MS. ANANDAN MANJULA,SALEM vs. DCIT, CIRCLE-1, SALEM

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This appeal is directed against the order dated 08.01.2026 passed by the National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act, 1961, bearing DIN & Order No. ITBA/NFAC/S/250/2025-26/1084562783(1), whereby the addition of Rs.60,50,000/- made by the Assessing Officer (AO)u/s. 69A of the Act and subjected to tax u/s. 115BBE has been sustained.

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 2 :: 2. The assessee has raised the following grounds of appeal:

i. The order of the National Faceless appeal Centre passed U/s.250 of the 1.T Act dated 08.01.2026 in DIN & Order Number:ITBA/NFAC/S/250/2025- 26/1084562783(1) is against the facts of the case and natural justice. ii. The Appellant is maintaining Books of accounts for the Silver Leg chain Job Work done by her and she has been regularly filing her returns of income for all the earlier Years. For Asst. Year: 2017-2018 she filed return of income on 20.06.2017 admitting a Gross Taxable income of Rs. 11,28,694/- comprising of Job Work Receipts from Silver Leg Chain Work and Rental Income from the properties owned by her. iii. The D.C.I.T, Circle-1(1) Salem by order dated 08.12.2019 passed U/s.143(3) of the Act in Order No. ITBA/AST/S/143(3)/2019-20/1021923075(1) made an addition of Rs.60,50,000/- to the returned "Taxable Income" of Rs. 10,68,690/ by treating the Deposit of SBN currencies as unexplained money. iv. Against the said order the Appeal filed before National Faceless Appeal Centre was also confirmed by order dated 08.01.2026 passed U/s.250 of the 1.T.Act 1961. The Appellant is maintaining Books of Accounts, wherein the collection of Sundry Debtors as on 31.03.2016 to an extent of Rs.52,00,000/- were collected and deposited in the Bank account has not been believed by the Assessing Officer as well as by N.F.A.C.. v. In fact for the earlier Asst Year: 2016-2017 the return of income was filed on 03.08.2016 (much before the date of

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 3 :: announcement of demonetization) admitting a Taxable Income of Rs.8,54,770/ and in the Balance Sheet the Sundry advances were shown as Rs 52,00,000/-. vi. Out of the realization of the said advances and further Rental Income and Silver Job work done for the period from 01.04.2016 to 07.11.2016 the Cash deposit of Rs.60,50,000/- which was made after 08.11.2016 has been added to the returned income rejecting the explanation filed. vii. There is no Provision under the Income Tax act to treat the deposit of SBN Currencies as income when the sources for the said deposits were explained and also recorded in the books of accounts maintain by the Appellant. Hence invoking the Provisions of Section.69A is not Legally maintainable. viii. When the Books of Accounts maintained are accepted and there is no case for making addition as unexplained as held by I.T.A.T, Visakhapatnam dated 17.05.2021, in the case of HIRAPANNA JEWELLERS (TS-361-ITAT-2021 (VIZ). ix. More over as per the GAZETTE notification issued by the Ministry of Law and Justice on the specified Bank notes "(Cessation of Liabilities) Act 2017 dated 28.02.2017 fixed the appointed date, which means 31st Day of December 2016. From the said definition contained in Sec.2(1)(a) & Sec. 5 of the above Act, the deposit of demonetized currencies upto the appointed Day ie, 31st Day of December 2016 is permissible. x. The Appellant also relies on the following decisions of LT.A.T wherein similar addition made to the returned income has been deleted.

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 4 :: i] Order of the ITAT "B" Bench in ITA.NO:280/CHNY/2022 dated 22.02.2023 for the Asst. Year:2017-2018 in the file of P.T.Anandhan, Shevapet, Salem-2. ii]Order of the I.T.A.T, "B"-Bench, Chennai in ITA.NO:2604/CHNY/2025 dated 28.01.2026 in the file of Mrs. A.Suganthi, Shevapet, Salem-2. iii) Order of the Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd., Versus A.C.I.T in ITA.NO.431/CHNY/2023 dated 07.10.2024.

xi. As the facts of the case of the Appellant are similar to the various points discussed in the above Appellate Orders, the addition of Rs 60,50,000/- made to the returned income for deposit of demonetized currencies may be deleted and justice rendered. For the reasons stated above and further grounds and evidences to be adduced at the time of hearing the Appellant prays that the addition made by Assessing Officer and confirmed by CIT (Appeals) may kindly be deleted and justice rendered. 3. Brief facts of the case are that the assessee is engaged in the job-work of manufacturing silver leg chains and also derives rental income. The assessee has been maintaining regular books of account and has been filing returns of income consistently in the earlier years.For the assessment year (AY) 2017-18, the assessee filed her return of income on 20.06.2017 declaring total income of Rs.10,68,690/-. The case was selected for limited scrutiny on account of substantial cash deposits during the demonetisation period. 3.1 During the course of assessment proceedings, the AO noticed cash deposits aggregating to Rs.60,50,000/- in the assessee's bank

