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Facts
The assessee, an agent for M/s.Hermis Tickets Pvt Ltd, deposited Rs.6,78,500/- in Specified Bank Notes (SBNs) in bank accounts during FY 2016-17, relating to business commenced on 21.10.2016. The Assessing Officer made an addition under Section 69, asserting that government instructions precluded receiving amounts in SBNs, which was confirmed by the First Appellate Authority.
Held
The Tribunal found no evidence from the AO that the deposits were unrelated to the assessee's admitted business or that demonetization was initiated for these activities. Relying on a coordinate bench decision (TASMAC), it held that legitimate SBN receipts are not illegal and their source is similar to other currency. Therefore, the addition made by the lower authorities was set aside, and the AO was directed to delete the impugned amount.
Key Issues
Whether cash deposits made in Specified Bank Notes (SBNs) from legitimate business activities during the demonetization period can be treated as unexplained cash credit under Section 69 of the Income Tax Act.
Sections Cited
250, 69, 68
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T VARKEY & SHRI AMITABH SHUKLA
Years: 2017-18 Dinesh Income Tax Officer No.94, Sullikarudu, Ward-2(1), Getticheviyur, Erode, Erode Tamil Nadu-638 110. [PAN: CEEPD6297J] (प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/ Assessee by : Mr. S.Bhupendran, Advocate प्रत्यर्थी की ओर से /Revenue by : Mr.R.Raghupathy, Addl. CIT सुिवाई की तारीख/Date of Hearing : 18.02.2025 घोर्णा की तारीख /Date of Pronouncement : 26.03.2025 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/APL/S/250/2024-25/1068907916(1) dated 20.09.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), for the assessment year 2017-18. Through the aforesaid appeal the assessee has challenged order u/s 250 dated 20.09.2024 passed by NFAC, Delhi. 2.0 The only issue raised by the assessee, through its grounds of appeal, is regarding an addition of Rs.6,78,500/- made by the Ld.AO on account of cash deposits in assessee’s bank accounts. The Ld.Counsel for the assessee has submitted that it started the business of money
Page - 1 - of 4 :- 2 -: transfer in FY-2016-17 by becoming an agent of M/s.Hermis Tickets Pvt Ltd and its business actually commenced from 21.10.2016. As per para 4 of his Ld.AO’s order an amount of Rs.6,78,500/- was deposited in assessee’s bank account by way of specified bank notes(SBNs). The Ld. Counsel submitted that the Ld.AO made the addition of Rs.6,78,500/- u/s 69 holding that contemporaneous government instructions precluded assessee from receiving any amount in SBNs. The Ld. First Appellant Authority confirmed the addition of the Ld.AO by concurring with the reasoning given therein. The Ld.Counsel has placed reliance upon the order of this tribunal in the case of TASMAC as at dated 07.10.2024. The Ld. DR relied upon the orders of lower authorities. 3.0 We have heard rival submissions in the light of material available on records. There is nothing in the order of Ld.AO to allude that the impugned amounts represented any receipts from activities qua which the demonetization was initiated. The Ld. AO has not brought any evidence on record so as to allude that the impugned receipts are not connected with the assessee’s admitted business activities. On the issue of treatment of SBNs, we have noted a Hon’ble Coordinate Bench of this tribunal in the case of TASMAC as at dated 07.10.2024 as observed as under:- Page - 2 - of 4 :- 3 -:
…..8.3 In view of the above provisions, as in the present case, once the receipt of SBNs by assessee is not illegal or barred by any legal provisions the receipt of SBNs cannot be put on a different footing for the purpose of Section 68 or Section 69 of the Act from other currency as the source of SBNs are same as the source of other currency. The SBNs though are not legal tender, is of no - 34 - consequence for determination of source, because the SBNs can be encashed for the face value with the bank without any question being raised. We further noted from the RBI circulars or CBDT circulars that neither the RBI circulars nor any CBDT circulars including any instructions on demonetization requires any person to disclose the source of SBNs. We noted from the facts of the case placed before us that out of total deposits of Rs.2635.35 Crores were in cash for the month of November 2016, which has been accepted as the value of liquor sold for a sum of Rs.2582.56 Crores, hence it can be easy presumed, unless disproved by Revenue, that the balance sum of Rs.52.79 Crores is out of sale of liquor. There is no basis or evidences or examination of any person for reaching a conclusion that this sum of Rs.52.79 Crores received by assessee has been substituted in demonetized currency. We noted from the evidences placed before us that the observation of the AO that branch wise details of deposits made in SBNs was not available is Page - 3 - of 4 4 -: not correct for the reason that the complete details of deposits of SBNs account-wise, branch-wise was submitted before the AO as well as before the CIT and also before us…..
4.0 We are in agreement with the decision of this tribunal supra on the issue of treatment of SBNs. Accordingly, considering the facts of the case as well as in respectful compliance to the decision of Hon’ble Coordinate Bench of this tribunal in the case of TASMAC, the order of lower authorities is set aside and the Ld.AO is directed to delete the impugned addition of Rs.6,78,500/-. In the result, all the grounds of appeal raised by the assessee are allowed. 5.0. In the result, the appeal of the assessee is allowed. Order pronounced on 26th , March-2025 at Chennai. Sd/- Sd/- ( एबी टी. वकी) (अयिताभ शुक्ला) (ABY T VARKEY) (AMITABH SHUKLA) न्यानयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, नदिांक/Dated: 26th , March-2025. KB/- आदेश की प्रनतनलनप अग्रेनर्त/Copy to: 1. अपीलार्थी/Assessee: 2. प्रत्यर्थी/Revenue 3. आयकर आयुक्त/CIT - Coimbatore 4. नवभागीय प्रनतनिनर्/DR 5. गार्ा फाईल/GF
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