ABDULMEDU ABDULJAFFAR,PUDUKOTTAI vs. ITO, WARD-1,, PUDUKOTTAI

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ITA 2926/CHNY/2025Status: DisposedITAT Chennai05 November 2026AY 2017-189 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 20,00,000 made by the AO and confirmed by the CIT(A) is unsustainable. The assessee provided documentary evidence, including bank statements and a ledger account from Sun Direct TV Private Limited, showing remittances of Rs. 56,64,500 to Sun Direct TV during November and December 2016. These remittances exceeded the SBN deposits in question. The Tribunal admitted this additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, finding it necessary for proper adjudication. The business practice of aggregating cash collections and remitting them periodically was deemed plausible, especially since the AO accepted a similar opening cash balance. The Tribunal found that the deposits were recorded in the assessee's books of account and the basic condition for invoking Section 69 was not satisfied. The theory of human probability and inference of contumacious conduct were not sufficient to displace the evidence. The addition was deleted, and grounds related to Section 69 were allowed. Interest under Sections 234A and 234B were directed to be recomputed.

What were the facts?

The assessee, an individual, filed a return for AY 2017-18 declaring Rs. 4,68,850. The case was selected for scrutiny to verify cash deposits. The Assessing Officer (AO) noted Specified Bank Notes (SBNs) totaling Rs. 27,14,000 deposited in Bank of India (Rs. 13,33,000) and IDBI Bank (Rs. 13,81,000) during the demonetisation period. The assessee explained these were subscription fee collections on behalf of Sun Direct TV Private Limited, deposited with a delay due to business practice. The AO, unconvinced, added Rs. 20,00,000 u/s 69 of the Income-tax Act, 1961, after allowing for an opening cash balance of Rs. 7,74,000. The Commissioner (Appeals) confirmed the addition, citing the assessee's failure to furnish further details.

What were the issues?

1. Whether the addition of Rs. 20,00,000 made by the AO under Section 69 of the Income-tax Act, 1961, is justified, considering the assessee's explanation that the Specified Bank Notes (SBNs) deposited represented collections made prior to the demonetisation period and were subsequently remitted to Sun Direct DTH? (Question of law and fact, turns on Section 69). Assessee's contentions: The AO wrongly applied the theory of human probability and invoked Section 69, as the cash deposits were recorded in the books of account and not outside. The deposits represented collections made before demonetisation and were remitted to Sun Direct DTH, with the assessee's claim limited to commission. Revenue's contentions: The assessee failed to substantiate the SBN deposits during the demonetisation period, and therefore, the order of the CIT(A) confirming the addition should be upheld.

Which sections of the Income-tax Act were involved?

Section 69,Section 143(3),Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA

For Respondent: Shri. SB Chakraborthy, Sr. DR
Hearing: 07.10.2026Pronounced: 05.11.2026

PER S. R. RAGHUNATHA, AM :

The present appeal has been preferred by the Assessee against the order dated 06.08.2025 passed by the Learned Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-4 Kolkata [hereinafter referred to as “the Ld.CIT(A)”], arising from the assessment order dated 28.12.2019 passed by the Assessing Officer, Ward 1, Pudukkottai [hereinafter referred to as “the AO”], u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2017-18.

:-2-: ITA. No.:2926/Chny/2025 2. The brief facts of the case, as emanating from the records, are that the assessee is an individual who filed his return of income for the assessment year 2017-18 on 05.01.2018, declaring a total income of Rs.4,68,850/-. The case was selected for scrutiny through CASS under the category “Limited” to verify the cash deposits made during the year. Accordingly, the AO issued statutory notices to the assessee, calling for details and documents in support of the return of income filed. In response, the assessee uploaded the details and documents through the e-filing portal on various dates.

3.

