TaxTMI 
TaxTMI 
2023 (10) TMI 1436
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.... addition of Rs. 17.28,000/- as unexplained cash deposited in the bank account u/s. 69A of the Act. rejecting the bonafide explanation tendered under the facts and in the circumstances of the appellant's case. 3.1 The addition made by the learned A.O. u/s. 69A of the Act is opposed to law and facts of the appellant's case in as much as, the cash deposits were made by the appellant's trade debtors directly to the appellant's Bank accounts during the demonetization period for which the appellant had also procured and filed confirmation letters from the trade debtors before the learned CIT[A] during the course of appellate proceedings and thus, these cash deposits were made out of known and explainable sources of funds. 3.2 The learned CIT[A]/NFAC is not justified in upholding the tax imposed under the provisions of section 115BBE at the rate of 60% under the facts and in the circumstances of the appellant's case. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies herself liable to be charged to interest u/s. 234-B and 234-C of the Act, under the facts and in the circumstances of the appell....
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....dinary public were only allowed to use the old notes they had in exceptional circumstances for payment of central/state government school/college fee. payment of utility bills, purchase of medicines, milk, fuel & LPG as per the directions of the Government of India. They were allowed to deposit currency accumulated upto 08-11-2016 into their bank accounts to convert into legal tender. Accordingly, if the old currency was used in places other than the exceptions provided by the Govt. of India, such notes does not have any value. The assessee has claimed that she has received the demonetised currency in the denomination of Rs. 500/- and Rs. 1000/- from sale of poultry products and realisation of sundry debtors. Since the assesses was not authorised by the Government of India to collect such old notes, all such old notes deposited by the asses see does not have any value to it when the assessee accepted such payments/receipts. In view of the above, the said sum of Rs. 17,28,000/is treated as unexplained money credit into their bank accounts u/s 69A of the Income Tax Act, 1961 and taxed as per the provisions of section 15BBE of the Income Tax Act 1961." 4. Aggrieved by the order of ....
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....tores operated under authorisation of Central or State Governments; (d) for purchase at milk booths operating under authorisation of the Central or State Governments; (e) for purchase of petrol, diesel and gas at the stations operating under the authorisation of Public Sector Oil Marketing Companies; (f) for payments at crematoria and burial grounds; (g) at international airports, for arriving and departing passengers, who possess specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character; (h) for foreign tourists to exchange foreign currency or specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character. 2. All establishments referred b in paragraph 1, shall maintain complete account of record of stock and sale of transactions made with the specified bank notes during the period between 9th November, 2016 and 11th November, 2016." 6.15 As seen from the above, it is quite clear that the assessee was prohibited from making cash sales in the demonetized currency i.e., SBNs ....
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....al of the assessee also for the same reason by holding that assessee was not allowed to accept the SBNs. 8. The RBI had permitted the assessee to deposit SBN into the bank account on or before 'appointed date'. The banks were asked to accept the same before the 'appointed date'. The SBNs (Cessation of Liabilities Act, 2017) defines 'appointed day' vide section 2(1)(a) of the Act. "Appointed Day" means 31st day of December, 2016. Section 5 of the SBNs Cessation of Liabilities Act, 2017 also deals with prohibition of holding, transferring or receiving SBNs. Section 5 states as under : "5. On and from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note: Provided that nothing contained in this section shall prohibit the holding of specified bank notes- (a) by any person- (i) up to the expiry of the grace period; or (ii) after the expiry of the grace period,- (A) not more than ten notes in total, irrespective of the denomination; or (B) not more than twenty-five notes for the purposes of study, research or numismatics; (b) by the Reserve Bank or its agen....
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....various dates out of the business of the Assessee which were deposited in the bank account of the Assessee between 10/11/2016 and 19/12/2016 in CBS Bank and Axis Bank. Since the deposit of Rs. 4,50,500/- in her bank account are from the sale proceeds from distribution of FMCG goods relating to her business concern 'M/s. Mahalakshmi Enterprise' from small and medium class traders collected on various dates in discharge of their liability in 1000 rupee and 500 rupee notes. It was submitted that old demonetized notes could be accepted till 30-12-2016 and a payee can continue to accept old demonetized notes of Rs 500 or Rs 1000 since those notes can be accepted as valid tender and there is no prohibition or lawful direction not to pay or accept old notes. The old notes still continue to be convertible into money since any person who is validly in possession of the old notes can get them converted into egal tender from banks or can tender it for payment to specified transactions. There are no rules forbidding the payments in old notes. Therefore it is not correct to say that the old notes do not carry any value. It was submitted that the Assessee's nature of business involves de....
