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Facts
The assessee, a milk distributor, deposited Rs. 7,58,000/- in old SBNs of Rs. 500/- and Rs. 1000/- during the demonetization period. The AO and CIT(A) added this amount as unexplained income, stating that the assessee accepted SBNs after the ban.
Held
The Tribunal held that the assessee, dealing in an essential commodity, was justified in accepting SBNs for milk purchase, especially during the panic and confusion of demonetization. The notification allowed such transactions for milk booths, and the source of cash was considered bonafide.
Key Issues
Whether cash deposits made in old SBNs during the demonetization period are to be treated as unexplained income when the assessee deals in an essential commodity and the transaction is for purchase of goods.
Sections Cited
69A, 115BBE
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Income Tax Appellate Tribunal, Hyderabad SM ‘B’ Bench, Hyderabad
Before: Shri Vijay Pal Rao & Shri Manjunatha G.
(Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri A.V.Raghuram, AR रधजस् व द्वधरध/Revenue by: Ms. V.Koteshwaramma,DR सुिवधई की तधरीख/Date of Hearing: 29/01/2025 घोर्णध की तधरीख/Date of 30/01/2025 Pronouncement: आदेश / ORDER PER. MANJUNATHA G., A.M: This appeal filed by the assessee is directed against order dated 04.10.2024 of the Commissioner of Income Tax (Appeals) [“Ld.CIT(A)”], Bhubaneswar, pertaining to A.Y.2017-18.
The appeal is time barred by 6 days. The assessee filed an affidavit, submitting that he was out of station for couple of days as one of his close relatives had expired and could not pay the appeal fee as instructed by the counsel and it is only on 06.01.2025, the assessee could pay the appeal fee and file
2 ITA 23/Hyd/2015 Srinivas Gourishetty appeal before the Tribunal, which resulted in the delay of 6 days. The assessee further submitted that the delay in filing the appeal is neither willful nor wanton but for the reasons mentioned above. He, therefore, prayed to condone the delay of 6 days in filing the appeal and admit the appeal to decide the same on merits, for which the Ld.DR has not raised any objection. After hearing both sides, we condone delay in filing the appeal and admit appeal for disposal in the interest of justice.
The brief facts of the case are that the assessee, an individual, engaged in the business of milk distributor, selling milk packets to the shop keepers, filed his return of income for the A.Y.2017-18 on 04.03.2019, admitting income of Rs.4,09,836/-. The case was selected for scrutiny and during the course of assessment proceedings, on the basis of AIR information available, the Assessing Officer noticed that the assessee has made cash deposits into Andhra Bank account, which includes cash deposits during the demonetization period for Rs.29,72,500/-. The Assessing Officer, further noted that out of cash deposits during the demonetization period, Rs.7,58,000/- was in old denominated SBNs of Rs.500/- and Rs1000/- denomination. The Assessing Officer called upon the assessee to explain the nature and source of the cash deposited during the demonetization period. In response, the assessee submitted that he is into the business of milk distributor, selling milk packets to the shopkeepers, surrounding his place
3 ITA 23/Hyd/2015 Srinivas Gourishetty and receive cash from the shopkeepers against sales. Further, during demonetization period, more particularly on 08.11.2016, 09.11.2016 and 10.1.2016, the assessee has received SBNs of Rs.500/- and Rs.1000/- from customers and the same has been deposited into the bank account. The Assessing Officer, after considering the relevant submissions of the assessee, observed that although the assessee claims that because of panic and ignorance of law, he has accepted SBNs of Rs.500/- and Rs.1000/-, but the fact remains that from the date of demonetization i.e. on 08.11.2016, SBNs of Rs.500/- and Rs.1000/- had lost its legal tender, except few exemptions, as per the notification of the Government. Since the assessee is not covered under the notification and barred from accepting the SBNs after 08.11.2016, explanation of the assessee for the source for the cash deposit cannot be accepted. Therefore, made addition of Rs.7,58,000/- u/s 69A of the Income Tax Act, 1961 (“the Act”) and brought to tax u/s 115BBE of the Act.
On appeal, the Ld.CIT(A) for the reasons stated in the appellate order, rejected the explanation of the assessee and upheld the additions made by the Assessing Officer towards cash deposits u/s 69A of the Act.
Aggrieved by the Ld.CIT(A) order, the assessee is now in appeal before the Tribunal.
The learned counsel for the assessee submitted that the Ld.CIT(A) erred in upholding the additions made towards cash
4 ITA 23/Hyd/2015 Srinivas Gourishetty deposit of Rs.7,58,000/- u/s 69A of the Act, without appreciating the fact that as per the notification issued by the Ministry of Finance dated 08.11.2016, the demonetized currency notes of Rs.500/- and Rs.1000/- are allowed to be accepted in specified cases and the assessee is covered by the said notification. As per the notification, for purchase of milk at milk booths covered under the authorization of Central or State Governments, old currency notes are allowed. Although the assessee is not government authorized milk distributor, but the fact remains that the assessee is in the business of distribution of milk and because of the nature of the business, he was forced to accept the cash for few days. The Assessing Officer and the Ld.CIT(A), having noticed the above facts, erred in sustaining the additions only on the ground that the assessee is not an authorised milk distributor, even though the assessee has explained the source for the cash deposits with known sources of income, therefore, he submitted that the additions made by the Assessing Officer should be deleted.
The Ld.DR on the other hand, supporting the order of the Ld.CIT(A), submitted that the assessee himself admitted to have accepted SBNs after 08.11.2016, in violation of notification issued by the Ministry of Finance. Further, the assessee is not coming under the exempted category of persons for accepting SBNs after 08.11.2016. The Ld.CIT(A), after considering the relevant facts has rightly sustained the additions made by the Assessing Officer and their order should be upheld.
5 ITA 23/Hyd/2015 Srinivas Gourishetty
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, the assessee is engaged in the business distribution of milk to retail sellers under the name and style of G.S. Tirumala Milk Parlour. It is also an admitted fact that the assessee was receiving cash from retail sellers against sales even before the date of demonetization, which is evident from the amount of cash deposits into the bank account from 01.04.2016 to 31.03.2017. From the pattern of cash deposits, we find there is no abnormal deviation in the cash deposits during the demonetization period. In fact, the Assessing Officer and the Ld.CIT(A) never disputed the fact that the source for cash deposit is out of sale of milk and there is no deviation in cash deposited during the demonetization period, when compared to earlier period. But, the only reason for the Assessing Officer to make additions towards cash deposits during the demonetization period is prohibition to accept SBNs after 08.11.2016 by any person, except exempted category of persons by the notification of Ministry of Finance. According to the Assessing Officer, the assessee is not an exempted category person for accepting SBNs after 08.11.2016. Therefore, even if the SBNs is out of his business transactions, the same cannot be accepted as source for the cash deposits. We find that the Ministry of Finance has issued notification on 08.11.2016 and as per the said notification, there is no prohibition for dealing with the SBNs of 6 ITA 23/Hyd/2015 Srinivas Gourishetty Rs.500/- and Rs.1000/- from 08.11.2016 for purchase of milk at milk booths. However, the only condition is that the said milk booth should be operating under the authorization of the Central or State Government. In the present case, although the assessee is not operating milk booth under authorization of the State or Central Government, but the fact remains that the assessee is dealing with essential commodity, which is required for day do day life of any human being and therefore, merely for the reason that the milk booth operated by the assessee is not authorised by Government, it cannot be said that the assessee is not entitled for accepting SBNs of Rs.500 and Rs.1000 after 08.11.2016. Since, the assessee is dealing with essential commodity and further during the demonetization period, it was not clear as to who is allowed to accept SBNs and under panic, many people have accepted SBNs during the initial period of demonetization. Therefore, considering the facts and circumstances of the case, also arguments of the assessee and also amount of cash deposits during the demonetization period, we are of the considered view that the arguments of the assessee with regard to source for cash deposit is bonafide and acceptable. The Assessing Officer and the Ld.CIT(A), without appreciating relevant facts simply sustained the additions towards cash deposit u/s 69A of the Act. Thus, we set aside the order of the Ld.CIT(A) and direct the Assessing Officer to delete the addition of cash deposit u/s 69A of the Act.
7 ITA 23/Hyd/2015 Srinivas Gourishetty
In the result, appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 30th January, 2025.