On perusal of the submissions made by the assessee, the AO found that the assessee had deposited Specified Bank Notes (SBNs) during the demonetisation period to the tune of Rs.13,33,000/- in Bank of India and Rs.13,81,000/- in IDBI Bank. Further, the assessee explained that the SBNs deposited during the demonetisation period were out of collections of subscription fees on behalf of Sun Direct TV Private Limited, as the assessee was a dealer in set-top boxes for Sun Direct Cable Network. Further, the assessee submitted that the amounts collected from subscribers on or before the commencement of demonetisation, i.e., 08.11.2016, were deposited into the bank accounts with some delay due to the time gap between the collection of cash from customers by the employees, aggregation of the cash so collected, and its subsequent deposit into the bank accounts. However, the AO was not convinced with the explanation offered by the assessee regarding the deposit of SBNs into the bank accounts, as the assessee did not fall under the exempted category, as notified by the RBI, for accepting SBNs after 09.11.2016. Accordingly, the AO concluded the assessment by making an addition of Rs.20,00,000/- u/s.69 of the Act out of the total SBN deposits of Rs.27,14,000/-, after giving credit for the opening cash balance of Rs.7,74,000/- held as on midnight of 08.11.2016, and passed the assessment order u/s.143(3) of the Act dated 28.12.2019.

4.

Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee contended that the

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AO was not justified in applying the alleged theory of human probability to the deposits of SBNs, which represented collections made prior to the demonetisation period and were subsequently remitted to Sun Direct DTH, against which the assessee’s claim for retention of money is limited to the commission receivable on such remittances. Further, the assessee contended that the AO was not justified in invoking Section 69 of the Act, as the cash deposits under consideration were duly recorded in the books of account maintained by the assessee and were not outside the books of account. Therefore, according to the assessee, the provisions of Section 69 of the Act were not applicable. During the appellate proceedings, the Ld.CIT(A) called upon the assessee to furnish specific details regarding the SBNs deposited during the relevant period. Since the assessee failed to furnish the further details called for, the Ld.CIT(A) confirmed the additions vide order dated 06.08.2025. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

5.

The Ld.AR, Shri Hithesh, Advocate for the assessee, assailing the action of the Ld.CIT(A), raised the following grounds of appeal, which are as under:

“1. The assessing officer is not justified in bringing to tax a sum of Rs.20,00,000/- u/s 69 of the IT act. 2. The AO is not justified in applying alleged theory of human probability on deposit of SBN which include collections prior to demonetization period and remitted to sun Direct DTH on which the applicant claim of retention of money is limited to commission receivable on such remittance. 3. The AO is not justified in attributing contumacious conduct in respect of holding demonetized currency notes prior to cut of dates 08-11-2016 without due regard to business practice of appellant to aggregate cash collections from various sources on different dates and remitting the same into the bank accounts at periodic intervals for remitting into the bank account of SUN DIRECT DTH (P) LTD. 4. The AO is not justified in invoking in section 69 to facts on record since the alleged investment into the bank account are found to be recorded in the books of accounts of the assessee and not dehors the accounts books for which the express provisions of sec 69 does not apply. 5. The AO is not justified in levying the interest of Rs.71,460/- u/s.234A 6. The AO is not justified in levying the interest of Rs.3,93,030/- u/s.234B 7. The Order of AO is arbitrary illegal and injustice.

:-4-: ITA. No.:2926/Chny/2025

8.

For these grounds and such other grounds that may be added at the time hearing, it is prayed that the order of assessment be cancelled.”

6.

The Ld.AR for the assessee submitted that the entire cash deposited in the form of SBNs into the assessee’s bank accounts had been duly recorded in the books of account. Further, the cash deposited was utilised for making the payments to Sun Direct DTH towards set-top boxes and the renewal of cable connections for customers. In support of the above contentions, the Ld.AR filed a paper book containing a summary of the cash deposits. The paper book contained a tabulation of the amounts transferred to Sun Direct DTH, bank statements of both Bank of India and IDBI Bank, and the ledger account of the assessee obtained from Sun Direct TV Private Limited for the financial year 2016-17. The Ld.AR drew our attention to pages 3 to 6 of the paper book, wherein the details of the amounts remitted to Sun Direct TV Private Limited during November and December 2016 towards subscription payments, along with the corresponding transaction IDs, were furnished. The amounts so remitted were Rs.39,61,500/- through Bank of India and Rs.17,03,000/- through IDBI Bank. The Ld.AR also took us through the ledger account of the assessee issued by Sun Direct TV Private Limited and the assessment for the entire financial year 2016-17 (pages 97 to 151). The Ld.AR submitted that the transactions were duly recorded in the books of account of both the assessee and Sun Direct TV Private Limited. Further, the Ld.AR submitted that there was no prohibition on accepting SBNs from customers up to 30.12.2016 and relied on the decision of the Chennai Tribunal in the case of M/s. Kurinji Chit Funds Pvt. Ltd. v. The ITO in ITA No.1130/Chny/2026 dated 17.09.2026.