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 5 :: accounts during the period following demonetisation. The assessee explained that the deposits represented, inter alia, realization of sundry debtors/advances outstanding as on 31.03.2016, together with rental receipts and receipts from silver leg-chain job work.The assessee pointed out that the sundry advances of Rs.52,00,000/- were reflected in the balance sheet as on 31.03.2016 and that the return for assessment year 2016-17 had been filed on 03.08.2016, much prior to the announcement of demonetisation on 08.11.2016. It was therefore contended that the source of the cash deposits was duly identifiable and was not an unexplained source arising during the demonetisation period. The AO, however, was not satisfied with the explanation and made an addition of Rs.60,50,000/- u/s. 69A of the Act, treating the same as unexplained money, and subjected the addition to tax u/s. 115BBE. Aggrieved, the assessee preferred an appeal before the CIT(A), which was dismissed vide order dated 08.01.2026.The CIT(A) observed that the primary issue was whether the assessee had satisfactorily explained the nature and source of the cash deposits so as to discharge the burden u/s. 69A.The CIT(A) held that mere reflection of sundry advances of Rs.52,00,000/- in the balance sheet as on 31.03.2016 did not, by itself, conclusively establish that the said advances were actually realised in cash during the relevant period. It was further observed that the assessee had not furnished, to the satisfaction of the appellate authority, sufficient contemporaneous evidence such as debtor confirmations, reconciliation statements and other supporting material establishing a direct nexus between the alleged realisations and the deposits.The

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 6 :: CIT(A) further held that the provisions of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 did not override the provisions of the Income-tax Act relating to unexplained money. According to the CIT(A), even if deposit of SBNs was permissible up to the relevant date, the assessee was still required to satisfactorily explain the nature and source thereof.TheCIT(A), accordingly, upheld the addition of Rs.60,50,000/- u/s. 69A and the consequential application of section 115BBE. Now assessee is in appeal before the Tribunal. 4. The ld. AR submitted that the impugned addition is wholly unsustainable on facts as well as in law. He submitted that the assessee is regularly engaged in silver leg-chain job work and rental activity and has been maintaining books of account and filing returns of income regularly. The financial records of the assessee for earlier years establish the existence of substantial sundry advances/debtors much before demonetisation. The following position was placed before the Tribunal: Assessment Year Income Returned Sundry Advances

2015-16 Rs.6,11,350/- Rs.44,00,000/-

2016-17 Rs.8,54,770/- Rs.52,00,000/-

2017-18 Rs.10,68,690/- Nil

4.1 The ld.AR submitted that the return for assessment year 2016- 17 was filed on 03.08.2016, i.e. much before demonetisation, and the balance sheet for that year reflected sundry advances of Rs.52,00,000/. Thus, the existence of the advances could not be said to be an afterthought created after demonetisation.The ld. AR

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 7 :: further submitted that the assessee had produced the cash book and that the cash receipts were duly recorded therein. The deposits in question were explained as arising from realization of the earlier outstanding advances/debtors and other disclosed business and rental receipts. The books of account were not rejected by the Assessing Officer.It is therefore argued that once the source of the deposits was explained and was supported by the assessee's books of account and earlier returns, section 69A could not be invoked merely because the cash deposited happened to be in specified bank notes.Reliance was placed, inter alia, on the following decisions: 1. Paramakudi Thulasiraman Ananthan v. DCIT, ITA No.280/Chny/2022, dated 22.02.2023; 2. Smt. A. Suganthi, ITA No.2604/Chny/2025, dated 28.01.2026; 3. TamilNadu State Marketing Corporation Ltd. v. ACIT, ITA No.431/Chny/2023, dated 07.10.2024; and 4. HirapannaJewellers, ITAT Visakhapatnam, dated 17.05.2021.

4.2 The ld.AR submitted that submitted that in the case of Paramakudi Thulasiraman Ananthan, the Chennai Bench had considered substantially identical facts involving silver leg-chain job work, rental income, earlier years' sundry debtors and deposits of SBNs during demonetisation, and had directed deletion of the addition u/s. 69A. The Tribunal found the source of the deposits from realization of sundry debtors to be genuine and bona fide where the assessee had maintained books and produced the cash book. The ld. AR further relied upon the Specified Bank Notes (Cessation of Liabilities) Act, 2017, pointing out that the appointed day was 31.12.2016 and, therefore, the mere fact that the assessee deposited SBNs during the period prior to the appointed day could

