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Facts
The assessee received back loans and disbursed loans during the demonetization period, depositing a significant amount of cash, including Specified Banking Notes (SBNs). The Assessing Officer (AO) added the SBN amount to the assessee's income, disbelieving the assessee's explanation.
Held
The CIT(A) held that the assessee acted as a Business Correspondent for Yes Bank and was authorized to collect SBNs on their behalf, directing the deletion of the addition. The Tribunal upheld the CIT(A)'s order, finding no merit to interfere.
Key Issues
Whether the addition made by the AO for unexplained SBN deposits is justified when the assessee claims to have acted as a Business Correspondent authorized by a bank.
Sections Cited
148A, 263, 250, 115JB, 69A, 115BBE
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Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Deputy Commissioner of Income Tax, Circle-5(1), Kolkata, Aayakar Bhawan, 8th Floor, P-7, Chowringhee Square, Kolkata - 700069 .....................…...…………….... Appellant vs. G U Financial Services Private Limited, 606/2112, Kalyani Bhawan, Bharat Villa, Naharkanta, Rudrapur Bhubaneshwar - 752101 [PAN: AAACV8903A] ...............…..….................... Respondent Appearances by: Assessee represented by : B. Tripathy, CA Department represented by : Abhishek Kumar, JCIT, Sr. DR Date of concluding the hearing : 07.01.2025 Date of pronouncing the order : 16.01.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
In this case, the ITAT Registry has reported a delay of 28 days in filing the present appeal by the Revenue. Request for condoning the said delay has been filed as under:
Dates Events/Reasons 05.02.2024 Order of CIT(A) was received in the O/o Pr. CIT-2, Kol. 05.02.2024 The order was received in the O/o DCIT for Appeal scrutiny report from office of PCIT-2, Kolkata 05.04.2024 Due date for filing of 2nd Appeal 18.03.2024 ASR is submitted before the O/o PCIT-2, Kolkata 25.04.2024 Certificate of filing 2nd appeal was received from the O/o Pr. CIT-2, Kolkata 26.04.2024 Necessary documents/paper/details required for filing 2nd Appeal before Hon’ble ITAT, Kolkata were collected and prepared. 02.05.2024 2nd Appeal was filed.
G U Financial Services Private Limited It is submitted that the appeal could not be filed on or before due date due to late processing of procedure from the higher authority as huge work load relating to time barring assessment u/s 148A and 263 proceedings were going on. Therefore, it is requested to kindly condone the delay of 27 days in filing appeal before the Hon’ble ITAT, Kolkata for the sake of substantial justice.” 1.1 Considering the reasons advanced for the said delay, the same is hereby condoned and the appeal is admitted for adjudication.
1.2. The present appeal arises from the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2017-18, dated 05.02.2024.
In this case, the assessee filed its return of income on 28.10.2017 declaring total income of Rs. 97,07,420/- u/s 115JB of the Act. The Ld. AO noticed that during demonetization period, the assessee company received back loans amounting to Rs. 6,30,68,670/- and disbursed loans amounting to Rs. 3,60,34,000/-. The Ld. AO found that during the demonetization period, the assessee company deposited cash amounting to Rs. 2,93,37,929/- in the bank. Out of the total cash deposit an amount to Rs. 1,30,34,000/- was in Specified Banking Notes (SBNs). In light of this fact, the Ld. AO disbelieved the explanation offered by the assessee and added Rs. 1,30,34,000/- u/s 69A of the Act.
2.1 Aggrieved with this action of the Ld. AO, the assessee approached the Ld. CIT(A) and there it was pleaded that the assessee was acting as an agent of Yes Bank Limited and had received SBNs on their behalf in a fiduciary capacity. Before the Ld. CIT(A), the assessee filed a letter dated 15.11.2016 from Yes Bank in support of its claim that SBNs were collected under the authority of the said bank only. The relevant finding of Ld. CIT(A) are as under:
5.2 I have carefully gone through the grounds of appeal, statement of facts and assessment order passed by the AO and written submission uploaded by the appellant. It is the case of the AO that the assessee company being a Non-Banking Financial Company for the year under consideration has received and deposited an amount of Rs. G U Financial Services Private Limited 1,30,34,000/- in SBN during the demonetization period. AO is of the view that the assessee is not specified person or parties which were exempted as published or notified by the RBI to accept SBN. On the contrary appellant has submitted that AO has ignored the fact that as the Business Correspondent (BC) of Yes Bank Ltd., the assessee was permitted to collect the Specified Bank Notes (SBNs) from the loanees as a pure agent of Yes Bank Ltd. In support of its contention appellant has uploaded the letter dated 15th November, 2016 from Yes Bank Ltd. authorizing the assessee to collect the SBNs from loanees. 5.3 Having perused the above submission as well as documents uploaded by the appellant, I am of the view that AO is not justified in making the impugned addition without appreciating and verifying the whole facts of the case. Addition has only been made citing the reason that the assessee was not entitled to receive and deposit the SBN during demonetization period as was not in the exempt list published by the RBI. However, acting as an agent (BC) of Yes Bank Ltd., the assessee was entitled to receive the said SBNs for and on behalf of the bank. AO has completely ignored this fact that appellant in its capacity as a Business Correspondent (Agent) of Yes Bank Ltd. was specifically permitted to receive the SBNs and deposit the same with the bank as the loans were made by the bank and the assessee was merely acting as a collection agent on their behalf for the impugned transactions. It is amply clear that the SBNs recorded in the books are as a pure agent duly authorized to collect on behalf of the bank. AO has failed to verify and appreciate this fact. Therefore, AO is directed to delete the addition of Rs. 1,30,34,000/- made u/s 69A r.w.s. 115BBE of the Act. Thus, Grounds of appeal raised on the issue is allowed.
2.2 Aggrieved with action of the Ld. CIT(A), the Revenue has filed the present appeal with the following grounds:
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs. 1,30,34,000/- made by the AO on account of disallowance u/s 69A of the Act.
2. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds herein above before or hearing of this appeal.”
Before us, the Ld. DR argued that the assessee was legally prohibited from accepting SBNs during demonetization period and therefore, the finding of Ld. AO was justified and worthy of being upheld.
3.1 Per contra, the Ld. AR stated that they had duly filed necessary communication received by them from M/s Yes Bank, in as much they were authorized by the said Bank to collect cash from loanee SHG customers during demonetization period. It was in such a capacity only, when the assessee was working as Business Correspondent of M/s Yes Bank, that the impugned activity took place.
We have carefully considered the rival submissions and also gone through the orders of authorities below. It is seen that the Ld. CIT(A) was persuaded to decide the issue in favour of the assessee on the ground that G U Financial Services Private Limited there was correspondence/communication available from M/s Yes Bank to show that the assessee was a Business Correspondent of the said bank and in that capacity, the assessee had collected the SBNs. Considering this finding we deem it fit to not interfere with the impugned order of the first appellate authority on merit. The action of Ld. CIT(A) is hereby upheld.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the court on 16.01.2025