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Facts
The assessee, a stamp vendor, deposited Rs. 2,65,500/- in Specified Bank Notes (SBNs) during the demonetization period. The Assessing Officer (AO) treated Rs. 2,54,000/- as undisclosed money under Section 69A, deeming it unauthorized as stamp vendors couldn't accept SBNs post-demonetization. The Commissioner (Appeals) upheld the AO's decision.
Held
The Tribunal held that Rs. 46,000/- was explained as a mere re-deposit from a prior cash withdrawal to reduce overdraft interest. For the remaining Rs. 2,08,000/-, the Tribunal found the explanation plausible given the cash-intensive nature of the stamp vending business and the substantial turnover. The Revenue failed to provide contrary evidence, and the amount was considered reasonable within the business context.
Key Issues
Whether the demonetized currency notes (SBNs) deposited by a stamp vendor during the demonetization period constituted undisclosed income under Section 69A.
Sections Cited
69A, 143(3), 142(1), 143(2)
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of the first appeal dated 24.01.2025 passed by the learned Addl/JCIT(A)-1, Ludhiana ["CIT(A)"], which in turn arises out of the assessment order dated 23.12.2019 passed by the learned Income Tax Officer, Raisen ["AO"] u/s 143(3) for Assessment Year 2017-18 ["AY"] of Income-tax Act, 1961 [“the Act”], the assessee has filed this appeal on the grounds as mentioned in Form No. 36 (Appeal Memo).
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 2. The background facts leading to present appeal are such that the
assessee, an individual, is engaged in the business of stamp vending. The
assessee filed return of income for AY 2017-18 declaring total income of Rs.
2,88,210/- (including business income of stamp vending activity). The case
was selected for scrutiny under CASS to examine “large cash deposits
compared to returned income” during previous year 2016-17 and the AO
issued notices u/s 143(2)/142(1). In response to notices, the assessee made
submissions to AO. On examination of statements of bank accounts of
assessee, the AO extracted details of deposits made by assessee in three
bank a/cs, one with State Bank of India [“SBI”] and two with Madhya
Pradesh Gramin Bank [“MPGB”], and details of sale transactions of stamps
done by assessee, during previous year 2016-17 for three periods, namely (i)
01.04.2016 to 08.11.2016 (pre-demonetisation), (ii) 09.11.2016 to
30.12.2016 (demonetization) and (iii) 31.12.2016 to 31.03.2017 (post-
demonetisation). These data are given by AO in a tabular format in Para 5 of
assessment-order. Thereafter, in later part of very same para 5, the Ld. AO
noted that the assessee had deposited an aggregate sum of Rs. 2,65,500/-
in Demonetised Currency Notes/Specified Bank Notes ("SBNs") during the
demonetization period in accounts with SBI and MPGB. The details of such
deposits in SBNs, as noted by AO, are as under:
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18
Account No. & Bank Date Amount in SBNs
30388993026; SBI 03.12.2016 Rs. 11,500/-
201211330001862; MPGB 17.11.2016 Rs. 46,000/-
201211330001862; MPGB 03.12.2016 Rs. 1,08,000/-
201211130000490; MPGB 17.11.2016 Rs. 1,00,000/-
Total Rs. 2,65,500/-
The Ld. AO excluded Rs. 11,500/- deposited in SBI on 03.12.2016 by
treating the same as personal past savings and held that the remaining sum
of Rs. 2,54,000/- [46,000 + 1,08,000 + 100,000] constituted undisclosed
money u/s 69A on the premise that the assessee, being a stamp vendor,
was not an authorized person to receive SBNs after 09.11.2016
(commencement of demonetization) when they ceased to be legal tender. The
total income was accordingly assessed at Rs. 5,42,210/- against the
returned income of Rs. 2,88,210/-. Aggrieved, the assessee preferred an
appeal before Ld. CIT(A). The Ld. CIT(A), vide impugned order of first appeal,
confirmed AO’s action holding that no substantial evidence was furnished
by assessee to establish that the SBNs deposits constituted business
receipts and also that the transactions in SBNs during demonetization
period were not valid for the business of stamp vending carried by assessee.
Now, the assessee has filed present appeal.
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 4. Presently, the short issue for our consideration is whether the
addition of Rs. 2,54,000/- made u/s 69A on account of deposits in SBNs
during demonetization period is sustainable?
Ld. AR for assessee made following submissions:
(i) The assessee is engaged in stamp vending business where cash
collections from constituents towards sale of stamps are inherent to
the nature of business. The assessee has deposited such business
collections in bank accounts from time to time.
(ii) With regard to the deposit of Rs. 46,000/- made on 17.11.2016 in
MPGB account (A/c No. 201211330001862), the Ld. AR successfully
demonstrated, from bank statements of both SBI and MPGB placed in
Paper-Book, that the assessee had made a cash withdrawal of Rs.
50,000/- from SBI account on the preceding day i.e. 16.11.2016, out
of which Rs. 46,000/- was re-deposited in MPGB account on
17.11.2016. The Ld. AR submitted that the MPGB account is an
Overdraft A/c carrying a debit balance on which the bank was
charging interest, and the purpose of withdrawal from SBI and re-
deposit in MPGB by assessee was to reduce interest burden. This
inter-account movement of funds is explained with the support of
entries in bank statements placed in Paper-Book.
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 (iii) With regard to the remaining deposits of Rs. 1,00,000/- on
17.11.2016 (MPGB A/c No. 201211130000490) and Rs. 1,08,000/- on
03.12.2016 (MPGB A/c No. 201211330001862), the Ld. AR submitted
that these amounts were received from constituents in SBNs prior to
declaration of demonetization for the purpose of purchase of stamps.
