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Facts
The assessee, running a petrol bunk, declared income for AY 2017-18. The AO made an addition of Rs. 2,48,500/- on account of cash deposits during the demonetization period, considering them unexplained. The FAA confirmed the AO's order.
Held
The Tribunal held that petrol and diesel sales from stations authorized by Public Sector Oil Marketing Companies were exempted and entitled to receive Specified Bank Notes (SBNs) up to 31.12.2016. Therefore, the cash deposits from such sales were not unexplained.
Key Issues
Whether cash deposits made from petrol/diesel sales during demonetization period, from an authorized dealer, are considered unexplained income when gazette notifications provided for exemptions.
Sections Cited
250, 143(3), 69A, 115BBE
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Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed at the instance of the assessee is directed against the order of Addl/JCIT(A)-2, Gurugram dated 31.01.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2 -: 2. There is a delay of 11 days in filing the appeal. The assessee has filed condonation petition along with affidavit stating therein the reason for belated filing of this appeal. On perusal of the same, I find there is sufficient reason for delay in filing this appeal before the Tribunal. Hence, I condone the delay in filing the appeal and proceed to dispose off the appeal on merits.
The grounds raised by the assessee read as follows:- 1) The Impugned Order is bad, erroneous and unsustainable in law. 2) Without prejudice, the Assessing Officer and the JCIT(A) failed to take note of the fact that the books of accounts of the Appellant, who is in the business of running petrol and diesel bunk, are duly audited and erred in adding the alleged cash deposits without rejecting the books. 3) Without prejudice, the Assessing Officer and the JCIT(A) totally erred in not considering the Gazette Notification No. 2653 dated 08/11/2016 and subsequent Notification No. 2774 SO 3544E dated 24/11/2016 regarding exemption of transactions to petrol/ diesel/ gas, thereby not considering the nature of activity carried out by the Appellant. (Relying on dated 07/03/2023). 4) Without prejudice, the JCIT(A) and the Assessing Officer erred in not considering that once the nature and source of the credit has not been disputed and has been created out of ordinary business sales, such credit cannot be termed as 'unexplained' and addition cannot be made, solely because it was made in SBNs. (Relying on dated 07/10/2024) 5) Without prejudice, the JCIT(A) erred in observing that the Appellant did not provide any supporting documents to substantiate the claim, when the Appellant had duly submitted all the explanations and relied decisions. And for all other grounds of appeal that may adduced later, the Appellant humbly prays that the delay be condoned, appeal be admitted, be considered and justice be rendered.
3 -: 4. Brief facts of the case are as follows: The assessee is an individual running a petrol bunk. For the assessment year 2017- 18, the return of income was filed on 30.10.2017 declaring total income of Rs.3,63,320/-. The assessment was selected for scrutiny on account of cash deposits made during the demonetization period. The assessment was completed u/s.143(3) of the Act vide order dated 18.12.2019 making addition of Rs.2,48,500/- being cash deposits made during the demonetization period from 03.12.2016 to 26.12.2016. The AO was in the view that exemption in view of Gazette Notification issued by the Ministry of Finance in No.2653 dated 08.11.2016 had permitted exemptions for certain transactions to petrol/diesel /gas by taking Specified Bank Notes (SBNs) only up to 24.11.2016. Consequently, the cash deposits made subsequently amounting to Rs.2,48,500/- was brought to tax as unexplained money u/s.69A of the Act.
5. Aggrieved by the assessment completed u/s.143(3) of the Act, the assessee preferred appeal before the First Appellate Authority (FAA). The FAA confirmed the view taken by the AO.
4 -: 6. Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The Ld.AR for the assessee submitted that on identical facts, the Chennai Bench of the Tribunal in the case of Smt. Rangasamy Deepa vs. ITO in (order dated 07.03.2023) had held that fuel stations are allowed to accept SBNs up to 31.12.2016. It was submitted by the Ld.AR, the Tribunal has taken into account the relevant Gazette Notification in arriving at the aforesaid conclusion.
The Ld.DR supported the orders of the AO and the FAA.
