee, prior to the appointed day i.e., 31.12.2016, was prohibited from accepting the SBNs and addition of the same under section 69A of the Act is warranted.

15. However, in the instant case, I notice that the AO and the CIT(A) have not examined the source of the aforesaid cash deposits. For the limited purpose of examining the same, the issue is restored to the files of AO. The AO is instructed to examine the source of cash deposits. The assessee shall produce necessary evidence in support of her case. It is ordered accordingly.

8. In view of the above finding of the Bangalore Bench of the Tribunal, I hold that assessee cannot be denied the benefit of source of cash deposits of the SBNs since he has received the same prior to the appointed day mentioned in the SBN (Cessation of Liabilities Act, 2017). However, as regards the issue of source of cash deposit, there is no verification done by the AO or the CIT(A). Hence, the issue is restored to the file of the AO. The AO is directed to examine the claim of the assessee whether cash deposits

P a g e 19 | 33 are out of receipts from trade activities. If it is found so, the source of cash deposit ought to be accepted as explained. It is ordered accordingly. 9. In the result, appeal filed by the assessee is allowed for statistical purposes. “

P a g e 20 | 33

10. In regard to issue of transfer of file from SMC Bench to Division Bench, ld Sr DR did not raise any objection.

P a g e 21 | 33 was found by the Presiding Officer that this case is required to be heard by Division Bench and it was informed to the ld counsels, who were present i.e. Shri B.Panda, Sr. Advocate and Shri B.R.Panda, Advocate and ld Sr DR Shri S.C.Mohanty. The copy of the order sheet entry transferring the file from SMC Bench to Division Bench is extracted below: dt.18.6.2024 : Assessee represented by :Basudev Panda, Sr. Adv and B.R.Panda, Advocate. Department represented by :S.C.Mohanty, Sr.DR. The Hon’ble Bench is directed to fix this case before the Division bench on 10.7.2024. Case is adjourned to 10.7.2024. Both the parties are informed in the open court.

12. Consequently, the appeal of the assessee was transferred to Division Bench constituted by the present Members. It must also be mentioned here that the Presiding Officer, who was sitting in SMC Bench, is also part of the Division bench here in the present appeal. This being so, the arguments raised by ld AR that SMC Bench does not have the power to transfer the file to Division bench without speaking order does not stand to reason and the said argument is rejected. In any case the reasons were also explained to the Counsels who had appeared before the SMC bench and it is so recorded in the order sheet that “Both the parties are informed in the open court.”

P a g e 23 | 33 P a g e 24 | 33 P a g e 25 | 33 P a g e 26 | 33 P a g e 27 | 33 “ P a g e 28 | 33 P a g e 29 | 33

‘4. I have considered the submission of the ld. Sr. DR and the written submissions filed by the assessee. It is an admitted fact that the assessee’s cash balance as on 08.11.2016 is only Rs.252.40. It is also an accepted fact that as on the date of demonetisation except for specified persons no other persons were permitted to transact in the demonetised currency. The assessee does not fall within the exempted category of persons to deal with the demonetized currency. With this in mind, if it is seen, the sale alleged to have been made by the assessee between 08.11.2016 and 12.11.2016 though shows availability of funds along with recovery from the debtors, still it cannot be said that this is a source for the specified bank notes being the demonetised currency which has been deposited in the bank on 12.11.2016. I am unable to even consider a position that Rs.28 lakhs SBNs could have been with the assessee before 08.11.2016 insofar as the cash book only shows cash availability of Rs.252.40. Admittedly, if the assessee desires to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he has received the SBNs. In the absence of such prove, the deposit of SBN to the extent of Rs.28 lakhs will have to be treated as the unexplained investment of the assessee. In these circumstances, I find no error in the order of the ld. CIT(A). Consequently, the appeal filed by the assessee stands dismissed.

16. Admittedly, the facts in the assessee’s case does not in any manner tally with the facts in the case of Shri Krishnamurthy Nagaraj (supra) or the facts in the case of Ganapathy Palaniyappan (supra). It must be mentioned here that the facts in the present case clearly shows that the assessee has been selling his merchandise and accepting SBNs in respect of the sales

P a g e 31 | 33 even after the appointed date. No prudent individual would spread over the deposits of the SBNs over a period of two months from the date of Demonetisation more specifically several times he had to stand in a queue to deposit the said money, if he had such amount of SBN at the beginning of the Demonetisation. It is also accepted fact that except the specified persons, no other persons were permitted to transact in the demonetised currency. The assessee does not fall within the exempted category person to deal with the Demonetisation currency. It was however open to the assessee to specify from where he has received SNBs and in absence of such evidence, the addition as made by the Assessing Officer and confirmed by ld CIT(A) is liable to be confirmed and we do so.

P a g e 32 | 33 In these circumstances, it must be considered that the Assessing Officer has been very reasonable in restricting the addition to Rs.8,35,500/-.

Order dictated and pronounced in the open court on 10/07/2024. Sd/- sd/- (Manish Agarwal) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 10/07/2024 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : Mr Bichitrananda Rout, At: Dhiha Sahi, Shankarpur, Cuttack 2. The Respondent: ITO, Ward -2(1), Cuttack 3. The CIT(A)- NFAC, Delhi 4. Pr.CIT, Cuttack 5. DR, ITAT, 6. Guard file. //True Copy// By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 33 | 33