7.

In view of the above, the Ld. AR prayed that the addition made by the AO and confirmed by the Ld. CIT(A) be deleted.

8.

Per contra, the Ld.DR Shri SB Chakraborthy, Sr. DR for the Revenue relied on the orders of the lower authorities and submitted that the assessee had failed to substantiate the deposits of SBNs during the demonetisation

:-5-: ITA. No.:2926/Chny/2025 period. Accordingly, the Ld.DR submitted that the order of the Ld.CIT(A) confirming the addition deserved to be upheld.

9.

We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The short issue for our consideration is whether the addition of Rs.20,00,000/- made u/s.69 of the Act, out of the SBNs of Rs.27,14,000/- deposited by the assessee in Bank of India (Rs.13,33,000/-) and IDBI Bank (Rs.13,81,000/-) during the demonetisation period, is sustainable, where the assessee explains that the deposits represent subscription collections made on behalf of Sun Direct TV Private Limited on or before 08.11.2016, which were thereafter remitted to that company. 10. The facts are not in dispute. The assessee is a dealer in set-top boxes of Sun Direct and collects subscription and renewal amounts from customers on behalf of Sun Direct TV Private Limited. The AO accepted the opening cash balance of Rs.7,74,000/- held at midnight of 08.11.2016 and made the addition on the balance, mainly on the ground that the assessee did not fall within the category of persons notified by the RBI as entitled to accept SBNs after 09.11.2016. The Ld.CIT(A) confirmed the addition because the assessee did not furnish the further details called for during the appellate proceedings. 11. We find that the reasoning of the AO is misdirected. The explanation of the assessee is not that it accepted SBNs from its customers after the cut-off date. Its explanation is that the notes were collected on or before 08.11.2016, were aggregated over time, and were deposited into its bank accounts with a delay caused by the interval between collection by its employees, aggregation and deposit. The legal tender status of the SBNs was withdrawn with effect from the midnight of 08.11.2016, and holders of notes in their possession on or before that date were allowed to tender them within the grace period notified under the Specified Bank Notes (Cessation of Liabilities) Act, 2017. Whether the assessee was in the category of persons permitted to accept SBNs after 09.11.2016 therefore has no bearing on the real question, which is whether the assessee actually held these notes as on 08.11.2016 and whether that holding

:-6-: ITA. No.:2926/Chny/2025 has been credibly explained. The contention of the Ld.AR that there was no prohibition on accepting SBNs from customers up to 30.12.2016 need not be decided for this purpose, as the case of the assessee rests on collections made before the cut-off date. 12. On that question, the assessee has placed a paper book on record. It contains a tabulation of the amounts remitted to Sun Direct TV Private Limited during November and December 2016 towards subscription payments, with the corresponding transaction IDs (pages 3 to 6), the bank statements of Bank of India and IDBI Bank, and the ledger account of the assessee in the books of Sun Direct TV Private Limited for the financial year 2016-17 (pages 97 to 151). The remittances so made were Rs.39,61,500/- through Bank of India and Rs.17,03,000/- through IDBI Bank, a total of Rs.56,64,500/-. This is more than double the SBNs of Rs.27,14,000/- on which the addition is made. The ledger obtained from Sun Direct TV Private Limited is the record of an independent third party and corroborates that the amounts were received by it from the assessee in the ordinary course of business. The transactions are thus recorded in the books of both parties and are traceable through the banking channel. 13. The Ld.CIT(A) sustained the addition solely because the assessee did not furnish the details called for. The documents referred to above go to the root of the matter. They are bank statements of the assessee's own accounts and the ledger of a third party, and the Ld. DR did not point out any defect in them. To the extent these documents were not before the authorities below, we admit them in exercise of the power under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The Hon'ble Delhi High Court, in CIT v. Text Hundred India Pvt. Ltd. (ITA Nos.2077, 2061 and 2065/2010, order dated 14.01.2011, 2011:DHC:228-DB), has held that the Tribunal has a judicial discretion to admit additional evidence, even on the application of a party, where such evidence has a material bearing on the issue and is necessary for proper adjudication

:-7-: ITA. No.:2926/Chny/2025 and substantial justice. That test is satisfied here, since the evidence directly bears on the only point on which the addition has been confirmed. 14. The business practice described by the assessee is also plausible. A dealer who collects subscription amounts from a large number of customers on behalf of a principal would ordinarily aggregate the collections and remit them to the principal at periodic intervals, which explains why notes collected before 08.11.2016 were still held on that date and deposited thereafter. The AO accepted the opening cash balance of Rs.7,74,000/- on the very same footing, and nothing has been shown to distinguish the balance of the deposits in character. The addition of Rs.20,00,000/- is also not tied to the AO's own computation: the SBN deposits of Rs.27,14,000/- less the opening cash of Rs.7,74,000/- come to Rs.19,40,000/-, which is less than the amount added. The theory of human probability on which the AO has proceeded, and the inference of contumacious conduct drawn from the holding of demonetised notes, cannot take the place of evidence. Here the evidence points the other way, with remittances of Rs.56,64,500/- to the principal during the very months following demonetisation. The assessee's claim is that its own entitlement out of these collections is confined to the commission on the remittances, and no material has been brought on record to dispute it. 15. The AO has also invoked section 69 of the Act. That section applies where the assessee has made investments which are not recorded in the books of account maintained by him for any source of income and offers no satisfactory explanation of their nature and source. The deposits here were made into the bank accounts of the assessee and as shown by the paper book, are recorded in the books of account of the assessee. No finding to the contrary is recorded in the assessment order as summarised above. A cash deposit in the assessee's own bank account which is duly recorded in his books is not an investment outside the books, and the basic condition for the application of section 69 is therefore not satisfied. The addition cannot be sustained under that section.

:-8-: ITA. No.:2926/Chny/2025 16. The Ld.AR has also relied on the order of the coordinate Bench of this Tribunal in M/s.Kurinji Chit Funds Pvt. Ltd. v. The ITO(ITA No.1130/Chny/2026, order dated 17.09.2026) in support of his contention regarding the acceptance of SBNs from customers up to 30.12.2016. We have taken note of that decision and respectfully follow it to the extent it is applicable. In any event, our conclusion rests independently on the facts and the documentary evidence in this case as discussed above. 17. In view of the above, we hold that the assessee has satisfactorily explained the SBN deposits of Rs.27,14,000/- as arising out of business collections made before 08.11.2016 and utilised for remittance to Sun Direct TV Private Limited, that these deposits are recorded in the books of account, and that the provisions of section 69 of the Act are not attracted. The addition of Rs.20,00,000/- made by the AO and confirmed by the Ld.CIT(A) is accordingly deleted, and Ground Nos.1 to 4 are allowed. Ground Nos.5 and 6, relating to interest u/ss.234A and 234B of the Act, are consequential, and the AO is directed to recompute the interest after giving effect to this order. Ground Nos.7 and 8 are general in nature and need no separate adjudication. 18. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 05th November, 2026 at Chennai.

Sd/- Sd/- (मनुकुमार�ग�र) (एस.आर.रघुनाथा) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखासद�य/Accountant Member �या�यकसद�य/Judicial Member

चे�नई/Chennai, EJTADA Digitally signed by EJTADA DURGA NARESH DURGA -दनांक/Dated, the 05th November, 2026 Date: 2026.11.10 16:52:20 NARESH MM +05'30'

:-9-: ITA. No.:2926/Chny/2025

आदेशक)'�त/ल0पअ1े0षत/Copy to: 1. अपीलाथ&/Appellant 2. '(यथ&/Respondent 3.आयकरआयु2त/CIT– Chennai/Coimbatore/Madurai/Salem 4. 0वभागीय'�त�न�ध/DR 5. गाड$फाईल/GF

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