ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, COIMBATORE vs. MAHAMERUBENEFIT FUNDS NIDHI LIMITED, COIMBATORE

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeal), (hereinafter referred to as ‘Ld.CIT(A)’), Chennai-20, dated 28.11.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2017-18.

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 2 :: 2. The main grievance of the Revenue is against the action of the Ld.CIT(A) deleting the addition of Rs.1,22,60,666/- made by AO on account of unexplained credit u/s.69A of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) on account of deposit cash in Specified Bank Notes (SBN). According to the Revenue the Ld.CIT(A) erred in holding that the deposits made of Rs.1,22,60,666/- (SBNs) were legal when the notification issued by the Government of India dated 8- 9.11.2016 declared that SBNs were not legal tender.

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 3 :: issued show cause notice to the assessee to prove inter alia the nature & source of SBNs; and in response the assessee submitted details of fixed deposits sources and cash book. On examination of the cash book of the assessee, the AO found discrepancies in the opening and closing balances and non-recording of cash deposits reflected in Bank statements. The AO therefore, rejected the cash book as unreliable and consequently treated the cash deposit of Rs.1,22,60,666/- as unexplained money u/s.69A of the Act and added the same to the total income of the assessee by passing assessment order on 28.12.2019.

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 4 :: noted to have reiterated the submission of the Managing Director of the assessee-Company which was recorded during the survey which happened in its premises on 23.03.2017, wherein the assessee has stated that these deposits represented amounts paid directly by the depositors and borrowers into the assessee’s bank account. The AO is noted to have rejected the submission of the assessee for the following reasons: - “1. On verification of cash book submitted by the appellant that opening balance and closing balance do not match with the details of cash in hand as admitted in the ITR's filed for the AY 2016-17 and 2017-18. ii. There is cash deposit of Rs.18,00,000/- on 10.11.2016 in Lakshmi Vilas Bank account of the appellant, whereas, the cash book has been credited with only Rs.7,60,000/- and there are no credits in the cash book for all the other cash deposits made during the demonetization period. iii. Though the cash deposits were made by the depositors and borrowers as stated by the Managing Director Shri D. Balavenkatraman in his sworn statement, the same should have been credited in the cash book. Since the appellant has not accounted the same in the cash book, the AO was not satisfied with the correctness and veracity of the entries in the cash book submitted by the appellant and rejected the said cash book. Thereafter, the sum of Rs.1,22,60,666/- was added as unexplained money u/s 69A of the Act.” 7. We note that the Ld.CIT(A) has reversed the action of the AO by passing a reasoned order after analyzing the submissions which are found to be supported by relevant documents. Against the AO’s observation that on verification of cash book submitted by the assessee opening balance and closing balance with the details of cash in hand as admitted in the ITR filed for AY.2016-17 and 2017-18, the Ld.CIT(A) has rightly held by observing as under: - 6.2. During the appeal proceedings, the appellant had filed written submissions, wherein it was stated that the AO was not aware of the basic fact that all the amounts that were deposited in the bank directly by the

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 5 :: customers, will appear only in the bank statement of the appellant and will not appear in the cash book. The appellant had also filed its submission as part of its elaborate grounds of appeal and also submitted the copy of Cash Transaction 2016 compliance submitted in response to the department's OCM with respect to the cash deposited in its Lakshmi Vilas Bank account of Rs. 1,04,12,102/- during the demonetization period. The appellant had also submitted the details of the person with PAN and without PAN who had deposited the cash in its Lakshmi Vilas Bank and Karur Vysya Bank. 6.3. I have perused the assessment order and details furnished by the appellant. On perusal of the same, with respect to the observation of AO that cash book submitted by the appellant that opening balance and closing balance do not match with the details of cash in hand as admitted in the ITR's filed for the AY 2016-17 and 2017-18, it is noted that the appellant had explained that Assessing Officer has made an error while verifying the opening and closing cash balances. It was also stated that as per AO, there was difference in the amount of opening and closing balance of cash in hand in ITRs for the Assessment year 2016-17 and 2017-18 of Rs.6,71,857/- and Rs.2,87,623/- respectively. In this regard, it was submitted that besides Head Office, the company has also a branch at Ganapathy, whereas, the AO had considered only the cash book pertaining to Head Office only. Further, it was also stated that in Oppanakara street branch, the cash balance as on 31.03.2016 was Rs.6,71,857/-and on 31.03.2017 was Rs.7,20,837/- and the Assessing Officer has considered only the cash balance in Oppanakara street but has not considered the cash balance in Ganapathy branch on 31.03.2016 amounting to Rs.5,13,101/- and on 31.03.2017 amounting to Rs.2,87,623/-. It was also stated that if the closing balance of Ganapathy Branch is considered, there would not be any difference as observed by the AO in the Assessment Order. The above explanation offered by the appellant appears to be correct for the reason that the AO had considered only the closing cash balance as per the cash book of in Oppanakara street branch of Rs.7,20,837/-, whereas if the closing cash balance of Ganapathy Branch of Rs.2,87,623/- is considered, there will not be any difference as observed by the AO. 8. The second reason given by the AO is that assessee has deposited cash of Rs.18 lakhs on 10.11.2016 in Lakshmi Vilas Bank, whereas the cash book has been credited with only Rs.7 lakhs 60 thousand and there are no credits in the cash book for the balance cash deposits made during the demonetization period, the Ld.CIT(A) has rightly held and observed as under :-