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....sessee as income from other sources. It was also submitted that the government permitted all to deposit old demonetized notes upto 31.12.2016. Since the amounts deposited were sale proceeds of business and the income from the business have already been taxed, the impugned addition should be deleted. Our attention was also drawn to section 26(2) of the RBI Act, 1934 which provides that government can specify certain notes as not legal tender. It was argued that if there is any violation of the statutory provisions, the consequences will be only under the relevant provisions of RBI Act, 1934 and those violations cannot lead to any addition under section 68 of the Act. The learned Counsel also placed reliance on the following judicial pronouncements rendered on identical facts of the case as that of the assessee. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the sai....
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....bmissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, th....
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....ued by RBI and Government of India. The Assessing Officer, had discussed the issue with reference to GO issued by RBI and Government of India and concluded that since the assessee has accepted demonetized currency in violation of circular/notification issued by the Government of India, the source explained by the assessee cannot be accepted. In other words, the Assessing Officer never disputed fact that the assessee has made sales in cash before demonetization period and also realized cash from debtors against cash sales made before demonetization period. Therefore, to decide the issue whether the assessee can accept specified bank notes even after it was banned for legal tender after 09th November, 2016 and further, the same can be added u/s. 69 of the Act as unexplained investment and also can be taxed u/s. 115BBE of the Act, it is necessary to examine the case in light of business model of the assessee, and evidence filed during the course of assessment proceedings. 9. The provisions of section 69 of the Act, deals with unexplained investment, where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded ....
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....lour of the money. From the details filed by the assessee, it is evident that during the month of November and December, the assessee has made almost more than 5 crores cash deposit which includes various demonetized currency and regular notes. Further, the Assessing Officer has accepted fact that out of total cash deposits, only a sum of Rs. 1,82,37,000/- is in specified bank notes. From the above, it is very clear that there is no significant change in the pattern of cash sales, cash collection and cash deposit during demonetization period, when compared to earlier period in the same financial year and also during immediate preceding financial year. Therefore, we are of the considered view that the assessee has satisfactorily explained source for cash deposit made during demonetization period in specified bank notes and thus, the Assessing Officer is completely erred in making additions u/s. 69 of the Act. 10. Coming back to the observations of the Assessing Officer with regard to GO/notification issued by the RBI and Government of India, to deal with specified bank notes. The Assessing Officer is mainly on the issue of notification issued by the RBI to deal with the spe....
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....t is very clear that, while making additions towards cash deposits in demonetized currency, the Assessing Officer needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if you go through analysis furnished by the assessee in respect of total sales, cash sales realisation from debtors and cash deposits during financial year 2015-16 & 2016-17, there is no significant change in cash deposits during demonetization period. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. In our considered view, to bring any amount u/s. 69 of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been create....
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....od, assessee could not explain proper source. In this case, on perusal of details and records, we find that the assessee has filed all details to explain source for cash deposits and on the basis of details filed by the assessee, the Assessing Officer never disputed fact that source for cash deposit is not out of ordinary business receipts, which has been accounted in the books of accounts of the assessee and further, there is no deviation in cash deposits during demonetization period when compared to earlier period in same financial year and in earlier financial year. Therefore, we reject the case laws relied upon by the ld. DR. 15. In this view of the matter and by considering facts and circumstances of this case, we are of the considered view that the Assessing Officer erred in making additions towards cash deposits during demonetization period u/s. 69 of the Act. The ld. CIT(A), without appreciating relevant facts simply sustained additions made by the Assessing Officer. Thus, we set aside the order passed by the CIT(A) and direct the Assessing Officer to delete additions made towards cash deposits u/s. 69 r.w.s. 115BBE of the Act." 13. The Visakapatnam Bench of the....