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 8 :: not render the underlying source unexplained.Accordingly, it was prayed that the addition of Rs.60,50,000/- be deleted. 5. The ld. Departmental Representative supported the orders of the Assessing Officer and the CIT(A). It was submitted that the assessee had failed to satisfactorily establish the actual realization of the alleged sundry advances and the direct nexus between such realization and the cash deposited during the demonetisation period. He further submitted that the mere existence of sundry advances in an earlier balance sheet could not, by itself, prove that the same were subsequently realised in cash in the form of SBNs. The Revenue therefore supported the invocation of section 69A and the consequential taxation u/s. 115BBE. The ld. DR accordingly prayed for dismissal of the appeal. 6. We have heard the rival submissions and perused the material available on record.The undisputed facts are that the assessee is engaged in silver leg-chain job work and also derives rental income; she has been regularly filing returns of income; books of account have been maintained; and sundry advances of Rs.52,00,000/- were reflected in the balance sheet as on 31.03.2016.Significantly, the return for assessment year 2016-17 was filed on 03.08.2016, i.e. much before the announcement of demonetisation on 08.11.2016. Thus, the existence of the sundry advances cannot be regarded as a post-demonetisation creation intended to explain the cash deposits.The assessee has also stated that the cash book was furnished during the proceedings and that the impugned deposits were sourced from realization of the earlier outstanding advances/debtors and other regular disclosed receipts. There is no finding that the books of account were rejected u/s. 145 of the Act

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 9 :: or that the corresponding income/transactions recorded therein were otherwise found to be fictitious.In these circumstances, the mere fact that the cash realised by the assessee was subsequently deposited in the form of specified bank notes during the demonetisation period cannot, by itself, lead to the conclusion that the money represented unexplained income. 6.1 This issue is squarely covered, on materially similar facts, by the decision of the co-ordinate Bench of this Tribunal in Paramakudi Thulasiraman Ananthan v. DCIT, ITA No.280/Chny/2022, dated 22.02.2023. In that case also, the assessee was engaged in silver leg-chain job work, had rental income, had disclosed sundry debtors in the balance sheet of earlier years and had deposited SBNs during the demonetisation period. The Chennai Bench examined the earlier returns, financial statements and cash book and found the explanation regarding realization of sundry debtors to be genuine and bona fide. The Tribunal held that, once the source of the cash deposits was explained, the addition u/s. 69A and taxation u/s. 115BBE could not be sustained. The ratio of the above decision applies with greater force to the present case, since the assessee's sundry advances of Rs.52,00,000/- stood reflected in the balance sheet as on 31.03.2016, much before demonetisation, and the assessee has produced the books/cash book in support of the transactions. 6.2 We also find support from the subsequent decision of the Chennai Bench in TamilNadu State Marketing Corporation Ltd. v. ACIT, ITA No.431/Chny/2023, dated 07.10.2024. In that case, the Tribunal held that for purposes of sections 69/69A, the relevant consideration is the nature and source of the money. Where the

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 10 :: source of the deposits is explained from ordinary business receipts duly recorded in the books and offered to tax, an addition cannot be sustained merely because the deposits were made in demonetised currency. The appeal in that case was accordingly allowed. 6.3 We also note that the co-ordinate Bench, in the case of Paramakudi Thulasiraman Ananthan, specifically considered the legal effect of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 and observed that, up to 31.12.2016, specified bank notes could be deposited in bank accounts. The Tribunal thereafter proceeded to examine the actual source of the deposits and, having found the realization of sundry debtors to be genuine and bona fide, directed deletion of the addition u/s. 69A. 6.4 The CIT(A), in our considered view, has approached the matter primarily from the standpoint of the form of currency deposited rather than examining the substance of the assessee's explanation, namely, whether the cash represented realization of pre-existing disclosed assets/business receipts. The existence of the advances in the earlier balance sheet and the assessee's regular filing of returns prior to demonetisation are relevant circumstances which cannot be brushed aside without bringing contrary material on record. 6.5 Further, section 69A cannot be invoked merely because the AO entertains a doubt about the manner in which an otherwise disclosed asset was realised. The essential requirement is that the assessee should fail to satisfactorily explain the nature and source of the money. In the present case, the explanation is supported by the earlier balance sheet, returns of income and books/cash book maintained by the assessee.The decisions relied upon by the Revenue, therefore, do not advanceits case where the assessee has

ITA No 1548/Chny/2026 (AY 2017-18) Ms. Anandan Manjula Vs DCIT C-1 :: 11 :: furnished a plausible and documentary explanation for the source of the deposits and there is no material brought on record to establish that the deposits represented undisclosed income.Accordingly, respectfully following the aforesaid co-ordinate Bench decisions and considering the facts peculiar to the present case, we hold that the addition of Rs.60,50,000/- u/s. 69A is not sustainable. Consequently, the taxation of the said amount u/s. 115BBE also cannot survive. The Assessing Officer is accordingly directed to delete the addition of Rs.60,50,000/- made u/s. 69A of the Act and the consequential tax liability u/s. 115BBE. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the 10th day of August,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: 10th August 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 SANDEE by SANDEEP KUMAR P KUMAR Date: 2026.08.11 17:45:05 +05'30'