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 6 :: 6.4. With respect to the second observation of the AO that there is cash deposit of Rs.18,00,000/- on 10.11.2016 in Lakshmi Vilas Bank account of the appellant whereas, the cash book has been credited with only Rs.7,60,000/- and there are no credits in the cash book for all the other cash deposits made during the demonetization period, the appellant had submitted that AO has made a clerical error while arriving at the Cash Deposit amount in Lakshmi Vilas Bank as Rs.1,08,90,666/-. It was also stated that the actual cash deposit made in the said bank account was only Rs.89,12,102/- and the difference amount of cash Deposit of Rs. 19,78,564/-, is out of Rs.8,00,000/- and Rs.7,00,000/- made on 08.11.2016, which should not have been included as it is made during the banking hours of 8th November, and the balance amount of Rs.4,78,564/- is relating to cash deposit which was reversed on the same day, i.e, 12.11.2016. Further, it was also stated that out of the total cash deposit of Rs.89,12,102/- made in Lakshmi Vilas Bank, Rs.82,78,887/- is made by members directly for which they have submitted all the members' PAN details with address at the time of assessment and remaining amount of Rs.6,33,215/- was deposited during the demonetization period by the appellant out of the available cash balance on 8.11.2016, which is reflected in the books of accounts. Further, the appellant also submitted that the AO was not aware of the basic fact that all the amounts were deposited in the bank directly by the customers will appear only in the bank statement of the appellant and will not appear in the cash book. The reason stated by the AO for not accepting the claim of the appellant that the source for cash deposited in the bank accounts are collection of loan/deposits from its members was that the corresponding credit entries for the cash deposited is not appearing in the cash book as credits. In this regard, it is observed from the assessment order at page no.5 that the appellant during the course of assessment proceedings had submitted the details of amounts received from its customers in its reply filed in response to the show cause notice dated 12.12.2019 issued by the AO. It is also noted that the appellant had also furnished the details of deposits/loan repayments received from its members during the OCM (Operation Clean Money) verification carried out by the department. In the appeal proceedings, the appellant had furnished a copy of the response submitted by it through departmental portal for OCM, which clearly shows that the appellant had furnished the response with regard to the cash deposited of Rs.1,04,12,102/- in its Laxmi Vilas Bank account along with details of members with PAN for Rs.42,29,373/- and without PAN for Rs.40,49,514/- from whom the said amounts were collected and deposited in the said bank account. It is also noted from the same details submitted by the appellant that out of Rs. 1,04,12,102/- as reported by the department, only Rs.89,12,102/- was deposited during the period 09.11.2016 to 30.12.2016 and Rs.6,33,215/- was deposited from the earlier income or savings. Further, it is also noted from the assessment order at page no.6 and 7 that during the course of assessment proceedings, on 28.12.2019, the appellant had submitted the details of the source for the time deposits in various banks, which was from the shareholders and also attached the details of deposits. The same was also verified by the AO and the AO also accepted without having any adverse findings on the details of shareholders payment of deposits/loan repayment as recorded in the books of accounts of the appellant. Without considering the above, the AO had noted that for the

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 7 :: cash deposited of Rs.18,00,000/- on 10.11.2016, the corresponding credit in the cash book was only Rs.7,60,000/- and also noted that no other credits were found with respect to the cash deposited during the demonetization period for making the addition u/s 69A of the Act. In this regard, it is observed that the details submitted by the appellant with regard to the amount received from the customers in response to the show cause notice and the details submitted on 28.12.2019, wherein the customers with PAN and without PAN having complete address of them was verified by the AO without finding any of them were either non-existing or they are bogus customers. Further, it is also noted that the same details were submitted by the appellant in response to the OCM compliances submitted online by the appellant. Furthermore, it is also noted that when the members had deposited or repaid their loan directly into the appellant's bank accounts, the corresponding credits will not appear in the cash book and subsequently the corresponding entry will appear in the bank book and the customer's account. Therefore, the reason adduced by the AO that the corresponding credits were not appearing in the cash book could not be the reason for not accepting the claim of the appellant that the customers had directly deposited in the bank account of the appellant. Hence, it is held that the AO having verified the details of customers from whom the cash was directly deposited into the bank accounts and not found any discrepancy, the AO cannot deny the same. 9. The third reason given by the AO is that though the cash deposits were made by the depositors and borrowers as stated by the Managing Director Shri D. Balavenkatraman in his sworn statement, the same ought to have been credited in the cash book, but the assessee has not accounted the same in the cash book. Hence he expressed his dissatisfaction about with the correctness and veracity of the entries in the cash book submitted by the assessee and rejected the said cash book and added the sum of Rs.1,22,60,666/- as unexplained money u/s 69A of the Act. The Ld.CIT(A) is noted to have overturned the action of AO by rightly considering the relevant material by observing as under : - 6.5. With respect to the AO's observation that though the cash deposits were made by the depositors and borrowers as stated by the Managing Director Shri D. Balavenkatraman in his sworn statement, the same should have been credited in the cash book, it is noted that the Managing Director Shri D. Balavenkatraman in his sworn statement recorded during the

