THIRUMALAI NADHIYA,COIMBATORE vs. ITO, NCW-3(3),, COIMBATORE

Assessment Years: 2017-18 Thirumalai Nadhiya, Income Tax Officer, No.2/1, N.R.S.Nagar, Non-Corp Ward-3(3), Narasimanaickenpalayam, Coimbatore. Coimbatore, Tamil Nadu-641 031. [PAN: ATMPN3208Q] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri N.Arjun Raj, Advocate, प्रत्यर्थी की ओर से /Revenue by : Ms.R.Anitha, Addl.CIT सुनवाई की तारीख/Date of Hearing : 07.07.2025 घोषणा की तारीख /Date of Pronouncement : 08.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1074827269(1) dated 21.03.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment year 2017-18. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.

2.0 The only issue contested by the assessee through its grounds of appeal is regarding the addition of Rs.31,81,340/- confirmed by the Ld.CIT(A) qua the overall addition of Rs.58,51,500/- made by the Ld.AO on account of unexplained cash deposits in assessee’s bank accounts during the demonetization period. The brief factual matrix of the case is that the assessee’s husband is a stamp duty vender. The assessee was operating in remote locations and was collecting stamp duty from clients in cash and which were paid to the government account through online. The assessee was thus providing online payment service for the registrar office. The assessee used to collect the cash from clients which was deposited in its bank account and the stamp duty was paid online on behalf such clients. The Ld.AO had noted that during demonetization period total cash of Rs.67,63,500/- was deposited out which Rs.58,51,500/- was in specified bank notes (SBNs). The Ld.AO held that the SBNs were declared illegal tender and hence proceeded to make the addition in the hands of the assessee. The Ld.CIT(A) confirmed the addition of the Ld.AO while getting inquiries conducted in the remand proceedings. The Ld.AO conveyed that out of total amount of Rs.67,08,135/- of cash deposited in assessee’s account, confirmations for Rs.35,26,795/- was received from persons that they had paid cash to the assessee. The Ld.CIT(A) therefore confirmed the said unconfirmed amount of Rs.31,81,340/-. Pertinently whereas the Ld.AO had made the Page - 2 - of 5 addition u/s 69A, the Ld.CIT(A) confirmed the amount of Rs.31,81,340/- u/s 68 of the Act. 3.0 The Ld.Counsel for the assessee has assailed the appellate order on the very premise of invocation of section 68 of the Act. It has been stated that there is no case for applying the impugned section as the ingredients of any “credit in the books of accounts” has not been found in this case. It was stated that it is settled law now that the entries in the bank accounts are not to be construed as books of accounts of the assessee. The Ld.Counsel for the assessee further submitted that acceptance of cash from clients for online payments is an accepted part of its business activity, which has not been disputed by the Revenue. The Ld. Counsel further submitted that the impugned cash deposits forms a very small component of its overall turnover of about Rs.5 Crores. 4.0 Per contra, the Ld.DR relied upon the order of lower authorities. 5.0 We have heard rival submissions in the light of material available on records. We have noted that the entire emphasis of the Ld.AO and the CIT(A) in making and sustaining the impugned addition is upon the issue of legality of transacting in SBNs in demonetization period by the assessee. We have noted that a coordinate bench of this tribunal has extensively dealt this issue in the case of Tamil Nadu State Marketing Corporation Limited in dated 07.10.2024. It has Page - 3 - of 5 been concluded therein that there was no bar in transacting in SBNs in demonetization period. We have also noted that the business practice of the assessee entails receipt of cash from clients for making online stamp duty payments on their behalf. We have perused the details of online stamp duty payments made by the assessee with corresponding cash deposits in its bank accounts. We have also noted that the cash deposits taken by the assessee have been ploughed back into Tamil Nadu State government account by way of online stamp duty payments and the assessee is only in receipt of corresponding small commission payments. We have also noted that it is not the case of the Revenue that the impugned cash deposits were sourced through any unaccounted income of the assessee. We are also unable to subscribe to the hypothesis propounded by the Ld.CIT(A) qua invocation of section 68 in this case. The bank statements of the assessee maintained by the banks cannot be equated with books of accounts of assessee as prescribed u/s 68. They cannot be equated as books accounts of assessee. Consequently, we are of the considered opinion that the order of lower authorities is not based upon correct understanding and facts of the case. We therefore set aside the order of the lower authorities and direct the Ld.AO to delete the addition of Rs.31,81,340/- sustained by the Ld.CIT(A). Accordingly, all the grounds of appeal raised by the assessee are allowed. Page - 4 - of 5 6.0 In the result, the appeal of the assessee is allowed. Order pronounced on 8th , Aug-2025 at Chennai. Sd/- Sd/- (एबी टी. वर्की) (अधमताभ शुक्ला) (ABY T VARKEY) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 8th , Aug-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF