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Facts
The assessee, running a petrol pump, deposited Rs. 13,75,000/- in old Rs. 1,000/- notes during the demonetization period. The Assessing Officer (AO) added this amount under Section 68 of the Act, treating it as unaccounted income, and also disallowed 10% of car expenses. The CIT(A) upheld these additions.
Held
The Tribunal held that the deposit of Specified Bank Notes (SBNs) was permissible under the Specified Bank Notes (Cessation of Liabilities) Act, 2017, as the deposit was made before the appointed date of 31.12.2016. However, the disallowance of 10% of car expenses for lack of a log book was upheld due to insufficient evidence from the assessee.
Key Issues
Whether the deposit of old currency notes during the demonetization period was legal and if the disallowance of a portion of car expenses was justified.
Sections Cited
143(3), 142(1), 68, 250
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Income Tax Appellate Tribunal, DELHI BENCHES: G : NEW DELHI
Before: SHRI SUNIL KUAMAR SINGH & SHRI BRAJESH KUMAR SINGH
Suman Dahiya, Vs ACIT, C/o DS Legal & Associates, Aayakar Bhawan, Opp. Mansarover B-50, LGF, South Extension, Park, Rohtak, Haryana 124001 Part-II, New Delhi 110049 PAN: AAEPD0159P Assessee by : S/Shri Shantu Jain & Prateek Kumar, Advocates Revenue by : Shri Sanjay Sharma, Sr. DR Date of Hearing : 14.05.2025 Date of Pronouncement : 16.05.2025 ORDER
PER SUNIL KUMAR SINGH, JM:
This appeal has been preferred against the impugned order dated 08.07.2024 passed in Appeal no. CIT(A), Rohtak/10779/2019-20 by the Ld. Commissioner of Income–tax(Appeals)/National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”], u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment Year [A.Y.] 2017-18, wherein learned CIT(A) has dismissed assessee’s appeal and confirmed the addition made vide assessment order dated 19.12.2019.
The brief facts under appeal state that assessee was running a petrol pump in the name and style of M/s. Vishal Filling Station, VPO Jakhoda, Bahadurgarh. Assessee e-file its return of income on 07.11.2017, declaring total income of Rs.39,65,160/- the return was processed u/s. 143(1) of the Act. The case was selected for complete scrutiny under CASS. Statutory notices u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee asking her to explain as to why cash of Rs.13,75,000/- was deposited on 25.11.2016 in the currency of Specified Bank Notes (SBN) of Rs.1,000/- during post demonetization period in assessee’s Yes Bank account no. 12184600000043 and further to explain in respect of the car expenses amounting to Rs.2,75,873/-. Assessee submitted before ld. AO that the sale increase from November 2015 to November 2016 was 184.41% and from November, December 2015 to November, December 2016, was 92.28%, whereas the difference in cash deposit was only 89.28%. Ld. Assessing Officer was not satisfied with assessee’s response and further found that the log book was also not maintained to support the claim of car expenses, hence, added Rs.13,75,000/- u/s. 68 of the Act and 10% of car expenses as Rs.27,587/-, assessing the total income at Rs.53,67,747/-.
Aggrieved by the assessment order dated 19.12.2019, assessee preferred an appeal before learned CIT(A), who dismissed assessee’s first appeal, confirming the aforesaid additions.
Assessee has raised following grounds in this second appeal.
“1. That the action taken u/s 143(3) of the Income Tax Act and consequent assessment framed, as upheld by Ld. CIT(A) is vitiated, without jurisdiction and contrary to law.
2. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. Assessing Officer in making an addition of Rs. 13,75,000/- on account of unaccounted income u/s 68 of the Act, during post-demonetization period and that too by recording incorrect facts and findings and without observing the principle of natural justice.
3. That in any case and in any view of the matter, action of Ld. CIT(A) in upholding the action of Ld Assessing Officer in making an addition of Rs. 13,75,000/- on account of unaccounted income u/s 68 of the Act, during post-demonetization period, is bad in law and against the facts and circumstances of the case.
4. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. Assessing Officer in making an addition of Rs.27,587/- on account of 10% of car expenses being personal in nature, and that too by recording incorrect facts and findings and without observing the principle of natural justice. 5 That in any case and in any view of the matter, action of Ld. CIT(A) in upholding the action of Ld. Assessing Officer in making an addition of Rs.27,587/- on account of 10% of car expenses being personal in nature, is bad in law and against the facts and circumstances of the case. 6. That the assessment so framed and upheld and addition made suffers from perverse findings and is contrary to the facts on record and the same needs to be set aside. 7. That the levy of interest under the Act is disputed and as such unsustainable in law besides being excessive.
