PRAFULLA KUMAR PRADHAN,RAJ SUNAKAHALA vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), BHUBANESWAR , BHUBANESWAR

The assessee is represented by Shri P.R.Mohanty, Advocate and department is represented by Shri S.C.Mohanty, Sr. DR.

The only issue involved in this case with regard to addition of Rs.10,98,000/- made u/s.69 of the Act on account of cash deposited in the bank during demonetization period under SBN.

It was submitted by the Id. AR that the cash was deposited out of the cash sales made during the year. The assessee is dealing in IMFL and accepted cash which includes the SBN taken against cash sales during demonetization period. The Id. AR submitted that the cash was accepted in SBN under compulsion as the customers came to the shop and had taken the goods i.e. liquor bottle and after opening the same asked the assessee to accept sale consideration in SBN. In the case of liquor, once the bottle is opened, no one can accept it as sales return, therefore, the assessee has no other alternative but to accept the sale consideration in any denomination irrespective of the fact whether it is SBN or any other currency. It was the submission that the AO has not rejected the books of accounts nor stock declared by the assessee was disturbed. The sales declared by the assessee were also accepted. He, therefore, submitted that there was a reasonable cause in accepting the SBN which was deposited in the bank and the source of the same was duly explained and thus the addition made deserves to be deleted.

In reply, Id. Sr. DR submitted that the cash was received in SBN during the demonetization and the assessee being a trader in IMFL is not authorized to collect such SBN currency, therefore, the addition made by the AO is correct. Accordingly, the Id. Sr. DR vehemently supported the orders of the lower authorities

We have heard the rival submissions and perused the material available on record. It is perused that in this case the assessee has deposited total cash out of Rs.16,98,000/- in SBN during the demonetization period. The AO after giving credit of average sales of Rs.6,00,000/- held Rs. 10,98,000/- as unexplained. From the perusal of the order, it is seen that the AO nowhere held that the SBN accepted by the assessee during the demonetization is unauthorized and he himself had accepted the sales as well as stock declared by the assessee. It is not a case where provisions of Section 145(3) of the Act are invoked and income is estimated. The assessee is dealing in IMFL and had made retail sales of liquor wherein many cases customers took the goods and opened up the cap. Once the liquor bottle is opened, it cannot be returned to the seller as it cannot be accepted by any other customer and is a total loss to seller. Due to this compulsion and exceptional circumstances, the assessee had to accept the SBN in those cases. Though we are of the view that SBN cannot be accepted during demonetization except authorized by the RBI, however, as the circumstances narrated above are beyond the control of the assessee, therefore, it is a reasonable cause where to protect the interest of business and to avoid total loss, SBN were accepted from such customers. The AO has already allowed Rs.6,00,000/- as unexplained out of such sales in SBN and also accepted the trading results declared by the assessee wherein such cash sales in SBN was included in total sales by the assessee. Looking to these circumstances, we are of the considered view that the addition of Rs. 10,98,000/- made by the AO and confirmed by the Id. CIT(A) should be deleted as the assessee has demonstrated the exceptional circumstances under which such cash was accepted under SBN. In view of these facts, the addition of Rs. 10,98,000/- made by the AO is hereby deleted.

In the result, appeal of the assessee is allowed.