AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 1432
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....h credit u/s 69A of IT Act. On appeal, CIT(A) confirmed the addition to the extent of Rs. 1,25,11,000/under income from other sources. Aggrieved by the same, the present appeal is filed. 4. The Assessing Officer was not justified in invoking the provision of section 69A of the Act particularly when the entries were recorded in the books of accounts maintained by the appellant and the explanation relating to cash deposit was given. 5. The SOP for AOs with regard to handling of cases related to demonetization vide CBDT circular dated 09/08/2019 in F.No 225/145/2019/ITA- has not been followed by Ld. AO in the appellant case. As per instruction AO is required to fill the checklist separately for business cases and non-business cases. 6. The Ld. CIT(A) erred in not considering that, the Assessing Officer conveniently ignored the fact that the deposit during demonetization period is out of cash on hand as of 08.11.2016 and realisation from debtors and went ahead in making addition u/s 69A, when cash on hand on demonetization period could have been arrived and verified by the records submitted by the appellant, sales and purchase register and bank statements. ....
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.... BANK 9218 26,09,000 5 ICICI 257 38,80,000 TOTAL 2,66,82,800 4. When the assesee was asked to explain the source for such cash deposits, it was stated by assesee's representative that the non-invalid notes were included in the above deposits to the extent of Rs.75,11,000 in ICICI bank in account No. ending 0129 and ICICI bank to the extent of Rs. 19,30,000/- in account number ending 257 totaling to Rs.94,41,000/Hence, out of the total cash deposit to the extent of Rs.2,66,82,800/- during the demonetization period the invalid notes deposited are to the extent of Rs.1,72,41,800/- as per the explanation given by the assessee. However, it should not be in the fraction of 800 hence it is taken that the old invalid notes is to be taken only at Rs, 1,72,41,000/-. 5. It is seen that the closing cash balance as per the cash book as on 08.11.2016 was to the extent of Rs.13,71,884/- which includes denominated notes to the extent of Rs.13,70,000/-. Hence, the excess amount of cash deposited in old notes over and above the closing cash balance as on 08.11.2016 is Rs.1,58,71,000/- . These amount is to....
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....ncome is from any particular source. 7. The Hon'ble Madras High Court in the case of V. Datchinamurthy Vs. Asst. Director of Inspection (1984) 149 ITR 341 (Mad) held that it has been a long accepted principle of income-tax law that an assessee is obliged to explain the nature and source of cash credits in his accounts and in the absence of satisfactory explanation on his part, the assessing authorities can very well proceed to treat the amount of cash credits in question as representing the taxpayer's income. 8. In these circumstances, the excess amount deposited to the extent of Rs.1,58,71,000/- is assessed u/s 69A." 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed a detailed written submission on the issue. The sum and substance of the arguments of the assessee before the ld. CIT(A) are that the alleged cash deposits in specified bank notes is not Rs. 1,58,71,000/- as assessed by the AO, but it is only a sum of Rs. 1,25,11,000/-. The assessee further submitted that, he is into wholesale business of fruits and his business is mainly in cash. The assessee has deposi....
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.... also under obligation to furnish the details when he was asked to substantiate his claim. The assessee, in his submissions before the AO as well as in the grounds of appeal, has admitted that he has deposited Rs. 1,25,11,000/- whereas the Assessing Officer has computed the amount as Rs.1,58,71,000/-. Therefore, the real dispute in this case is only to the extent of difference between the two amounts, which comes to Rs.33,60,000/-. 9.2 During the demonetization period the old notes were not prohibited for every purpose, instead the payments were allowed for specific purposes, which are as under :- 1. Payments towards prepaid mobile top-up to a limit of Rs.500 per top-up. 2. Purchase from Consumer Cooperative Stores will be limited to Rs.5000 at a time. 3. Payment of fees in Central or State Government Colleges. 4. Foreign citizens will be permitted to exchange foreign currency upto Rs.5000 per week. Necessary entry to this effect will be made in their passports. 5. Payment of current and arrear dues to utilities will be limited to only water and electricity. This facility will continue to be available only for individuals and ho....
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....explained source for cash deposits and further, said cash was recorded in the books of accounts maintained by the appellant for the relevant period. The Ld. Counsel for the assessee, referring to the financial statement for assessment year 2015-16 to 2017-18 submitted that, if you see the turnover of the assessee from his business and cash deposits made into bank account for this period, there is no sudden increase in cash deposits during demonetization period. The assessee is dealing with fruits which is highly perishable. Further, the assessee deals mainly in cash. Therefore, when the assessee has explained source for cash deposits out of his business receipts, merely for the reason that the assessee has accepted specified bank notes from 08.11.2016 is not a ground for making addition u/s. 69 of the Act. The ld. Counsel for the assessee referring to the Specified Bank Notes (Cessation of Liability) bill, 2017 submitted that as per section 5 of said bill, on or from the appointed date, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note, and for this purpose appointed day means 31st December, 2016. Since, the assessee has accepted cash towar....
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.... is in cash. If you see pattern of cash deposits from financial year 2014-15 to financial year 2016-17, the assessee has made huge cash deposits month on month to various bank accounts which is almost equal to cash deposits made in the month of November, 2016 during demonetization period. Although, there is slight increase in cash deposits in the month of November, 2016 when compared to November, 2015, but the explanation of the assessee was that during demonetization period, he has dealt with specified bank notes because he was dealing with perishable goods like fruits. Further, unless he sells his goods by accepting specified bank notes, he could not recover whatever amount invested for purchase of fruits. We find that, the main business activity of the assessee is trading in fruits, which is highly perishable. We further, noted that the assessee is declaring huge turnover from last three to four financial years which runs into several crores. The assessee had made huge cash deposits from financial year 2014-15 to 2016-17, which runs into several crores. For example, cash deposit in the financial year 2014-15 is about Rs. 16.90 crores. Similarly, cash deposit in the financial yea....
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....dated 08.11.2016 shall cease to be liabilities of the RBI u/s. 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act. From the above bill, it is very clear that, on or from the appointed date, no person shall hold, transfer or receive any specified bank notes because said note does not have guarantee of the RBI. In other words, up to appointed date i.e., 31.12.2016 there is no restriction in holding or receiving specified bank notes, even though its legal tender was banned from 08.11.2016 onwards. Since, there is no blanket prohibition on receiving demonetized currency notes up to 31.12.2016, we are of the considered view that, when the assessee has explained reasons for accepting specified bank notes even after 08.11.2016, the AO ought to have accepted the explanation furnished by the assessee when he is not disputing the nature of business and source for cash deposits. In our considered view, what is relevant to decide the issue is, whether the assessee is able to explain source for cash deposits or not. In case, the assessee explains the source for cash deposits, even though there is certain violation of any other ....