INCOME TAX OFFICER, WARD-1, KOTTAYAM vs. SUNITHA MENON, KOTTAYAM

Appellant by : --- None--- Respondent by : Smt.V.Swarnalatha, Sr.DR Date of Pronouncement : 25.09.2024 Date of Hearing : 14.08.2024 O R D E R Per Bench : This Revenue’s appeal in 2017-2018 arises out of the order of the Commissioner of Income-tax (Appeals) / NFAC vide DIN & Order No.ITBA/NFAC/S/250/2023- 24/1059206644(1) dated 29.12.2023, in proceedings u/s.143(3) of the Income-tax Act, 1961; in short “the Act” hereinafter.

Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex parte.

“8.1.3 On careful examination of the order, I find that the facts mentioned in the abovementioned ITAT order is squarely applicable to the appellant's case. The appellant filed sales register for the period of 01.11.2016 to 30.12.2016 and 01.11.2015 to 30.12.2015, cash book extracts, copies of VAT return etc. However, the AO was not able to find any defect in the books of accounts and has not rejected the books of account for any reasons and seems to have made addition only based on general statement that as per Para (e) of Circular dtd. 08.11.2016 the appellant was not allowed to accept the SBN during the demonetization period as the appellant-firm was not a public sector oil company but a public limited company engaged in the business of retail sales of petrol, diesel & oil. Apart from the above observation, the AO has not explicitly doubted the sales made during the demonetization period. 8.1.4 The fact and substance of argument by the appellant is that (i) the sales have been accepted by the A.O., (ii) the books of account have not been rejected u/s. 145(3), (iii) only profit on turnover can be assessed as the amount on genuine purchases has to be allowed. The argument of the appellant is technically correct as provisions u/s. 145(3) of rejecting the books of account have not been specifically invoked in assessment order. Hon'ble Karnataka High Court in the case of Shankar Khandsari Sugar Mills Vs.CIT 193 ITR 669 (Kar.) has observed that "In the absence of any prejudice to the revenue, and the basis of the tax under the Act being to levy tax, as far as possible, on the real income, the approach should be liberal in applying the procedural provisions of the Act. An appeal is but a continuation of the original proceeding and what the Income-tax Officer could have done, the appellate authority also could do." Therefore, the sales cannot be ignored as they are forming integral part of books of account. Similarly, the allowance for genuine purchases has to be granted. As per the ratio laid down in the case of CIT/vs. Bajaj Tempo Limited 196/TR 188(SC), "that the beneficial provisions have to be computed liberally so as to promote the purpose for which it was introduced There is clarion call from highest echelon of Government to reduce the litigation in courts so as to enhance the efficiency of justice delivery system in the country. Therefore, the substance of the matter has to be perused through the lenses of independent evidences. For . Sunitha Menon. instance, the payment received by Reliance Industries Limited through banking channel is credible evidence which cannot be ignored. 8.1.5 Recently, the Co-ordinate Bench of the Bangalore Tribunal in the case of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha held as follows: "...15. The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly-invoked sec 68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income Tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016- issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete this disallowance." 8.1.6 The addition has been made by the A.O. as unexplained investment has been carefully examined. Based on the various judicial pronouncements as quoted above and the facts of the appellant's case also being similar, I am of the view that the conditions to invoke provisions u/s. 68/69A are not prevailing in this case. Once cash deposits in bank account are explained to have originated from sales recorded . Sunitha Menon. in the books of accounts which have not been rejected by the AO, applicability of provisions u/s. 68/69A in this case on the same cash deposits out of such recorded sales does not arise. Since, the AO did not reject the books of accounts of the appellant and has not brought anything contrary on record to show that cash sales is not the source for the cash deposited during demonetization period, I find that there is no justification for addition of Rs.76,08,000/- under section 68/69A of the Act, as the nature and source of cash deposits was satisfactorily explained by the appellant. In view of the above and respectfully following the judgement of Hon'ble jurisdictional ITAT Ahmedabad in the case of M/s. Ashapura Petrochem Marketing Pvt. Ltd (cited supra) & Co-ordinate Bench of the Bangalore Tribunal in the case of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha, the Assessing Officer (AO) is hereby directed to delete the addition of Rs.76,08,000/- made on this account, and re-compute the total income accordingly. The ground of appeal is allowed.”

3. Suffice to say that it has come on record that the assessee has duly reconciled her income in fuel outlet business vis-à-vis all the corresponding cash deposits made during demonetization. That being the case, we are of the considered opinion that the CIT(A)/NFAC has rightly deleted the impugned addition in this peculiar facts and circumstances of the case. Ordered accordingly.

Order pronounced in the open court on this 25th day of September, 2024. Sd/- Sd/- (Amarjit Singh) (Satbeer Singh Godara) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin ; Dated : 25th September, 2024. Devadas G*