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Facts
The assessee, engaged in SIM card distribution, deposited Rs. 15.59 lakhs in cash, including Specified Bank Notes (SBNs), into his bank accounts during the demonetization period (08.11.2016 to 31.12.2016). The Assessing Officer made an addition of Rs. 3.88 lakhs for SBN deposits made post-November 8, 2016, which was subsequently sustained by the first appellate authority.
Held
The Tribunal considered a bank certificate and relevant Gazette Notifications, specifically Notification No. 2774 SO 3544(E) dated 24.11.2016, which extended the legal tender status of SBNs for certain transactions, including mobile top-ups, until December 15, 2016. Upon review, it was found that only Rs. 6,000/- was deposited after this extended period (between 17.12.2016 to 21.12.2016). Therefore, the addition was restricted to Rs. 6,000/-, and the assessee was granted consequential relief for the remaining amount.
Key Issues
Whether the addition made on account of SBN cash deposits during the demonetization period was justified, considering the extended legal tender status for certain transactions as per government notifications.
Sections Cited
Income Tax Act, 1961, Section 250, Income Tax Act, 1961, Section 144, Reserve Bank of India Act, 1934, Section 26(2), Income Tax (Appellate Tribunal) Rules, 1963, Rule 34(4), Gazette Notification No. 2653 dated 08.11.2016, Gazette Notification No. 2774 SO 3544 (E) dated 24.11.2016
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
This appeal is filed by the assessee against the order of the ld. Addl./JCIT CIT(A)-1, Bengaluru dated 28.03.2024 passed u/s 250 of the Income Tax Act, 1961 which has emanated from the order of the ITO, Ward, Katra passed u/s 144 of the Act, 1961 dated 27.12.2019. deposit of Rs.3,88,000/- made in bank account during the demonetization period.
Brief facts emerging from records are that the assessee is engaged in the business of SIM card distribution and recharge of mobiles vouchers, under trade name of Chowdhary Communications and the assessee maintained two bank accounts with Jammu & Kashmir Bank being A/c No. xxxxx00231 (current account) and xxxxx005965 (savings account). He deposited an amount of Rs.15.59 (fifteen) lakhs in cash during the period of 08.11.2016 to 31.12.2016 (as per the details contained in page no. 8 of the assessment order) and the said deposit includes an amount of Rs.5,53,000/- SBN (specified bank notes) in the current account maintained with J & K Bank. However, from para 3.2 of the assessment order, it is seen that the total amount of SBN deposits was Rs.4,94,000/- (and not Rs.5,53,000/).
On the basis of cash balance available in the books of account, the Assessing Officer has allowed the benefit of the opening cash as on 08.11.2016 and has made an addition of Rs.3.88 lakhs to the total income being deposit of SBN post on 08.11.2016 (during demo period).
The matter carried in appeal has been dismissed by the ld. first appellate authority and the addition of Rs.3.88 lakhs have been sustained.
Now, the assessee is in appeal before the Tribunal, there is no representation by the assessee or his Advocate. However, the assessee has filed a written submission containing the revised Gazette Notification No. 2653 dated 08.11.2016 along with a Assessment Year: 2017-18 bankers certificate issued by the Branch Manager, Jammu & Kashmir Bank giving particular of SBN deposits by the assessee in the bank account. Copy of the said certificate is reproduced as under:
The Bank Manager has certified the total cash deposit for the month of November, 2016 at Rs.4,10,000/- (even though the dates are incorrectly mentioned as 2024 instead of 2016). We also refer to the Government Notification in the matters:-
“Gazette Notification No. 2653 dated 8.11.2016 [Providing certain exemptions for the convenience of the members of public] S.O. 3408 (E). —Whereas, by the notification of the Government of India in the Ministry of Finance, vide F. No. 10/3/2016-Cy.I dated 8th November, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 8th November, 2016, the Central Government declared that the bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as the specified bank notes), shall cease to be legal tender on and from the 9th November, 2016; And whereas, it has become necessary to notify certain exemptions for the convenience of the members of public in carrying out certain emergent and urgent transactions using the specified bank notes; Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby declares that the specified bank notes shall not be ceased to be legal tender, with effect from the 9th November, 2016 until the 11th November, 2016Jthe Nth November, 2016 - as substituted vide Notification No. 2682 SO 3445(E) dated 11.11.2016} {the 24th November, 2016 - as further substituted vide Notification No, 2685 SO 3448 (E) dated 14.11.2016. [the 15th December, 2016- as further sustained vide Notification No. 2774 SO 3544 (E) dated 24.11.2016], to the extent of transactions specified below, namely:- (a)……….. (b)………. (c)………. (d)………. (e)………. (f)………. (g)……… (h)……… (i)……… (j)……… (k)……… (l)………. (m)……… (n)……… (o)………
Inserted by Gazette Notification No. 2774 SO 3544 (E) dated 24.11.2016
(s) for making payments towards school fees up to a limit of Rs.2000/- per student in the Central Government, State Government, Municipality or Local Body Schools; (t) for making payments towards fees for the Central Government or the State Government colleges; (u) for making payments towards pre-paid mobile tup-up to a limit of Rs.500/- for every top- up; (v) for making payments at the toll plazas under National Highways Authority of India including concessionaries, with effect from 3rd December, 2016:”
From the above particulars placed before us, it is seen that vide the substitute Notifications No. 2774 SO 3544(E) dated 24.11.2016, the specified bank notes shall not be ceased to be legal tender w.e.f. 9th November, 2016 until the 15th December, 2016 to the extent of transaction specified below namely (u) for making payments towards pre-paid mobile top up to limit of Rs.500/- for every top up.
From the certificate issued by the Branch Manager of J& K Bank, it seen that the certificate is issued till the period of 13th November, 2016 only, and from contents of the assessment order page 3 and 4, it is seen that the assessee has also deposited SBN notes even after 15th December, 2016 totaling to Rs.6000/- (for the period of 17.12.2016 to 21.12.2016) and rest of the deposit pertain to the period till 30th November, 2016. As such, we find that the deposit for the period of 17.12.2016 to Notification No. 2774 SO 3544 (E) dated 24.11.2016.
As such, the addition in this case is restricted to Rs. 6000/- (six thousand) only instead of Rs.3.88 lakhs, and the assessee will get consequential relief.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 22.09.2025