I have heard rival submissions and perused the material on record. The AO had made addition u/s.69A of the Act amounting to Rs.2,48,500/- being cash deposits made during the demonetization period from 03.12.2016 to 26.12.2016. The AO is of the view, for the aforesaid period the assessee was not permitted to accept SBNs for the sale of petrol and diesel. The Chennai Bench of the Tribunal after considering various Gazette Notifications had held that for the purchase of petrol and diesel at stations operated under the authorization of Public Sector Oil Marketing Companies is entitled as an exempted category up to 5 -: 31.12.2016. The relevant finding of the Tribunal in the case of Smt. Rangasamy Deepa, supra read as follows:- 4. I have heard rival contentions and gone through facts and circumstances of the case. Brief facts are that the assessee is an individual and is an authorized dealer of Bharat Petroleum Company Ltd., and running fuel station in the name of M/s. Sri Angalamman Fuels during the financial year 2016-17. During the course of assessment proceedings, the assessee produced the following details:- • Day Book, Ledger Book and Cash Book for the period relevant to the A.Y. 2017-18. • Details of cash deposits made into the bank accounts during the year 2016-17 • Details of cash deposits during demonetization period. • Sources for cash deposits made during the year (including demonetization period)
The AO after verifying the bank account obtained from the concerned bank u/s.133(6) of the Act, noted that the assessee has deposited SBNs amounting to Rs.73,61,500/- in his bank account during demonetization period i.e., period from 09.11.2016 to 24.11.2016. According to AO, the cash of Rs.73,61,500/- was deposited by assessee out of receipts of SBNs for the period 09.11.2016 to 24.11.2016 in view of the Gazette Notification issued by the Ministry of Finance in No.2653 dated 08th November, 2016, the Central Government of India has permitted exemptions for certain transactions to the Petrol/Diesel/Gas under authorization of public sector oil marketing companies wherein payment could be received old notes of both Rs.1000/- Rs.500/- for the period from 9.11.2016 to 24.11.2016. The AO noted that apart from this assessee has received SBNs from 25.11.2016 to 22.12.2016 amounting to Rs.4,95,000/- which is not covered by the Gazette Notification and hence, he added this cash receipt in SBNs amounting to Rs.4.95 lakhs as unexplained cash deposit u/s.69A r.w.s. 115BBE of the Act. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed action of the AO. Aggrieved, now assessee is in appeal before the Tribunal.
Now before me, the ld.counsel for the assessee filed copy of Gazette Notification No.2654 – S.O. 3409(E) & 2654-S.O. 3407(E) & 2653 – S.O. 3408(E) dated 8.11.2016 issued by Government of India, 6 -: Ministry of Finance u/s 24(1) & 26(2) of the Reserve Bank of India Act, 1934 (2 of 1934) as amended by subsequent notifications issued under the Scheme of Demonetization of the year, 2016 and the relevant notification in Gazette Notification No.2653 dated 08.11.2016 which was further substituted vide Notification No.2774 SO 3544E dated 24.11.2016, to the extent of transactions specified below namely a…… b….. c….. d….. e. for purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector Oil Marketing Companies (read as Public Sector Oil and Gas Marketing Companies –vide Notification No.2684 SO 3447(E) dated 13.11.2016)
According to ld. Counsel, this notification dated 24.11.2016 exempted the purchase of petrol, diesel and gas at the stations operated under the authorization of Public Sector Oil Marketing Companies receiving cash in demonetization notes i.e.,SBNs upto 31.12.2016. The AO has also not disputed this fact that the cash deposit is not out of sale of petrol or diesel. Admittedly the assessee is an authorized dealer of Bharath Petroleum Company Ltd., which is an authorized Public Sector Oil Marketing Company. Once this is a position, I’m of the view that there is no illegality or the cash received is not unexplained because this is received on the basis of sale of petrol exempted vide the above notification which was further extended vide notification dated 24.11.2016. Hence I delete the addition and allow the appeal of assessee.
In light of the aforesaid order of the Chennai Bench of the Tribunal, I hold that petrol bunk operated by the assessee was under exempted category and was entitled to receive SBNs up to the specified date i.e., 31.12.2016. Further, I note from the material on record that the amount of cash deposits admittedly are out of sale of petroleum products. Accordingly, I delete the
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.