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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
Year: 2017-18 Kuppusamy Meiyappan, The Dy. Commissioner of 2/263, Perumal Koil Medu Street, Vs. Income Tax, No.8, Seelanaickanpatty, Circle-1(1), Salem – 636 201. Salem. [PAN: ALPPM 0517Q] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथF की ओर से/ Appellant by : Shri S. Sridhar, Advocate HIथF की ओर से /Respondent by : Shri D. Hema Bhupal, JCIT सुनवाई की तारीख/Date of Hearing : 03.07.2024 घोषणा की तारीख /Date of Pronouncement : 30.08.2024 आदेश / O R D E R PER S.R. RAGHUNATHA, A.M : This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), (NFAC), Delhi [hereinafter “CIT(A)”] in DIN & Order No. ITBA/NFAC/S/250/2023- 24/1059373357(1), dated 04.01.2024. The assessment was framed by the Assessing Officer 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.
The assessee has given the reason for delay in filing the appeal. We have considered the petition of delay in filing the appeal and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is condoned accordingly.
3. The sole ground before us is, the ld. CIT(A) has erred in confirming the addition of Rs.88,23,659/- u/s. 69A r.w.s. 115BBE of the Act as unexplained income.
The brief facts are that, the assessee is an individual and is in the business of trading in silk sarees and job work of weaving of silk sarees under the name and style of M/s. K.Meiyappan ‘A’ Fabrics. The assessee filed his return of income for the assessment year 2017-18 on 13.11.2017, admitting an income of Rs.11,45,870/-. The case was selected for scrutiny under CASS. Accordingly, notices u/s. 143(2) and 142(1) of the Act was issued to the assessee calling for details of cash deposits during demonetization period. In response to notices, the assessee submitted bank statements and explained that cash deposits of Rs.2,33,03,000/- in SBNs during demonetization period was from the sales made in the month of October and also cash sales from 01.11.2016 to 08.11.2016. However, the Ld. AO was not satisfied with the explanation furnished by the assessee and accepted and the balance amount of Rs.88,23,659/- was brought to tax u/s. 69A r.w.s. 115BBE of the Act and also Rs. 82,48,840/- cash deposited from 16/11/2016 to 09/12/2016, even though cash balance was explained but not deposited to bank account within reasonable time and completed the assessment u/s. 143(3) of the Act on 29.12.2019, holding as under:
The assessee has deposited a sum of Rs. 2,33,03,000/- in SBNs during the demonetization period. Vide this office notice dated 09.11.2019, the assessee was given an opportunity to explain the nature and source of the deposits. It was also made clear in the said notice that in case of non-compliance or in case the explanation given is not satisfactory, the amounts deposited will be brought to tax as unexplained income of the assessee, It is seen that the cash balance of the assessee as on 08.11.2016 is Rs.1,44,79,341/-,as against Rs. 2,33,03,000/- deposited by the assessee during the demonetization period. Thus, there is: a difference of Rs.88,23,659/- (rounded off), for which the source is not explained. The assessee has not offered any explanation as to the difference or as to the nature and source of the cash deposits made during the demonetzation period In view of this, the source for Rs. 88,23,659/- is not explained and the same is treated as unexplained income of the assessee u/s 69A r.w.s 115BBE oftheT ActThe same is brought to tax for A.Y.2017-18 under the head Income from other sources Since the income determined includes income in the nature referred to in section 69A, penalty proceedings u/s 271AAC of the Act separately. (Addition: Rs.88,23,659/-) 4. lt is further seen that the assessee has deposited the SBNs from 11.11.2016 to 09.12.2016. The total amount deposited is Rs.2,33,03,000/- Out of this, Rs.62,30,500/- is deposited within a reasonable time of 15.11.2016. The balance amount of Rs.1,70,72,500/- is deposited from 16.11.2016 up to 09.12.2016. Since demonetization was announced on 08.11.2016, the assessee had no reason to hold such huge amount of cash. The assessee also has made deposits into the bank accounts on nine different dates after 15.11.2016. The cash was available on 08.11.2016, the assessee could have deposited the entire amount in one transaction. The assessee has failed to explain the same. Hence, the sum of 4 -: Rs.1,70,72,500/- is from his unexplained receipts. Thus, nature and source of the said sum stands unexplained. In the absence of proper explanation from the assessee, sum of Rs.1,0,72,500/- is also treated as unexplained income of the assessee u/s 69A r.w.s. 115BBE of the lncome-tax Act, 1961 and the same is brought to tax for A. Y.2017-18. A sum of Rs. 88,23.659/- is already brought to tax u/s 69A r.w.s. 115BBE, as discussed above, the balance sum of Rs.82,48,840/-(1,70,72,500-88,23,659) is brought to tax for A.Y.2017-18 under the head "Income from other sources". Since the determined income includes income in reference to section 69A, penalty proceedings u/s. 271AAC of the Income-tax Act is initiated separately.”