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 8 :: course of survey conducted on 23.03.2017 had stated that the source of the cash deposited during the demonetization period is out of the deposits made by its depositors and borrowers directly into the appellant's bank account. It is also observed that the appellant had consistently submitted that the source of cash deposited into his bank account during the demonetization period was from its customers as part of the deposits received or loan repaid by them. However, the AO had merely stated that the cash book was rejected without finding any defects in the books of accounts including the cash book submitted by the appellant. 6.6. In the course of appeal proceedings, the appellant had also submitted that the percentage of increase in cash deposit during the demonetization period when compared to the cash deposits made during the same period of the previous year is only 4.96% as per the Assessment Order. It was also submitted that this is very much in order in the normal course of business considering the normal growth rate of business. It was also stated that if the total cash deposit during the relevant AY compared to the previous year is less by 19.36% as per the Assessment order. It was also stated that it is clear that there is no abnormal cash deposit during the demonetization period. In this regard, it is noted from the analysis made by the AO in the assessment order page no.4 & 5 that the overall cash collection for the FY 2016-17 was less by around Rs.1.2 crores compared to FY 2015-16. It is also seen that the total cash collection for the period 01.04.2016 to 08.11.2016 was only increased by around Rs.30 Lakhs compared to the same period for the FY 2015-16. Further, it is also seen that the cash deposited for the period 09.11.2016 to 31.12.2016 also increased by Rs.6 Lakhs only compared to the same period FY 2015-16. This analysis of the AO also suggests that there is no abnormal increase in the cash collection during the period 01.04.2016 to 08.11.2016 or 09.11.2016 to 31.12.2016 i.e. the demonetization period. 10. Coming to the main grievance of the Revenue that when the Government of India has declared by notification dated 8-9.11.2016 declaring Rs.500/- and 1000/-notes as invalid/not legal tender. The Ld.CIT(A) is noted to have held such a view by rightly relying on the decision of this Tribunal in the case of Mrs. Umamaheswari Vs. ITO in ITA No.527/Chny/2022 dated 14.10.2022; and notes that such a contention has been dealt by this Tribunal in favor of assessee, in the case of M/s. Sonny Fireworks Pvt. Ltd. ITA No.1081/Chny/2024, wherein this Tribunal held as under: -

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 9 :: The only reason given by the AO to make addition u/s.68 of the Act was that assessee could not have transacted/received SBNs during demonetization period and relies on the notification issued by the Government of India (supra). No doubt Specified Bank Notes of Rs.500/- & Rs.1,000/- has been withdrawn from circulation from 09th November, 2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31st December, 2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31st December, 2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization to 31st December, 2016. Therefore, under those circumstances, some persons continued to accept and transact the specified banknotes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the Assessing Officer makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. 11. Hence, we do not find any infirmity in the findings recorded by the Ld.CIT(A) that the SBNs deposited during the demonetization period as legal, since the assessee was able to discharge the burden to prove the nature & source of the SBNS/cash deposits amounting to Rs.1,22,60,666/- in its bank account which are deposited by the depositors and borrowers directly in assessee’s bank account during the demonetization period between 08.11.2016 and 31.12.20.2016. The assessee is noted to have reflected the same as part of its receipts in its books of account as collection from its customers against the deposits made or loan repaid by them which was deposited in the Bank accounts. Therefore, Ld.CIT(A) rightly held that assessee has explained the source for depositing the amount of Rs.1,22,60,666/- as part of collection from its customers as part of its deposits or loan repayment during the

ITA No. 570/Chny/2026 (AY 2017-18) Mahamerubenefit Funds Nidhi Ltd. :: 10 :: demonetization period which action is plausible and is in line with the several decisions of this Tribunal as rightly taken under by the Ld.CIT(A).

Order pronounced on the 22nd day of July 2026, in Chennai.

Sd/- Sd/- (गगन गोयल) (एबी टी. वक�) (ABY T. VARKEY) (GAGAN GOYAL) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER चे�नई/Chennai, �दनांक/Dated: 22nd July, 2026. YS 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 YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.08.03 11:03:11 +05'30'