TaxTMI 
TaxTMI 
2024 (9) TMI 1756
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....n the facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the assessment so completed u/s 144 of the Act is incorrect and not in accordance with the provisions of the Act. The Order so passed by Ld. AO and that upheld by Ld. CIT(A) is incorrect. Accordingly, the assessment so completed be kindly quashed and appellant be granted just and proper relief in this respect. 3. Without prejudice to above grounds, on the facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the addition of Rs. 12,47,000/- so made by AO and that upheld by Ld. CIT(A) is incorrect since the Appellant has duly explained and substantiated the nature and source of the funds received and deposited in bank. Accordingly, the additions so made & that upheld be kindly deleted and appellant be granted just and proper relief in this respect. 4. On the facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that the Ld. CIT(A), National Faceless Appeal Centre, has not effectively granted an opportunity of Virtual Hearing, since the notice relating to Vir....
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....tice issued, the assessee submitted relevant documents which were examined and placed on record. The Ld. AO noted inter-alia that it is the submission of the assessee that during the period under consideration i.e. AY 2017-18 cash deposited in the bank account were received from various customers and tenants. In para 5 of his order the Ld. AO has observed that regarding cash deposit in the bank account the assessee stated that during the demonetization period the assessee society has deposited cash of Rs. 13,61,080/- in Dena Bank, Murud Branch. Further, the assessee stated that the cash deposited amounting to Rs. 1,14,080/- on 08.11.2016 was legal tender and the same was received from tenants of the assessee society and from its members. In support of this contention the assessee submitted documents i.e. rent agreement and deposit denomination details and other relevant documents which were examined by the Ld. AO and placed on record. 5.1 Thereafter, the assessee was asked to explain the sources of remaining amount of Rs. 12,47,000/- deposited during the demonetization period. In response to which the assessee submitted the computation of total income and the amount of Rs. 12,47....
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....s as loan repayment and depositors as deposit of their money. - Pay cash to borrowers as loan and depositors as withdrawal of their own money. (1.3) Accordingly, the net money which remains with the Appellant society at the end of day or any carried forward cash balance from previous day is deposited into the bank accounts maintained by with Dena bank and LDCC bank. (1.4) Thus, the money so deposited into both the banks are purely sourced from the members. In the instant case the addition of Rs. 12,47,000/- is of cash deposited into banks on 10 and 11th November 2016. (1.5) Sir, said cash deposited is substantially received by the Appellant on the 9th and 10th only. Sir, we are enclosing herewith the cash book for the month of November 2016 as Enclosure No. 4 for your ready reference. (1.6) Further, we humbly seek your kind attention on the Enclosure No. 1 which contains the 'Counter slips'/'receipts' of cash received from the members by the Appellant on 08/11/2016 to 10/11/2016, on sample basis. Said slips can be cross verified with the names as appearing the cash book enclosed at Enclosure No. 4. (1.7) Sir, from the cas....
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....the money deposited are duly forming part of books of accounts of the assessee and properly accounted. A brief summary of applicability of preconditions can be demonstrated as under, Preconditions Whether Applicable (if not why) Whether, Assessee is found to be the owner of money, bullion, jewellery or other valuable article. Yes Whether, such money etc. is not recorded in books of accounts of the assessee. No (All the cash deposited is sourced from the its members and is property recorded in books of account-Cash book was already furnished before AO, though the same is not mentioned in the order) Assessee offers no explanation in this regard Or The explanation offered is not satisfactory Not relevant, since appellant has recorded cash (money) in its books this step of seeking explanation does not arise. However, Appellant in good faith have provided entire explanation of each penny. The crux of our above tabulated submission is, condition of providing explanation arises only and only when the money. bullion or jewellery is not recorded in books of account. Accordingly, in the instant case since all the cash deposits are duly accounted in c....
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....der section 69A of the Act. In support of the assessee's contentions, the learned AR placed reliance on the decision of the ITAT - Mumbai Bench in the case of DCIT Vs. Karthik Construction Co. in ITA No. 2292/Mum/2016 dated 23.02.2018, 'wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets 1 monies 1 entries which are recorded in the assessee's books of account. In my considered view, the aforesaid decision of the ITAT - Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee's books of account. In this view of the matter, I am of the opinion that the addition of Rs. 6,30,000/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs. 6,30,000/- made thereunder. The AO is accordingly directed.' (2.5) In view of our above submission, we humbly and most respectfully submit that the entire amount of addition u/s 69A categorized as unexplained is totally incorrect since entire amount is duly recorded in books of accounts the source of....
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....nment under sub-section (1) of section 26 of the said Act. 3.5) Whereas as per section 2 (1)(a) Appointed day is 31St day of December 2016. Relevant section is reproduced as under, (1) In this Act, unless the context otherwise requires, - (a) "appointed day" means the 31st day of December, 2016; (3.6) Accordingly, till 31.12.2016 anybody who was in possession of those SBN was entitled to get the equivalent consideration from RBI. (3.7) I.e., though from 08th November 2016, the SBN ceased to be legal tender Money, they were not declared to be illegal Article/ thing/ document/ paper to possess as like Contraband articles. Since these SBN weren't illegal, the same were considered as a commodity for barter which had a value till 31.12.2016. (3.8) Sir, Money may be defined as anything which is generally acceptable as a medium of exchange and at the same time acts as a measure, store or value and standard of deferred payment. (This is the definition included in books of class 12th of CBSE syllabus). (3.9) Further, the phrase 'Legal Tender' mens one can enforce making payment in that Specific Currency. Whereas, once a parti....