The Appellant craves leave for adducing necessary evidence, amendments and explanations including written one to the aforesaid grounds and also raise additional grounds in the course of hearing of the appellate proceedings.” 5. We have perused the records and heard learned representative for the assessee and ld. DR for the Revenue.
At the very outset, it is worth mentioning that the assessee has taken the first ground that the assessment framed u/s. 143(3) of the Act is without jurisdiction. However, no specific submissions have been made before this Tribunal by the ld. AR. Hence, the ground no.1 pertaining to the jurisdiction stands rejected for want of specific pleadings and submissions.
On the basis of remaining grounds 2 to 8, the main points for determination in this appeal are as under:-
Firstly, whether the appellant assessee was permitted under law to deposit Rs.13,75,000/- post demonetization period on account of SBN of Rs.1,000/- denomination deposited in bank on 25.11.2016 ? Secondly, whether the appellant assessee was entitled for the claim of car expenses of Rs.2,75,873/- during the year under consideration ? 8. Ld. Representative of the assessee has submitted that the assessee was entitled to deposit the sale proceeds by 31.12.2016 in view of the specified bank notes (cessation of liabilities) Act 2017. Further, submitting that this substantive law supersedes all the previous notifications and issued by the Central Government. Ld. AR has referred an order dated 16.03.2022 passed by the Visakhapatnam Bench of this Tribunal passed in for AY 2017-18 in support of his arguments.
The ld. DR supported the impugned order.
The only reason to add Rs.13,75,000/-, is mainly due to the notification no. S.O. 3544(E) dated 24.11.2016 published by Ministry of Finance, wherein it was directed that petrol pumps and other exempt categories were not allowed to accept old currency in the denomination of Rs.1,000/- after 24th November, 2016. Ld. Assessing Officer was satisfied in part with assessee’s response that all the purchase bills were verified with stock register satisfactorily after thoughtful consideration. Ld. AO further observed that on basis of this, no adverse inference was drawn for percentage increase in cash deposited during demonetization. It is true that the notification dated 24.11.2016, made certain amendments in the notification dated 08.11.2016 with further clarification that Specified Bank Notes (SBN) shall mean bank notes of the denominational value of Rs.500/-. However, the specified bank notes (cessation of liabilities) Act, (No.2), 2017 came into force w.e.f. 31.12.2016. This substantive provision of law has been discussed and interpreted by the aforesaid Coordinate Bench of this Tribunal vide para 9 of its order dated 16.03.2022, which reads 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 5 (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.”
It is well established precedent that a circular of CBDT, no doubt, has the force of law, can even supplant the law in cases where it is beneficial to the assessee and can mitigate or relax the rigors of the law. The powers of the CBDT in issuing circular for general guidance are subject to two important conditions. One is that it does not entitle the income tax authority including the Board to issue instructions or circulars contrary to the substantive provision of law or curtailing the relief to which the assessee is otherwise entitled under law. In Gestetner Duplicators (P.) Ltd. v. CIT (1979) 117 ITR 18(SC), the Hon’ble apex court has held that the circulars or directions cannot be permitted to curtails the provisions of the Act.
The circular cannot curtail the benefit conferred on assessee or be contradictory to the Act. Hon’ble Apex Court in Union of India V/s Wood Paper Ltd. AIR 1991 SC 2049 has held that the condition regulating the computation of benefit should be interpreted liberally. We are in respectful agreement with the findings of the coordinate Bench of this Tribunal and hold that in view of the ‘non-obstante’ clause contained u/s. 3 of the above referred Act No. 2 of 2017, the appointed date for the purposes of holding or receiving specified bank notes has been declared as 31.12.2016. The bank deposit was made on 25.11.2016, which is well before 31.12.2016. Ld. CIT(A) has miserably failed to take into consideration the aforesaid Act (No. 2) of 2017 and passed impugned order contrary to the law to this extent. The aforesaid first point is accordingly determined in favour of the appellant assessee. AO is thus directed to delete the addition of Rs.13,75,000/- added u/s. 68 of the Act.
Secondly, we notice that the ld. AO has disallowed a lump sum amount of Rs.27,587/- (10% of the claimed car expenses) on the ground that the assessee failed to provide any log book in order to verify the claim as to whether the car was used for the personal purposes or for the business purposes. It is evident that neither any evidence to this extent was produced before the Revenue Authorities nor before this Tribunal. Hence, we are not inclined to interfere in the judicious discretion exercised by the ld. AO and confirmed by the ld. CIT(A) by disallowing 10% of the claimed car expenses as personal expenses. This point is accordingly, decided against the appellant assessee.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 16.05.2025.