Since the assessee was already having a Credit balance in his A/c
with Stamps Department (this fact is demonstrated by Ld. AR by
drawing our attention to the the Copy of assessee’s A/c with Stamps
Department filed in Paper-Book), there was no immediate necessity to
deposit such collections in bank a/c. When the Bench raised a query
seeking the names of the constituents from whom the impugned
amounts were received, Ld. AR candidly submitted that the assessee
serves multiple constituents and maintains a running account with
the Stamps Department in which lump sum deposits are made
routinely from time to time for the business of stamp vending,
therefore it is not feasible to correlate each receipt with a specific
constituent. He, however, submitted forcefully that the deposits in
assessee’s Bank a/cs as well as transfers from Bank a/cs to running
A/c of Stamps Department from time to time, are referrable to genuine
business transactions made in the ordinary course of stamp vending
business carried on assessee and so is the case of impugned deposits
of Rs. 1,00,000/- and Rs. 1,08,000/-.
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 (iv) Ld. AR also submitted that the aggregate of the deposits that remain
to be explained (after excluding the deposit of Rs. 46,000/- which
stands fully explained from cash withdrawal from SBI A/c) amounts to
Rs. 2,08,000/- only, which is commensurate with the volume of
business as reflected in the records before the AO, extracted by AO in
tabular format in Para 5 of assessment-order. Therefore also, the
deposit of just Rs. 2,08,000/- should not be adversely viewed.
Per contra, Ld. DR for revenue supported the orders of the lower
authorities and submitted that the assessee has failed to furnish
satisfactory evidence to establish the source of deposits and that the receipt
of SBNs during the demonetization period was not permissible for a stamp
vendor. He, however, left the matter for the wisdom of bench in view of the
fact that the quantum of addition is very less.
We have considered rival submissions of both sides and perused the
material on record. The dispute between assessee and revenue authorities
relates to the source of deposit of Rs. 2,54,000/- made by assessee in SBNs
during the demonetization period. The disputed deposits are of Rs. 46,000 +
1,08,000 + 100,000.
We first examine the deposit of Rs. 46,000/- on 17.11.2016 in the
MPGB Overdraft A/c. The Ld. AR has demonstrated, from bank statements
of both SBI and MPGB placed in Paper-Book, that a cash withdrawal of Rs.
50,000/- was made by the assessee from his own SBI account on
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 16.11.2016 and Rs. 46,000/- was deposited in the MPGB account on the
very next day of 17.11.2016. This establishes a direct and verifiable nexus
between the withdrawal and deposit. The explanation that such re-deposit
was made in Overdraft A/c with MGPB to reduce interest burden is
commercially plausible and remains uncontroverted by Revenue.
Accordingly, the addition to the extent of Rs. 46,000/- is not sustainable
and is directed to be deleted.
We now turn to the remaining deposits aggregating to Rs. 2,08,000/-
viz., Rs. 1,00,000/- on 17.11.2016 and Rs. 1,08,000/- on 03.12.2016. The
explanation of assessee is that these amounts represent cash received from
constituents prior to demonetization for purchase of stamps, in the course
of stamp vending business. After a careful consideration, we give our
mindful and judicious understanding as under:
(i) It is an undisputed fact that the assessee is a stamp vendor
conducting business predominantly in cash, and that the Ld. AO had
himself accepted, without any addition, the cash deposits made in the
very same bank accounts for the period other than demonetization (i.e.
01.04.2016 to 08.11.2016 and 31.12.2016 to 31.03.2017) by
reference to the same records of stamp vending activity [Para 5 of
assessment-order]. The sole basis for treating the SBNs deposits
differently is only the notification of demonetization, without any
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 independent finding that the underlying business transactions or
records were not reliable.
(ii) The total sales of the assessee for the period 01.04.2016 to
08.11.2016 alone stood at Rs. 76,13,391/- as noted by AO in Para 5
of assessment order itself. Given the cash-intensive nature of the
stamp vending business, the existence of accumulated cash collection
from constituents as on 09.11.2016 is plausible and probable.
(iii) The aggregate amount in question, viz., Rs. 2,08,000/-, is relatively
small in the context of the overall business turnover of assessee. The
CBDT had, vide Para 6 of Annexure to the Instruction No. 3/2017
dated 21.02.2017 (SOP to be followed by Assessing Officers in
verification of Cash Transactions relating to demonetization),
instructed that cash deposits made during the demonetization window
should be assessed in the context of the nature, volume and pattern of
business activity of assessee. The guidance given by CBDT shows that
the deposits of business are not to be treated as unexplained. The
amount of Rs. 2,08,000/-, having regard to the nature and scale of
business, adequately passes the tests laid down by CBDT.
(iv) The Revenue has brought no positive material on record to
demonstrate that the impugned deposits represent income from any
source other than the business of stamp vending or to rebut the
assessee's explanation.
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 10. Upon judicious consideration of the facts as noted above and the legal
position, we are of the view that the section 69A can be invoked only where the explanation offered by assessee is found to be unsatisfactory based on material on record. In present case, the assessee has offered an explanation
that is consistent with the nature of the business and corroborated by surrounding circumstances, namely, the volume of sales, the cash-intensive nature of stamp vending, the running account with the Stamps Department,
and the Ld. AO's own acceptance of similar deposits for other periods. No contrary material has been placed on record by the Revenue to establish the existence of unexplained income held by assessee.
Accordingly, we hold that the addition of Rs. 2,54,000/- made by Ld. AO u/s 69A and sustained by Ld. CIT(A) is not justified and is directed to be
deleted in its entirety.
Resultantly, this appeal is allowed.
Order pronounced in open court on 17/04/2026
Sd/- Sd/-
(PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 17/04/2026 Patel/Sr. PS
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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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