P R & CO.,GOBICHETTIPALAYAM vs. ITO, WARD-2(1), ERODE

The Ld. AR submitted that the assessee is engaged in the business of wholesale and retail sale of rice to provisions stores etc. and has collected cash in certain cases in SBN from the parties. The Ld. AR drew our attention to the confirmation received from the cash collecting agents who have confirmed having collected cash in SBN from debtors of the assessee (page 35 to 42 of paper book). The Ld. AR further submitted that the A.O has not rejected the books of accounts and has accepted the sales of the assessee along with the corresponding debtors and therefore the A.O is not correct in rejecting the submissions of the assessee that collection from debtors is the source for cash deposited in SBN. The Ld. AR also drew our attention to month wise cash sales, cash receipts, cash deposits into the bank account for A.Y 2016-17 & 2017-18. The ld AR submitted that the trend of cash sales and cash collection during the year under consideration is in line as compared to the previous AY and therefore treating the cash deposit as unexplained u/s. 68 of the Act is not tenable. The Ld. AR also submitted a table containing the SA No.128/Chny/2025 PR & Co. :- 4 -: net profit ratio from A.Y 2013-14 to 2019-20 to submit that the net profit ratio of the assessee is consistent across all the A.Ys which goes to substantiate to claim that the sales which is explained as the source for the cash deposit cannot be held as not genuine to make an addition u/s. 68 of the Act. The Ld. AR also submitted that the FAA has not considered the various documentary evidences submitted by the assessee in support of the source of cash deposit in SBN.

The Ld. DR, on the other hand, argued that the assessee failed to provide the critical evidence like debtors' confirmation and proof of SBN collection/sales. The ld. DR further argued that for the purpose of making addition u/s. 68 of the Act, it is not mandatory for the A.O to reject the books of accounts. The Ld. DR in this regard relied on the decision of the Hon'ble Gujarat High Court in the case of Fakir Mohamod Haji Hasan vs. CIT [2001] 247 ITR 290 (Guj.) to submit that section 68 operates independently and the A.O has added only the unexplained portion without disturbing the overall books. The ld DR submitted that in the present case since the assessee has not discharged the onus of explaining the source of cash deposit SBN, the FAA has correctly confirmed the addition made by the A.O. The Ld. DR also argued that the SBN is declared as a non legal tender and acceptance of the same after 09.11.2016 is prohibited. The Ld. DR therefore argued that the explanation offered by the assessee cannot be accepted.

We have heard the parities, perused the material available on record. The assessee is a wholesale and retail trader in rice. The A.O did not accept the submission of the assessee that the source of deposit of cash in SBN is the collection from debtors. In this regard, we notice that the assessee has SA No.128/Chny/2025 PR & Co. :- 5 -: submitted affidavit from agents stating that they have collected cash from the debtors of the assessee and has handed over the same to the partner of the assessee. The details of the agents in the affidavit filed are tabulated as under; Sl. Name of the agent Amount No.

A Balusamy Rs. 5,20,000/- 2. P. Nandakumar Rs. 5,00,000/- 3. K.Sivasakti Rs. 4,80,000/- 4. G.R. Natarajan Rs. 4,60,000/- 6. We further notice that the assessee has submitted the cash ledger for the month of November reflecting the receipt of cash from cash sales and collection from debtors and the corresponding deposit of cash into the bank account of the assessee. We also notice that the assessee has submitted the details showing the cash sales, cash receipts and cash deposits into the bank account during the year under consideration. From the perusal of the order of the FAA, we notice that the FAA has upheld the disallowance made by the A.O on the ground that the assessee failed to correlate the cash sales with actual delivery of goods and has also not substantiated the sales with corresponding receipts from debtors. During the course of hearing, the Ld. AR submitted that considering the nature of business of the assessee, the assessee is not maintaining party-wise ledger account and the cash collections are carried out through agents who have confirmed the receipt of SBN from debtors. In this regard, it is relevant to mention that the FAA has not considered the confirmations submitted by the agents with regard to the cash collection in SBN. It is also relevant to mention that when compared with the overall turnover of the assessee which is at Rs.12,84,16,395/ the addition made towards collection from debtors in SBN is very nominal. We notice that the lower authorities have not considered the analysis of cash sales, cash receipts and cash deposit submitted by the assessee when compared to the SA No.128/Chny/2025 PR & Co. :- 6 -: earlier AY. Considering overall facts and circumstances of the case and the various documents evidences submitted by the assessee, we are of the considered view that the assessee has discharged the onus of substantiating the source for deposit of cash in SBN. Further, accepting SBN after 08.11.2016 can be a violation of notification issued by the Reserve Bank of India and the same cannot be treated as unexplained u/s. 68 of the Act when the assessee has substantiated the source of cash in SBN as cash sales and collections from debtors. In view of this discussion, we hold that the action of A.O to make an addition u/s. 68 of the Act towards cash deposited in SBN cannot be sustained and accordingly directed the A.O to delete the same.

In the result, the appeal of the assessee is allowed and the Stay application is dismissed as infructuous.