ASSISTANT COMMISSIONER OF INCOME TAX, PONDICHERRY vs. WINNER DAIRY PVT LTD, PUDUCHERRY

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ITA 426/CHNY/2026Status: DisposedITAT Chennai09 July 2026AY 2017-185 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the FAA's deletion of the addition, finding that the deposits were genuine business receipts and the AO misunderstood demonetization rules. The Tribunal noted that the assessee could deposit demonetized currency by satisfactorily explaining the source.

What were the facts?

The assessee, a dairy company, deposited Specified Bank Notes (SBNs) during demonetization. The Assessing Officer treated a differential amount as unexplained investment, as the deposits exceeded the cash balance on a specific date.

What were the issues?

Whether cash deposits of SBNs during demonetization, exceeding the stated cash balance, can be treated as unexplained investment when explained as genuine business receipts.

Which sections of the Income-tax Act were involved?

Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & MS PADMAVATHY S

Hearing: 08.07.2026Pronounced: 09.07.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the Revenue is directed against the order of Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi dated 21.11.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.

ITA No.426/CHNY/2026 - 2 - Winner Dairy Pvt. Ltd 2. Brief facts of the case are as follows: The assessee is a private limited company engaged in the business of dairy products. For the assessment year 2017-18, the assessee filed its return of income on 07.11.2017 declaring a total income of Rs.35,20,400/-. Based on information that the assessee had deposited Specified Bank Notes (SBNs) during the demonetization period, the case was selected for scrutiny under CASS. During the assessment proceedings, the assessee furnished the details called for by the Assessing Officer. On verification, the AO noticed that the assessee had deposited SBNs aggregating to Rs.2,41,81,000/- during the demonetization period, whereas the cash balance as on 08.11.2016 was only Rs.1,31,14,000/-. Accordingly, the AO issued a show-cause notice proposing to treat the differential amount of Rs.1,16,67,000/- as unexplained investment u/s.69 of the Act. In response, the assessee explained that the SBNs deposited represented cash received from sales during the course of its dairy business. However, the AO rejected the explanation holding that the assessee was not authorized to accept payments in demonetized currency after 08.11.2016. Consequently, the AO treated the SBNs allegedly received during the period from 09.11.2016 to 31.12.2016 amounting to Rs.1,16,67,000/- as unexplained investment u/s.69 of the Act.

ITA No.426/CHNY/2026 - 3 - Winner Dairy Pvt. Ltd 3. Aggrieved, the assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submissions and the material placed on record, the FAA deleted the addition by holding that the AO had proceeded on an erroneous understanding of the relevant demonetization notifications and had failed to appreciate the nature of the assessee's dairy business. It was concluded by the FAA that business of assessee involves daily cash transactions and cash deposits made in comparable months of earlier and later years supports the assessee’s claim that deposits were genuine business receipts.

4.

Aggrieved, Revenue is in appeal before us. The Ld.DR relied on the grounds raised and the order of the AO.

5.

The Ld.AR reiterated the submissions made before the Income- tax Authorities and relied on the findings of the FAA.

6.

We have heard rival submissions and perused the material on record. The AO made the impugned addition on the premise that the assessee, being a private dairy company, was not authorized to receive Specified Bank Notes (SBNs) after 08.11.2016 and, therefore, the cash receipts of Rs.1,16,67,000/- during the

ITA No.426/CHNY/2026 - 4 - Winner Dairy Pvt. Ltd demonetization period represented unexplained investment u/s.69 of the Act. We find that the comparative analysis of cash deposits and sales furnished by the assessee clearly demonstrates that the cash deposits during the demonetisation period were in line with the normal business trend and there was no abnormal increase warranting an inference of introduction of unexplained money. The assessee has also satisfactorily explained that the impugned deposits represented cash collections from its regular dairy business through its retail network.

7.

We further note that the Chennai Bench of the Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. v. ACIT in ITA No.431/CHNY/2023 (order dated 07.10.2024), has held that up to 30.12.2016, an assessee could deposit demonetized currency into its bank account and that the only requirement was to satisfactorily explain the source of such deposits. In the present case, the source of the deposits has been explained as business receipts, and no material has been brought on record by the Revenue to establish that the deposits represented unaccounted income.

8.

The factual findings recorded by the FAA, after appreciating the nature of the assessee's business and the evidences placed on

ITA No.426/CHNY/2026 - 5 - Winner Dairy Pvt. Ltd record, have not been dispelled by the Ld. DR by placing any contrary material before us. We, therefore, find no infirmity in the order of the FAA. Accordingly, the order of the FAA is upheld and the grounds raised by the Revenue are dismissed.

9.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on 9th July,2026 at Chennai.

Sd/- Sd/- (प�मावती एस) (जॉज� जॉज� के) (PADMAVATHY S) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 9th July, 2026 RSR, Sr.PS

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.07.10 11:40:04 +05'30'

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