Tribunal upholds deletion of high denomination notes from income, citing appellant's explanation

The tribunal upheld the AAC's decision to delete the addition of high denomination notes to the assessee's income. The appellant's history of dealing in high denomination notes, past bank deposits, and cash-based business supported the explanation for possessing the notes. The tribunal found the appellant's explanation reasonable, considering the lack of substantial increase in total assets and the nature of the business. Consequently, the appeal filed by the Revenue was dismissed, affirming the deletion of the addition to the income for the assessment year.

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Issues:
1. Addition of high denomination notes to income as undisclosed sources.

Analysis:
The appeal was filed by the Revenue against the order of the AAC regarding the addition of high denomination notes worth Rs. 25,000 to the assessee's income as undisclosed sources for the assessment year 1978-79. The assessee explained that the notes were acquired in smaller denominations during business transactions and later converted into high denomination notes of Rs. 1,000 each from the bank. However, the ITO did not accept this explanation due to the lack of specific details regarding the bank branches and dates of conversion. The AAC, considering the assessee's explanation, deleted the addition based on various grounds. The appellant, an illiterate person dealing in items like hides and skins of animals, did not maintain books of accounts and did not receive vouchers for purchases. The appellant's possession of high denomination notes in previous years, along with the business being cash-based and the lack of substantial increase in total assets, supported the claim that there was no undisclosed income. The AAC ordered the deletion of the addition to the total income.

Upon appeal, the Revenue contended that the AAC's decision to delete the addition was incorrect. However, after hearing arguments from both sides, the tribunal upheld the AAC's order. The tribunal noted that the appellant had a history of dealing in high denomination notes, as evidenced by previous deposits in the bank. The tribunal found it reasonable for the appellant to possess high denomination notes and declare them when demonetized in January 1978. Considering the facts and circumstances of the case, the tribunal agreed with the AAC's decision to delete the addition to the income, thereby dismissing the appeal filed by the Revenue.

In conclusion, the tribunal affirmed the AAC's decision to delete the addition of high denomination notes to the assessee's income, as the appellant's explanation, supported by past transactions and business practices, was found to be reasonable and in line with the facts of the case.

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