KUPPUSAMY MEIYAPPAN,SALEM vs. DCIT, CIRCLE-1(1), SALEM

आयकर अपीलीय अिधकरण, ‘बी’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI �ी मनु कुमार िग�र, �ाियक सद! एवं �ी एस. आर. रघुनाथा, लेखा सद! के सम) BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.647/Chny/2024 िनधा9रण वष9 /Assessment 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.

ITA No.647/Chny/2024 :- 2 -: 2. There is a delay of 8 days in filing the appeal by the assessee.

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.

confirming the addition of Rs.88,23,659/- u/s. 69A r.w.s. 115BBE of the

Act as unexplained income.

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

ITA No.647/Chny/2024 :- 3 -: the cash balance held on 08/11/2016 of Rs.1,44,79,341/- as explained

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:

ITA No.647/Chny/2024 :- 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.”

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

ITA No.647/Chny/2024 :- 5 -: deposited within a reasonable time of 15/11/2016 of Rs.62,30,500/-. 5. The action of the AO is patently wrong, since the assessee had

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 • ITA No.76/Vizag/2021 dated 16/03/2022.

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

ITA No.647/Chny/2024 :- 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

ITA No.647/Chny/2024 :- 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.

ITA No.647/Chny/2024 :- 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: • ITA No. 527/Chny/2022 dated 14/10/2022 • ITA No. 557/Chny/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).

ITA No.647/Chny/2024 :- 9 -: submissions has rightly confirmed the addition of cash deposits made

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.

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

ITA No.647/Chny/2024 :- 10 -: proceeds and collection from sundry debtors / trade debtors. In

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.

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

ITA No.647/Chny/2024 :- 11 -: of sales / collection from debtors has been recorded in the books of accounts, the provisions of section 69A could not be invoked in the present case.

ITA No.647/Chny/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.

Order pronounced on 30th August, 2024.

Sd/- Sd/- (मनु कुमार िग�र) (एस. आर. रघुनाथा) (Manu Kumar Giri) (S.R. Raghunatha) �ाियक सद! / Judicial Member लेखा सद�य लेखा लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�ई/Chennai, �दनांक/Dated: 30th August, 2024. EDN/- आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF