P.P. AGENCY,ERODE vs. ITO, WARD-1(1), ERODE

PDF · subscribers
ITA 2742/CHNY/2026Status: DisposedITAT Chennai12 August 2026AY 2017-184 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO's addition based solely on the deposit of SBNs was unsustainable. The Tribunal found that the assessee's books of account were in order and that the cash deposits were explained by sales and collections, with no major deviations from previous years.

What were the facts?

The assessee firm declared a total income of Rs. 5.33 lakhs. The Assessing Officer (AO) made an addition of Rs. 40.31 lakhs under Section 69A, primarily based on the assessee depositing Specified Bank Notes (SBNs) during the demonetization period. The Commissioner (Appeals) dismissed the assessee's appeal.

What were the issues?

Whether the deposit of SBNs during demonetization, without disputing the books of account, can be a sole basis for addition under Section 69A. Whether the AO followed the prescribed SOP for demonetization scrutiny.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: HONOURABLE SHRI GAGAN GOYAL & SHRI MANU KUMAR GIRI

Hearing: 20.07.2026Pronounced: 12.08.2026

PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Commissioner of Income Tax (A), Delhi passed u/s. 250 of the Act (hereinafter referred as the ‘Ld. CIT(A)’), dated 07.04.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2017-18. GROUDS OF APPEAL 1) The Impugned Order is bad, erroneous and unsustainable in law. 2) The Learned Commissioner (Appeals) erred in not considering the plea of the Appellant and in mechanically sustaining the action of the Assessing Officer. 3) Without prejudice, the Learned Commissioner (Appeals) also erred in not considering that the decisions relied upon by the Appellant including that of the Juri ictional ITAT in the case of 'TASMAC' squarely applied to the facts of the present case, as the sole reason for addition by the Assessing Officer was that the Appellant had received SBNs during the demonetization period without disputing the nature and source of them. P.P. Agency

4) Without prejudice, the Learned Commissioner (Appeals) also erred in not considering that the Assessing Officer did not dispute the explanation filed including the Cash Book and Cash Sales and Collection Comparison with earlier years, thereby acting arbitrarily and also violating the CBDT SOP issued for demonetization period scrutiny itself. 5) Without prejudice, the Learned Commissioner (Appeals) and the Assessing Officer also erred in not considering that Section 69A is fundamentally inapplicable, when it is not disputed by them that the impugned cash deposits were recorded in the books of account of the Appellant, which was also subjected to audit under Section 44AB and which was not rejected and the business results arising therefrom was accepted. And for other reasons and grounds that may be adduced later, the Appellant sincerely prays that the present appeal may be admitted, duly considered and justice be rendered.

2.

The brief facts of the case are the assessee firm filed a return of income on 19.09.2017 declaring a total income of Rs. 5.33 lakhs. The case of the assessee was selected for scrutiny under the CASS. After a detailed deliberations, the case of the assessee was assessed after making addition u/s 69A of the Act amounting to Rs. 40.31 lakhs. The assessee being aggrieved preferred an appeal before the Ld. CIT (A), who in turn dismissed the appeal of the assessee. The assessee being further aggrieved preferred the present appeal before us.

3.

We have gone through the order of the AO, the order of the Ld. CIT (A) and the submission of the assessee along with the grounds taken before us. It is observed that the assessee engaged in the business of broiler chicken on whole sale basis. During the year under consideration, the assessee deposited cash of Rs. 2, 04, 79, 550/- during the demonetization period, out of which, the assessee made deposit of Rs. 52, 76, 500/- in SBNs. On this reason itself, the AO made addition of Rs. 42, 32, 500/- [Rs. 52, 76, 500/- as total SBNs (-) Rs.12, 44, 600/- balance of cash in hand as on 08.11.2016].

4.

Moreover, during the assessment proceedings, the assessee presented its explanation in a tabular form based on financials of current year and two preceding years as under:

2015-2016 Sales Cash collection Cash deposit November 1,34,73,993/- 1,22,39,540/- 99,41,910/- P.P. Agency

December 1,58,76,691/- 1,35,77,104/- 1,28,32,680/- 2016-2017 November 1,55,59,750/- 1,39,38,713/- 1,31,38,020/- December 1,75,53,813/- 1,14,73,174/- 1,03,89,770/- 2017-2018 November 1,92,37,723/- 1,42,69,072/- 1,30,41,310/- December 3,80,95,948/- 1,23,93,346/- 1,10,64,100/-

5.

We find the above table in order and also observed that there is no major deviations in the results declared by the assessee for the year under consideration vis-à-vis the previous years. The basis adopted by the AO i.e. cash deposit of SBNs is not relevant in the present case and accepting SBNs and deposit of the same falls within the purview of Reserve Bank of India, if any action is to be taken. As far as the Revenue is concerned they cannot object or make any addition on the sole ground of accepting and depositing of SBNs.

6.

Furthermore, there is no deficiency in the books of the assessee was pointed out by the AO rather department’s own SOP was not followed by the AO in the case of the assessee. In view of the above observations, it is observed that the findings of the AO are baseless and liable to be dismissed, hence, the AO is directed to delete the additions of Rs. 40, 31, 900/- as the same is unsustainable. The grounds raised by the assessee are allowed.

7.

In the result, the appeal of the assessee is allowed.

Order pronounced on the 12th day of August, 2026 in Chennai. (मनु कुमार गिरर) (गगन गोयल) (MANU KUMAR GIRI) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER P.P. Agency

चेन्नई/Chennai, ददनाांक/Dated: 12th August, 2026. KB

आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF K BABU Date: 2026.08.13 16:01:45 +05'30'

More judgments on Section 69A

All 15,297 judgments and leading authorities on Section 69A →

Recent GST High Court judgments

Search GST case law →