Appeal partly allowed, Assessing Officer to confirm Rs. 36,46,000 as unexplained deposits.

The appeal was partly allowed, directing the Assessing Officer to confirm Rs. 36,46,000 as unexplained cash deposits.

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Issues involved:
The appeal challenges the order of the Commissioner of Income Tax (Appeals) regarding the addition of cash deposits during demonetization period under section 69A of the Income Tax Act, 1961 for assessment year 2017-18.

Grounds of Appeal:
1. The order of the National Faceless Appeal Centre at Delhi is contrary to law, facts, and circumstances of the case.
2. The addition of Rs. 72,92,000 as unexplained money under section 69A of the Act lacked proper reasons and justification.
3. Failure to appreciate that cash deposits were from taxi services rendered by the appellant.
4. Injustice in sustaining the addition made under section 69A despite the cashbook evidence.
5. Misapplication of section 69A and misreading of provisions.
6. The audited financial statements established the source for cash deposits.
7. Sustenance of cash deposit addition was wrong, erroneous, and unjustified.
8. Prohibition of SBNs post-demonetization does not automatically attract section 69A.
9. Overlooking the distinction between prohibition and deposit permission of SBNs.
10. Lack of proper opportunity before passing the impugned order.

Detailed Judgment:
The assessee, a partnership firm in the car hire business, declared income for AY 2017-18. The AO noted cash deposits during demonetization, especially in Specified Bank Notes (SBNs). The AO rejected the explanation that cash came from business receipts, citing the illegality of SBNs post-demonetization. The Ld.CIT(A) upheld the addition. The appellant argued that there was no prohibition on accepting SBNs during the demonetization window period and that the source was genuine business receipts. The Revenue contended that SBNs were withdrawn as legal tender post-demonetization. The Tribunal found the appellant's explanation reasonable, considering the nature of the business and lack of deviation in deposits. The AO's basis for the addition due to the illegal status of SBNs post-demonetization was deemed incorrect. The appellant, however, failed to provide evidence to prove the claim of receiving SBNs from customers. As a compromise, 50% of the cash deposits were treated as business receipts, granting partial relief to the appellant.

Judgment Outcome:
The appeal was partly allowed, directing the AO to confirm Rs. 36,46,000 as unexplained cash deposits. The order was pronounced in Chennai on July 19, 2023.

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