TaxTMI 
TaxTMI 
2025 (5) TMI 201
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd issued notice under section 143(2) of the Act. Notice under section 142(1) r.w.s. 129 of the Act with questionnaires was issued to the assessee. Notice under section 133(6) of the Act was also issued to the Canara Bank, Agaramsigoor Branch. After verification of bank details as reflected at pages 2 to 5, the Assessing Officer noted that the assessee made cash deposit during the demonetization period to the tune of Rs..2,60,000/- in SBNs and accordingly, treated the same as unexplained money under section 69A of the Act and added to the total income of the assessee. As not satisfied with the order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). On appeal, the ld. CIT(A) dismissed the appeal of the assessee for want of prosecution. On being aggrieved, the assessee is in appeal before the Tribunal. 4. The ld. AR Shri N. Arjun Raj, Advocate submits that there is no prohibition to receive SBNs during demonetization period upto 31.12.2016. Further, SBNs were permitted to deposit in the Bank upto 31.12.2016, argued vehemently, where there is no prohibition to accept and is permitted to deposit, addition cannot made. He submits that similar issue on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....16 except only from few notified business transactions were permitted to transact in SBNs and that too for a limited period upto 24.11.2016 as far as demonetized currency of Rs. 1000/- and Rs. 500/- and then it was extended upto 15.12.2016. The ld. Senior DR has also argued that the assessee's nature of business is not covered under the notification of the Government of India exempting certain categories. We noted that the ld. counsel for the assessee in reply to the same referred to Ordinance issued by the Ministry of Law & Justice, Government of India in the Gazette of India, wherein the SBNs were declared or ceased to be liability of RBI or Central Government and penal provisions were incorporated in the same for holding the demonetized currency as well as transacting in the same. The relevant Ordinance No.10 of 2016, The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 was brought in on 30.12.2016. We noted that vide this Ordinance dated 30.12.2016 i.e., Specified Bank Notes (Cessation of liabilities) Ordinance, 2016, No.10 of 2016 dated 30.12.2016, has clearly held the demonetized currency to have ceased to be legal tender as pointed out by ld. counsel, the prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all due diligence to prevent the contravention or default. (2) Notwithstanding anything contained in sub-section (l), where an offence under this Ordinance has been committed by a company and it is proved that the same was committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary, or other officer or employee of the company, such director, manager, secretary, other officer or employee shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purpose of this section,- (a) "a company" means anybody corporate and includes a firm, trust, a co-operative society and other association of individuals; (b) "director", in relation to a firm or trust, means a partner in the firm or a beneficiary in the trust. This was further explained by the Central Government i.e., RBI vide Circular dated 26.05.2017 and the relevant reads as under:- Why was the Scheme of Withdrawal of Legal Tender Character of the old Bank Notes in the denominations of Rs. 500 and Rs. 1000 introduced? The incide....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., i.e., The High Denomination Bank Notes (Demonetization) Act, 1978 with the present Demonetization Scheme, whereby the scheme was announced on 16.01.1978 wherein the high demonetization notes of value Rs. 500/- Rs. 1000/- or Rs. 10000/- was withdrawn from circulation and there was a clear bar in the Act for transfer or receipt of high denomination notes and that demonetized bank notes was ceased to be legal tender vide section 3 & 4 from 16.01.1978 only, which reads as under:- "3. High denomination bank notes to cease to be legal tender.-On the expiry of the 16th day of January, 1978, all high denomination bank notes shall, notwithstanding anything contained in section 26of the Reserve Bank of India Act, 1934 (2 of 1934), cease to be legal tender in payment or on account at any place. 4. Prohibition of transfer and receipt of high denomination bank notes.-Save as provided by or under this Act, no person shall, after the 16th day of January, 1978, transfer to the possession of another person or receive into his possession from another person any high denomination banknote." The ld. counsel for the assessee also relied on one decision of Hon'ble Bombay Hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee failed to discharge the onus cast on him to prove the acquisition of each and every high denomination note encashed by him. This approach, as earlier indicated, is not correct. The assessee having proved the source and shown satisfactorily the possibility of the inclusion of Rs. 1,000 high denomination notes of the value of Rs. 2 lakhs therein, the addition of Rs. 1,04,000 to his income for his failure to furnish detailed particulars of the receipt of such notes each of the 200 notes of Rs. 1,000 denomination tendered by him for encashment, is not in accordance with law." This judgment was referred by the ld. counsel for meeting the argument made by ld. Senior DR that the demonetized currency received by assessee in the present case is not out of sale proceeds of liquor. We have gone through the scheme and noted that the Specified Bank Notes (cessation of liabilities) Ordinance 2016 (subsequently this was passed as an Act), was towards cessation of liability of RBI in respect of SBNs with effect from 31.12.2016. The Government of India vide Gazette of India Notification dated 8.11.2016 notified that the SBNs of Rs. 500 and Rs. 1,000 notes is not a legal tender ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6, which has been accepted as the value of liquor sold for a sum of Rs. 2582.56 Crores, hence it can be easy presumed, unless disproved by Revenue, that the balance sum of Rs. 52.79 Crores is out of sale of liquor. There is no basis or evidences or examination of any person for reaching a conclusion that this sum of Rs. 52.79 Crores received by assessee has been substituted in demonetized currency. We noted from the evidences placed before us that the observation of the AO that branch wise details of deposits made in SBNs was not available is not correct for the reason that the complete details of deposits of SBNs account-wise, branch-wise was submitted before the AO as well as before the CIT and also before us. 8.4 We have gone through the notifications issued by the RBI and Government of India, to deal with specified bank notes. The only premise of the Revenue is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argument is that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes aft....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncluding the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. 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 circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. Simpliciter violation of certain notification issued by RBI or demonetization scheme announced by Government of India on 08.11.2016 will not entitle the Revenue to make addition u/s. 69 or 69A of the Act. Because, the mandate of the provisions of Section 69 & 69A of the Act, i.e., unexplained investments and unexplained money etc., may be deemed to be the income of the assessee for the financial year relevant to assessment year concerned, in which the assessee is found to be the owner of such money, bullion, jewellery or valuable article or unexplained expenditure, if, the such expenditure or such money etc., are not recorded in the books of accounts, if any, maintained by assessee for any source of income and the assessee o....