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Income Tax Appellate Tribunal, C BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI MANOJ KUMAR AGGARWAL
आयकर अपीलीय अिधकरण, ‘सी’ �यायपीठ,चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी महावीर �सह, उपा�य� एवं �ी मनोज कुमार अ�वाल, लेखा सद�य के सम� BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.69/CHNY/2023 िनधा�रण वष�/Assessment Year: 2017-18 Tamilnadu Tourism The Deputy Commissioner Development Corporation Ltd., Vs. of Income Tax, No.2, Wallajah Road, Corporate Circle 3(1), Chennai – 600 002. Chennai PAN: AAACT 3453H (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri R. Vijayaraghavan, Advocate ��यथ� क� ओर से/Respondent by : Shri R. Clement Ramesh Kumar, IRS, CIT सुनवाई क� तारीख/Date of Hearing : 10.07.2024 घोषणा क� तारीख/Date of Pronouncement : 08.10.2024 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Order No.ITBA/NFAC/S/250/2022-23/1047540045 (1) dated 22.11.2022. The assessment was framed by the Deputy Commissioner of Income Tax, Corporate Circle 3(1), Chennai for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 29.12.2019.
- 2 - ITA No.69/CHNY/2023 2. The first issue in this appeal of the assessee is with regard to the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeals Centre (NFAC) confirming the action of the ld. Assessing Officer in making addition of cash deposit of Rs.1,48,32,500/- by invoking the provisions of Section 69 of the Act as unexplained cash deposit being demonetized cash in Specified Bank Notes (SBNs). For this, assessee has raised various grounds, which are argumentative and factual and need not be reproduced.
Brief facts of the case are that assessee is engaged in the business of promotion of tourism related activities such as operating hotels, restaurants, boat houses, telescope houses, petrol bunk, conducting of package tours and fairs etc. During the course of assessment proceedings, the ld. Assessing Officer noted that the assessee had made large cash deposits during demonetization period in SBNs to the extent of Rs.2,14,84,000/- in various bank accounts. Assessee before the ld. Assessing Officer explained the same as closing cash balance as on 8.11.2016 as per cash book duly certified by the Auditor to the extent of Rs.34,41,904/- in which Rs.32,63,500/- was in SBNs. According to the ld. Assessing Officer, assessee has deposited excess SBNs notes which was available as on 8.11.2016 to the extent of Rs.1,82,20,500/-. The assessee also explained that the SBNs notes were collected through petrol bunk operated by the assessee company out of sales to the extent of Rs.33,88,000/-. The ld. Assessing Officer after considering the excess deposit of SBN notes to the extent of Rs.1,48,32,500/-, directed
- 3 - ITA No.69/CHNY/2023 the assessee to explain the source of cash deposits. The assessee before the ld. Assessing Officer explained that tourists plan their travel well in advance and continue to visit many places. Suddenly due to demonetization, they were put to hardship and started arguing with the cashiers/manager to accept the cash. Though circular was issued to all the units to follow the RBI guidelines, being a Government organization units we have collected the SBNs on account of pressure from tourists and also due to lack of understanding. Hence, the assessee has requested the ld. Assessing Officer to take a liberal view on this issue. However, the ld. Assessing Officer has not accepted the explanation of the assessee and added the excess deposit of SBNs to the extent of Rs.1,48,32,500/- as unexplained cash deposit u/s.69 ct r.w.s.115BBE of the Act. Aggrieved, assessee preferred appeal before CIT(A).
The ld. CIT(A) also confirmed the action of the ld. Assessing Officer by observing in 5.3 as under:- ‘’5.3 The above contentions taken by the appellant company don't hold any ground as the addition made by the AO is based on the fact that out of the total cash deposits made after demonetization in the form of SBNs amounting to Rs. 2,14,84,000/- the appellant falled to prove the source of such deposits amounting to Rs. 1,48,32,500/-, hence the question whether the appellant was authorized to collect/accept the SBNs is not an issue under consideration here. The onus to prove the source of cash deposits which lies with the appellant was not discharged by it during the assessment as well as the appellate proceedings also it has not brought any additional documentary evidences to prove the source of such cash deposits in question. Therefore, the Assessing officer rightly treated the deposits found credited in the bank accounts of the appellant as unexplained and the same is hereby confirmed’’.
