SRI NINGAPPA MANAGULI,HUTTI vs. THE INCOME TAX OFFICER, WARD-2, RAICHUR

This appeal by assessee directed against the order of CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 22.11.2021 for the assessment year 2017-18.

The first ground for our consideration is with regard to sustaining addition of Rs.5,80,936/- as unexplained cash credits u/s 69A of the Act in respect of the cash deposit made in the bank account of the assessee during the period of demonetization.

Facts of the case are that assessee had deposited a sum of Rs.13.72 lakhs into his bank account with Syndicate Bank from Sri Ningappa Managuli, Hutti Page 2 of 4 April, 2016 to December, 2016. During demonetization period I.e. 9.11.2016 to 31.12.2016, assessee made a deposit of Rs.8.06 lakhs into his bank account in Specified Bank Notes (SBN) of Rs.500/- & Rs.1000/- each which ceased to be an illegal tender after 9.11.2016. The contention of the assessee’s counsel is that this cash was generated out of his sale of liquor in his business. It is stated that assessee received cash after demonetization and deposited the same into bank account. It was contended that cash deposit from sales, which was duly accounted in his books of account and also VAT paid by the assessee. It was pleaded that the source of cash was not doubted, as such the section 69A of the Act cannot be applied. The Ld. CIT(A) observed that out of cash deposit of Rs.8.06 lakhs, an amount of Rs.2.25 lakhs was opening balance as on 9.11.2016 and balance amount of Rs.5,80,936/-. Though it was emanated from sale of liquor, which cannot be qualified to be called/recorded as sales in books of accounts. Such sales recorded are void and non-est in the eyes of law as the Central Government had withdrawn the legal tender of status of such SBNs w.e.f. 9.11.2016 as the assessee was not authorized to deal with such currency during that period and he sustained the addition of Rs.5,80,936/-. Against this, assessee is in appeal before me.

I have heard the rival submissions and perused the materials available on record. Similar issue came for consideration before this Tribunal in the case of Anatpur Kalpana Vs. ITO Koppal in dated 13.12.2021 in which it was held as under:- “9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation.

In view of the above order of the Tribunal, I inclined to allow the claim of the assessee on similar reasons. This ground of assessee is allowed.

Next ground in this appeal is with regard to the sustaining of sum of Rs.73,781/-, out of original addition of Rs.1,47,562/- in respect of agricultural income treated as non-agricultural income.

Facts of the case are that assessee shown agricultural income at Rs.14,75,620/-. The assessee is said to be owned agricultural land to the extent of 24 acres. The assessee however, failed to substantiate the entire agricultural income with the proper documentary evidence like sale pattis, crop grown certificates from the concerned authorities. In the absence of the above, the AO disallowed 10% of agricultural income as income from other sources and taxed it. On appeal, Ld. CIT(A) sustained addition at 5% of agricultural income as non-agricultural income worked out at Rs.73,781/-. Against this assessee is in appeal before me.

In the result, appeal filed by the assessee is partly allowed Order pronounced in the open court on 7th June, 2022