4. Aggrieved by the impugned order, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee reiterated that the business of trading in silk sarees, raw silk and job work has been carried out and the deposits made during the assessment year was out of sale proceeds, collection from debtors and the amounts withdrawn from the banks earlier. The assessee maintained regular books of accounts with stock inventory. The assessee furnished purchase bills, sales register, cash book and demonstrated that the cash was deposited in SBN was out of sales proceeds and collection from the debtors. The assessee challenged the addition U/s.69A of the Act for the following reasons:
A) Rs.88,23,659/- being the difference between cash deposits during demonetisation period of Rs.2,33,03,000/- and cash balance on Rs.1,44,79,341/- and B) Rs.82,48,840/- being the difference between Rs.1,70,72,500/- and Rs.82,23,659/- ;
Rs.1,70,72,500/- being the difference between cash deposits during demonetisation period of Rs.2,33,03,000/- and amount filed all the details electronically and they are examined. It is pertinent to note that NO finding with respect to any defect in the books of accounts given in the impugned order. It is important to note that the total turnover of the assessee in the immediate previous year was Rs.13.77 Crores and in the impugned year it was Rs.15.25 crores and the respective net profit rate are @ 0.76% & 0.78%. When the accounts of the assessee were not found to be defective, the additions made is required to be deleted and relied on the following decisions: • 134 Taxmann.com 256 (Del) or 441 ITR 550 • 189 ITD 608 (Vizag Tribunal) and • dated 16/03/2022.
Considering the assessee’s submissions, the Ld. CIT(A) deleted the addition to the tune of Rs.82,48,840/- on account deposits made after 15/11/2016 out of cash on hand held on 08/11/2016 and sustained the addition of Rs.88,23,659/- holding as under:
“16.0 On merits of the case, the A.O found that the appellant had deposited an amount of Rs. 2,33,03,000/- in SBNs during the period of demonetisation. The AO ascertained that the cash in hand as on 08.11.2016 as Rs.1,44,79,341/- only. The assessee has to explain where from the difference amount of Rs.88,23,659/- was received into the accounts and deposited the same during the demonetisation. No explanation seems to have been submitted by the assessee before the AO. The only argument made by the assessee during appeal proceedings is that he has maintained the books of accounts 6 -: and the amount credited in the bank account is duly shown in the books and such entries are taken care of the required explanation. This argument is not a convincing one. The AO had already given due credit to the argument of having balance of cash in hand as on 08.11.2016 and he has reduced the same from the total SBNs deposited during the demonetization period. Further, assessee stated that the cash deposited in the bank in SBNs are out of cash sales, debt realisation etc. This point was not contradicted by the AO and considered all these aspects of cash sales & debt realisations as part of the cash in hand as on 08-43.2016The assessee cannot claim that he had reaslised the sale proceeds and recovery of debt in SBNs during the demonetisation period which is against the notifications/circulars issued by the RBI. The assessee is prohibited in carrying out the business transactions in the demonetised Currency which is against then public policy. Even if the assessee has done any sale\transactions during the demonetisation period in currency of non-legal tender that will be considered as nota legal transaction. The transactions cannot be recognized in the books of accounts in the currency of non-legal tender. To that extent the books of accounts are Considered to be defective Since the appellant had not taken such plea carrying out the sales in SBNS, the only possibility of cash received in SBNs over and above the closing cash in hand as on 08.11.2016 to be treated as income from the sources other than the business.
17.0 Also stated that he had withdrawn the cash from the bank account is also source of SBNs deposited in the bank account during the demonetisation period. The cash withdrawn prior to demonetisation period was already taken as part of closing balance of cash in SBNs by the AO. Hence, there is no question of considering the same once again as source. If the assessee says that he had withdrawn the cash from the bank during the demonetisation period, the amount withdrawn cannot be in SBNs. Therefore, the explanation submitted for the difference of cash deposited in SBNs cash in hand as on 08.11.2016 is not satisfactory in terms of Sec.69A of the Act.
18.0 The appellant claims that he had maintained the books of accounts and all the sources of cash generated are reflected in the accounts. The appellant argues against the addition u/s 69A based on several case laws that when the books of accounts are maintained and entries of cash are recorded properly, no addition is warranted and if the same is made that is nothing but a double taxation. I completely disagree with the interpretation of the assessee on this point. The said case laws are applicable squarely when the cash deposits are made in normal circumstances other than demonetisation period. The deposits of SBNs have to be considered as a special case when the quantum is in excess of satisfactory explained level is deposited in bank account after announcement of demonetisation. As already stated, excess amount of SBNs 7 -: deposited for which no satisfactory explanation is provided are nothing but the assessee's undisclosed income irrespective of the fact of maintaining the books of accounts. Mere routing the excess cash in SBNs in books of account beyond known quantum of cash in hand cannot entitle the assessee to convert such excess amount of SBNs as a regular business transaction and accept the net profit ratio from such receipt as part of the total income admitted in the return. However, the AO is not correct to tax the entire amount of SBNs deposited in bank account as income u/s 69A and also as part of business income, n view of the above said discussion, the AO is directed to compute the total income of the assessee under the head business by reducing the met profit proportionate to the gross receipts after deducting the armouni-of.Rs.88,23,659/-Such working will meet the justice of on both the ends. There is no need of discarding the addition of SBNs from the assessed income which is against the facts and the law. Subjected to the above discussion, the ground no.2() raised by the appellant is dismissed.
19.0 The assessee had not deposited the entire amount of SBNs with him at one go in the bank account. He deposited the SBNs on several tranches. The AO has suspected that the assessee was not having sufficient opening balance as claimed by him but brought into the books later and claimed the same as available as on 08.11.2016. Such inference was drawn based on human behaviour and probability of taking such rare course. The AO might have been correct if the facts/documents supporting such inference with him. Once he had accepted the assessee's submission of closing balance of cash in hand, it is the prerogative of the asessee to deposit the SBNs at any time within the time period allowed by the RBI starting from 10.11.2016 to 31.12.2016. As rightly asserted by the appellant in his written submissions, the AO cannot specify the pattern of cash deposits to be done in a particular fashion. There may be several reasons though not specified by the appellant, such as bankers' refusal to accept the entire cash deposit at once or keeping the cash in various places by the asessee and the same cannot be brought to location bank or time required to spend on counting of cash is enormous or safely issues etc. Due to the above discussion, however strong the suspicion may regarding the pattern of cash deposits done by the assessee shall not lead to pure assumptions for making addition which is against the fact of having the cash in hand to the extent of Rs.1,44,79,341/-. Therefore, the addition made u/s 69A of the Act on the cash deposits of SBNs made in bank account which was deposited after 16.11.2016 cannot be sustained. Subjected to the above facts on record, the AO is directed to delete the addition of Rs.82,48,840/- u/s 69A.”
Aggrieved by the impugned order of the ld.CIT(A), the assessee preferred an appeal before us.
8 -: 7. The Ld. Counsel for the assessee, assailed that the ld.CIT(A) erred in sustaining the addition made u/s. 69A r.w.s. 115BBE of the Act, even though the assessee has filed all the relevant documents and details to prove its case. The Ld. Counsel for the assessee, stated that the assessee maintained proper books of accounts, stock records and have been furnished during the assessment proceedings. The assessment was concluded by the Assessing Officer without finding any defect in the books of accounts presented and accepted the same. The Ld.AR further stated that the Ld.CIT(A) erred in not considering the scope and overriding effect of the SBN(cessation of liablities) Act, 2017, more particularly the meaning and effect of the “Appointed day” under the Act and in support of the same he relied on the following decisions of the Tribunal: • dated 14/10/2022 • dated 04/01/2023 • ITA No. 264/Chny/2023 dated 26/07/2023 • ITA No. 808/Chny/2023 dated 11/10/2023 • ITA No. 1321/Chny/2023 dated 19/01/2024 • ITA No. 1128/Chny/2023 dated 28/02/2024 In light of the above argument the ld.AR prayed for deleting the addition made by the Ld.CIT(A).
Per contra, the ld. DR, on the other hand relied on the actions of the Assessing Officer and the ld. CIT(A), after considering the during the demonetisation period which was collected from debtors and from sales proceeds as it was not a legal tender and was prohibited to transact for any of the transactions by general public and hence the order of the Ld.CIT(A) should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The fact with regard to the impugned dispute are that the assessee has deposited a sum of Rs.88,23,659/- in specified bank notes during demonetization period to his bank account beyond the cash balance held on 08/11/2016. It is admitted from the records that the assessee is engaged in trading business of trading in silk yarn, silk sarees and job work of weaving silk sarees. The case was selected for scrutiny to verify the source for cash deposited and called for certain details. The assessee deposited cash of Rs.2,33,03,000/- after announcement of demonetization by Government of India. Out of which the assessee shown cash balance on 08/11/2016 of Rs.1,44,79,341/- and hence the difference amount of Rs.88,23,659/- considered as specified bank notes collected during demonetization period and deposited to his bank account, thereby confirmed the addition by Ld.CIT(A) U/s.69A of the Act made by the AO. The assessee deposited cash out of sale response to notice u/s. 142(1) of the Act, the assessee had furnished cash book, sales register, purchase register, bank statements. The assessee has maintained proper books of accounts which are subjected to tax audit u/s. 44AB of the Act. The books of accounts of the assessee have been accepted by the lower authorities while framing the assessment and not rejected by pointing out any defects.
On perusal of the records and facts and circumstances of the case, we are of the considered opinion that when the sales has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law.
The cash sales / collections made from debtors by the assessee have been credited in the books of accounts and the same form part of the assessee’s cash book. On these facts, it could be very well said that the assessee claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the Assessing Officer failed to rebut the same. The allegations/statistics relied upon by Assessing Officer to take an adverse view is not backed up by relevant evidence/material and therefore the impugned action of authorities below cannot be countenanced. Moreover, since cash generated out
As regards, the objection on legal tender of Specified Bank Notes on or after 08.11.2016, we find that as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which came into effect from 31.12.2016 appointed date for this purpose means 31.12.2016. Further, as per Sec.5 of said Ordinance, from the appointed date, no person shall, knowingly or voluntarily, hold or transfer or receive any Specified Bank Notes. From the above what is clear is that up to the appointed date i.e.31.12.2016, there is no prohibition for dealing with Specified Bank Notes. Therefore, in our considered view, the objection of the Ld.CIT(A) and that of AO on this issue in light of said Act is devoid of merits. Further, the Ld.AR relied on the following decisions of the Tribunal has addressed the similar issue in favour of the assessee. • dated 14/10/2022 • dated 04/01/2023 • ITA No. 264/Chny/2023 dated 26/07/2023 • ITA No. 808/Chny/2023 dated 11/10/2023 • ITA No. 1321/Chny/2023 dated 19/01/2024 • ITA No. 1128/Chny/2023 dated 28/02/2024 12 -: The Tribunal after considering relevant provision of Specified Bank Notes (Cessation of Liabilities) Act, 2017, held that there is no prohibition under the Act to deal with Specified Bank Notes up to 31.12.2016.
Therefore, on the given facts and respectfully following the order of Co-ordinate Bench of this Tribunal, the impugned additions are not sustainable in the eyes of law and hence, the same is deleted by allowing the grounds raised by the assessee.
In the result, appeal filed by the assessee is allowed.
Order pronounced on 30th August, 2024.