- 4 - ITA No.69/CHNY/2023 5. We have heard rival contentions and gone through facts and circumstances of the case. Admittedly, this cash deposit of Rs.1,48,32,500/- was received by the assessee during demonization period in SBNs from various customers or tourist who stayed with the assessee or tours arranged by the assessee and assessee has also explained the source. We have already considered this issue in favour of the assessee in the case of Tamil Nadu State Marketing Corporation Ltd vs. Assistant Commissioner of Income Tax, Chennai in ITA No.431/Chny/2023 for assessment year 2017-2018 dated 07.10.2024 and held as under:- ‘’8.4 We have gone through the notifications issued by the RBI and Government of India, to deal with specified bank notes. The only premise of the Revenue is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argument is that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 have been withdrawn from circulation from 09.11.2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31.12.2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31.12.2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31.12.2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the AO makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. 8.5 We further noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Revenue Officer to verify cash deposits during demonetization period in various categories of explanation offered
- 5 - ITA No.69/CHNY/2023 by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the AO needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. Simpliciter violation of certain notification issued by RBI or demonetization scheme announced by Government of India on 08.11.2016 will not entitle the Revenue to make addition u/s.69 or 69A of the Act. Because, the mandate of the provisions of Section 69 & 69A of the Act, i.e., unexplained investments and unexplained money etc., may be deemed to be the income of the assessee for the financial year relevant to assessment year concerned, in which the assessee is found to be the owner of such money, bullion, jewellery or valuable article or unexplained expenditure, if, the such expenditure or such money etc., are not recorded in the books of accounts, if any, maintained by assessee for any source of income and the assessee offers no explanation about the nature and source of such expenditure or acquisition of such money, etc., or the explanation offered by him, in the opinion of AO is not satisfactory. For violation of any RBI notification, etc., can have any civil or criminal liability and can be dealt with under any other provision of law by the concerned authority but for the purpose of bringing the amount under Income-tax, the provisions are very clear i.e., 69 & 69A of the Act. In our considered view, to bring any amount u/s. 69 or 69A of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also been duly included in the return of income filed in relevant assessment year. Therefore, we are of the considered view that, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account of demonetized cash in SBNs’’.
- 6 - ITA No.69/CHNY/2023 Since the issue is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd (supra), we allow the ground raised by the assessee and delete the addition made by the lower authorities.
The next issue raised in this appeal of the assessee is as regards to the order of ld. CIT(A) confirming the action of the ld. Assessing Officer in disallowing employee provident fund of Rs.1,19,40,581/-. For this, assessee has raised the following grounds of appeal.
‘’a. The Lower authorities have erred in disallowing a sum of Rs.1,19,40,581 /-being Employee contribution u/s 36(1)(va), when the sum is paid before the due date for filing return of income according to sec 43B and requires to be allowed. b. The Lower authorities have erred in not applying sec 43B of the Income Tax Act, 1961, to the payments made by the employer of the employee contribution to PF. c. The Lower authorities ought to have applied sec 43B, since sec 43B overrides all other provisions including section 36.
d. The Lower authorities ought to have allowed PF incurred in normal course of business under Section 37 of the Income Tax Act, 1961’.
We have heard rival contentions and gone through facts and circumstances of the case. This issue of late payment of employees contribution to provident fund is covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services P. Ltd vs. CIT, (2022) 448 itr 518
- 7 - ITA No.69/CHNY/2023 (SC). Since this issue is covered in favour of the Revenue, we dismiss this ground of the assessee.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 8th October, 2024 at Chennai.
Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 8th October, 2024 KV आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� /CIT, Chennai 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF.