Tribunal orders reassessment of case, emphasizes proof of demonetization deposits to avoid unexplained income

The Tribunal directed the AO to re-examine the case, consider the evidence provided by the appellant, and grant a proper opportunity for the appellant to be heard. The appeal was allowed for statistical purposes, emphasizing the importance of substantiating the genuineness of the deposits made during the demonetization period to avoid being treated as unexplained income under section 68 of the Income Tax Act.

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Issues:
1. Treatment of deposit of cash during demonetization period as unexplained income under section 68.

Analysis:

Issue 1: Treatment of deposit of cash during demonetization period as unexplained income under section 68

The appellant, a cooperative credit society, filed its return of income for the assessment year declaring Nil income after claiming deductions under section 80P. The Assessing Officer (AO) noted that the appellant had deposited Specified Bank Notes (SBNs) received from its members during demonetization into its bank accounts. The AO made an addition of the deposited amount under section 68 of the Income Tax Act, stating that the appellant should not have accepted banned SBNs as legal tenders. The appellant contended that it merely acted as an intermediary in utilizing old currency that ceased to be accepted as legal tender, and the deposited cash was received from its members. The appellant argued that the authorities did not verify the genuineness of the deposits and requested a remand for further consideration based on the evidence provided.

The Tribunal observed that the appellant had indeed deposited cash during the post-demonetization period. The Tribunal noted that the cash book and confirmations filed by the appellant should have been verified. Referring to various instructions issued by the Central Board of Direct Taxes, the Tribunal highlighted the importance of conducting a comparative analysis of cash deposits and sales, examining monthly sales summaries, stock register entries, and bank statements to identify cases of unaccounted money. The Tribunal emphasized the need for the AO to establish whether the appellant's case fell under the parameters indicating suspicion of fictitious sales or unaccounted money. The Tribunal directed the AO to verify all details and evidence provided by the appellant, granting the appellant a physical hearing to justify its claim. The Tribunal allowed the appeal for statistical purposes, emphasizing that the burden was on the appellant to establish the genuineness of the deposits to avoid being categorized as unaccounted cash.

In conclusion, the Tribunal directed the AO to re-examine the case, consider the evidence provided by the appellant, and grant a proper opportunity for the appellant to be heard. The appeal was allowed for statistical purposes, emphasizing the importance of substantiating the genuineness of the deposits made during the demonetization period to avoid being treated as unexplained income under section 68 of the Income Tax Act.

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