MANI BOOPATHI RAJU,NAMAKKAL vs. ITO, WARD-1, TIRUCHENGODE

PER MANU KUMAR GIRI, JM:

The captionedappeal filed by the Assesseeis directed against the order of the Ld. Commissioner of Income Tax, Appeal, ADDL/JCIT(A)-1, Jaipur, [CIT(A)] dated28.01.2026 for Assessment Years 2017-18. 2. Brief facts of the case are that the assessee is an individual deriving income from insurance commission, other commission and fees. For Assessment Year 2017-18, the

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 2 - :: assessee filed his return of income on 04.08.2017 declaring total income of Rs.3,81,600/-. The return was selected for scrutiny under CASS on account of cash deposits in the bank account, and notice u/s. 143(2) of the Income-tax Act, 1961 (“the Act”) was issued on 31.08.2018. During the course of assessment proceedings, the Assessing Officer (“AO”) noticed cash deposits aggregating to Rs.9,83,300/-, out of which Rs.7,01,000/- represented deposits of Specified Bank Notes (“SBNs”) of Rs.500 and Rs.1,000 denominations during the demonetisation period. The assessee explained that he was engaged in the business of insurance commission and that the cash represented collections received from customers towards insurance premium payments, including amounts received in SBNs during the demonetisation period. According to the assessee, such amounts were deposited into his bank account for remittance towards the respective insurance policies. The AO, however, rejected the explanation primarily on the ground that, pursuant to the Gazette Notification dated 08.11.2016, SBNs ceased to be legal tender from 09.11.2016 and the assessee was not one of the persons authorised to accept such currency. Accordingly, the AO treated Rs.7,01,000/- as unexplained money u/s. 69A of the Act and added the same to the income of the assessee.

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ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 3 - :: 3. On appeal, the CIT(A), the assessee furnished additional evidence under Rule 46A, which was forwarded to the Jurisdictional Assessing Officer for examination. The JAO, in the remand report dated 09.10.2024, reiterated that the assessee had not satisfactorily substantiated the receipt of SBNs from customers and had not established that the corresponding insurance premium payments were actually made by him on behalf of the customers. It was also stated that the insurance receipts were in the names of the customers. The CIT(A), after considering the remand report and the assessee's submissions, confirmed the addition of Rs.7,01,000/- u/s. 69A. The CIT(A) held that, even if the assessee had reflected the source of the deposits in his books, he was not authorised to receive SBNs for ordinary business transactions after demonetisation. The CIT(A) further observed that the assessee had failed to establish through documentary evidence that the insurance payments were actually made by him on behalf of the customers. Aggrieved, the assessee is in appeal before the Tribunal. 4. The learned AR submitted that the assessee had duly explained the nature and source of the cash deposits. The amount of Rs.7,01,000/- represented business receipts collected from customers towards insurance premium and the same was duly recorded in the books of account. It was submitted that the mere fact that the receipts were in the form of SBNs could not, by itself, lead to an inference that Page - 3 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 4 - :: the money was unexplained. The provisions of section 69A require the Revenue to establish that the assessee was found to be the owner of money which was not recorded in the books or for which no satisfactory explanation regarding its nature and source was offered. 5. The assessee placed reliance on the decision of the Co- ordinate Bench of the Tribunal in the case Tamil Nadu State Marketing Corporation Ltd Vs The ACIT ITA No.431/Chny/2023 for AY 2017-18, dated 07.10.2024, wherein, in the context of demonetisation deposits, the Tribunal held that mere violation of a notification relating to acceptance of SBNs could not automatically result in an addition u/s. 69/69A when the assessee had satisfactorily explained the nature and source of the deposits. 6. The assessee also relied upon the decision of the Hon'ble Bombay High Court in Narendra G. Goradia (HUF) v. CIT, 234 ITR 571, for the proposition that once the source and nature of the money are satisfactorily established, the assessee cannot be required to prove the acquisition of each individual currency note of a particular denomination. It was therefore contended that the issue before the Tribunal was not whether the assessee ought to have accepted SBNs from customers from a regulatory perspective, but whether the source of the money deposited in the bank account was unexplained for the purposes of section 69A. According to the learned AR, any alleged violation of the demonetisation notifications could not Page - 4 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 5 - :: convert an otherwise explained business receipt into unexplained income under the Act. 7. The learned Departmental Representative (“DR”) supported the orders of the lower authorities. It was submitted that the SBNs ceased to be legal tender with effect from 09.11.2016 and their acceptance was permitted only in specified circumstances and by specified categories of persons. The assessee, being an insurance commission agent, was not authorised to accept SBNs towards ordinary business transactions. The learned DR further submitted that the assessee had not furnished satisfactory evidence establishing that the SBNs were actually received from customers towards insurance premium payments. The receipts produced by the assessee were issued in the names of the customers and did not establish that the assessee had made the corresponding payments to the insurance companies. It was accordingly contended that the assessee had failed to discharge the onus cast upon him u/s. 69A and that the addition confirmed by the CIT(A) deserved to be sustained. 8. We have heard the rival submissions and perused the material available on record. The undisputed fact is that the assessee had made cash deposits of Rs.9,83,300/- during the relevant previous year, out of which Rs.7,01,000/- represented SBNs deposited during the demonetisation period. The assessee's consistent explanation before the AO as well as before the appellate authority was that the Page - 5 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 6 - :: amounts represented collections from customers towards insurance premium and that the same were recorded in his books of account. The lower authorities have not brought on record any material to establish that the amount of Rs.7,01,000/- represented an independent source of income of the assessee or that the assessee had introduced his own unaccounted money in the form of SBNs. The principal basis for making the addition is that the assessee was not authorised to accept SBNs after 09.11.2016. In our considered view, this aspect, by itself, cannot be determinative of the issue u/s. 69A of the Act. The provisions of section 69A are attracted where the assessee is found to be the owner of money or other specified assets which are not recorded in the books of account, if any, maintained by him, and the assessee either offers no explanation regarding the nature and source thereof or the explanation offered is not satisfactory. Thus, the crucial question for application of section 69A is the nature and source of the money and not merely the denomination of the currency in which the money happened to be received. 9. In this regard, we find considerable force in the reliance placed by the learned AR on the decision of the Co-ordinate Bench of this Tribunal in ITA No.431/Chny/2023 for AY 2017- 18 dated 07.10.2024 (supra). In the said case also, the Revenue had proceeded on the premise that the assessee was not entitled to accept SBNs after demonetisation. After Page - 6 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 7 - :: considering the demonetisation notifications, the Specified Bank Notes (Cessation of Liabilities) Ordinance/Act and the provisions of sections 69 and 69A, the Co-ordinate Bench held that mere violation of the notifications relating to SBNs would not, by itself, justify an addition u/s.s 69/69A where the assessee had satisfactorily explained the nature and source of the deposits. 10. The Co-ordinate Bench also took note of the fact that the withdrawal of legal tender status of SBNs and the subsequent prohibition concerning holding, transferring or receiving such notes were matters operating in different fields. For the purposes of the Income-tax Act, the Revenue must independently establish that the money constituted unexplained income or unexplained money of the assessee. 11. We find that the same principle applies to the facts before us. The Revenue has not disputed the assessee's status as an insurance commission agent, nor has it demonstrated that the cash deposits were wholly unrelated to the assessee's disclosed business. More importantly, no material has been brought on record to establish that the assessee had generated undisclosed income corresponding to the SBN deposits. The CIT(A)'s further observation that the assessee had not produced evidence such as cheque, RTGS or NEFT transactions to establish that he subsequently paid the insurance premium also does not, in our opinion, conclusively establish that the source of the cash deposits was Page - 7 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 8 - :: unexplained. The fact that the insurance receipts were issued in the names of the customers is also not, by itself, sufficient to establish that the cash collected by the assessee was unexplained money. At this stage, it is relevant to distinguish between proof of the source of money and proof of the subsequent utilisation of money. Once the assessee explains that the cash was received in the ordinary course of his disclosed business and such receipts are recorded in the books, the Revenue cannot sustain an addition u/s. 69A merely because the assessee has not established each subsequent payment with the particular mode of payment, unless the Revenue brings contrary material to disprove the source so explained. 12. We also find support from the ratio of the Hon'ble Bombay High Court in Narendra G. Goradia (HUF) v. CIT (234 ITR 571), wherein it was held, in substance, that where the assessee satisfactorily establishes the source and nature of the money, the assessee cannot be required to prove the acquisition of each individual high-denomination currency note. 13. In the present case, the AO has not rejected the books of account on the ground that the relevant business receipts were fabricated. There is also no finding based on independent enquiry that the customers from whom the assessee claimed to have received the amounts did not make such payments. We are conscious of the Revenue's Page - 8 - of 10

ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 9 - :: contention that acceptance of SBNs by the assessee may have been contrary to the restrictions applicable during the demonetisation period. However, even assuming that there was a regulatory violation, such violation by itself cannot be equated with unexplained money for the purposes of section 69A. The consequences, if any, of violation of the demonetisation scheme would have to be considered under the appropriate statutory provisions and cannot automatically result in taxation of an explained business receipt as unexplained income. 14. The fundamental requirement of section 69A is that the nature and source of the money should remain unexplained or the explanation offered should be found unsatisfactory on the basis of relevant material. In the present case, the assessee has furnished an explanation linking the deposits to his disclosed business activity, and the Revenue has not brought sufficient contrary material to establish that the deposits represented undisclosed income. Accordingly, respectfully following the decision of the Co-ordinate Bench in ITA No.431/Chny/2023 for AY 2017-18 dated 07.10.2024, and considering the facts and circumstances of the present case, we hold that the addition of Rs.7,01,000/- made u/s. 69A cannot be sustained merely on the ground that the assessee was not authorised to accept SBNs during the demonetisation period. We, therefore, set aside the order of

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ITA No. 1549/Chny/2026(AY 2017-18) Mani Boopathi Raju VS ITO W-1 :: - 10 - :: the CIT(A) and direct the AO to delete the addition of Rs.7,01,000/- made u/s. 69A of the Act. 15. In the result, the appeal filed by the assessee is allowed. Order pronounced in open court on 08th day of September, 2026 in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER चे�नई/Chennai, +दनांक/Dated: 08th September, 2026 SNDP, Sr. PS आदेश क ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF Digitally signed SANDE by SANDEEP KUMAR EP Date: 2026.09.11 KUMAR 12:57:47 +05'30' Page - 10 - of 10