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....ct specified notes subsequent to 08.11.2016. The contention of the appellant that though from 8th November, 2016 the SBN ceased to be legal tender Money, they were not declared to be illegal. Since these SBN weren't illegal, the same were considered as a commodity for barter which had a value till 31.12.2016. It is to note that the SBNs weren't illegal for individuals and they were allowed to deposit the S8N till 31.12.2016 and not for the Societies to accept SBN after 08.11.2016. The appellant is not an authorized person to collect the SBN after 08.11.2016. Therefore, the explanation offered that they belong to members of society has no relevance. They have been correctly treated as unexplained money. The AO should have treated it as unexplained income u/ s.68 and not under section 69A of the Act and this fact itself does not change the character of the money. Therefore, the addition made by the AO is upheld and the ground No. 2 is dismissed." 7. Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. 8. The Ld. AR submitted that the limited issue involved in the present appeal is that whether depositing of SBN(s) dur....
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....on of the assessee all along that the cash deposited during the demonetization period has been received from its members in the regular course of its business which fact has been duly accepted by the Ld. CIT(A) and recorded by him in para 6.2.1 of the appellate order (reproduced above). The fact on record (pages 1 to 59 of the assessee's paper book) reveals that the assessee had placed the relevant documents with respect to the source of cash deposited during the demonetization period. Nothing has been brought on record before us by the Revenue to prove otherwise. 12. The ld. AR though admitted that the assessee may have violated the relevant provisions of law by accepting SBN from its members subsequent to 08.11.2016. However, both the Ld. CIT(A) and the Ld. AO have not taken into consideration the legality of SBN and that the assessee has not ultravired the provisions of the Act. Therefore, no addition u/s 69A is warranted under the present facts and circumstances of the case. 13. We are inclined to agree with the submissions of the Ld. AR that there is no dispute with regard to the source of money i.e. cash deposits which have been received by the assessee society form....
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....sh credit u/s 68 of the Act. Therefore, the AO added Rs 1,20,45,000 u/s 68 of the Act. 5.1 The appellant during the course of appeal proceedings has submitted as under: "2.3 Contention of the Appellant: At the outset, it is submitted that the credit entries in respect of amounts received from members of the society on 09, 10 and 11 November which includes SBNs or supported by the cash book and record maintained by the appellant society which is duly audited by Government Auditors. The source of the deposits were not disputed by the AO. The AO has not accepted the impugned credit entries and added the same u/s 68 only for the reason that the society had accepted SBNs from members and as per AO such acceptance of SBNs was not permissible and the said notes were worthless pieces of papers. This contention of the AO is legally unjustified and incorrect in view of the provisions of section 5 of and Section 2(1)(a) of Specified Bank Notes (Cessation of Liabilities) Act, 2017 as per which any person can transfer or received SBNs upto 30/12/2016. Therefore, the contention of the AO is against the provisions of the Specified Bank Notes (Cessation of Liabilities) A....
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....e copy of submission dated 27/08/2019 alongwith details of customers including PAN is attached as Annexure-3, The copy of submission dated 21/11/2019 is attached as Annexure-4. The AO has ignored the above facts and did not verify the impugned members/creditors and treated the impugned credits in the accounts of the patsanstha as unexplained cash credit. The details of total deposits in bank of Rs. 1,20,45,800/- during demonetization period is as under: Particulars Amount Out of balance as on 8/11/2016 Rs. 6,34,689/- SBNs deposited 2,29,500 SBNs deposited on 8/11/2016 i.e. before demonetization period 6,50,000 Out of deposits / loans repayments received from members 1,11,66,300 Total 1,20,45,800 However, it appears that, due to heavy work load, the AO had not considered the above fact, while passing the assessment order. In view of the above facts, the AO should have verified the impugned members about source of SBNs deposited by them in the patsanstha, particularly in view of the fact that the appellant patsanstha had filed their full details alongwith PANs. It is very much unjustifiable to tax the patsanstha for the SBNs he....
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.... to advance the money and lastly, genuineness of the transaction. Thus, in order to establish receipt of credit in cash, as per requirement of section 68, the assessee has to explain or satisfy three conditions, namely : (i) identity of the creditor; (ii) genuineness of the transaction; and (iii) credit-worthiness of the creditor. 14. In Principal Commissioner of Income Tax vs. Veedhata Tower Pvt. Ltd., (2018) 403 ITR Borey 7/9 http://itatonline.org spb/ 15itxa1750-17.doc 415 (Bom), this court has held that assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. In the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect i.e., he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur. ....
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....ispute or if proved by the assessee no addition can be made u/s 68 as unexplained cash credit. In the case under appeal the source of amount credited in the cash book is proved from the books of accounts and records maintained by the society which is duly audited. The AO had made addition not for not proving source of amount received but for acceptance of SBNs after 8/11/2016. In view of the above facts it is evident that no addition can be made under any section of the Income tax Act including Section 68. (2) The AO had incorrectly assumed that the transactions of SBNs were not permitted during demonetization period and the SBNs were worthless papers and cannot be treated as legal tender and hence did not accept the credit entries received from members. It is worth mentioning here that the AO has held that the impugned SBNs of Rs. 500/- & Rs. 1000/- deposited by members are worthless pieces of papers. This contention of the AO is apparently incorrect as the impugned SBNs became worthless pieces of papers only after 30/12/2016 as the RBI had promised to pay the amount mentioned in the said SBNs and banks have given credit of the SBNs deposited with them u....
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....osition, the Assistant Sub- Registrar of Co-operative societies, had issued clarification on 11/11/2016 which was received by the appellant patsanstha on 6.15 p.m. on 11/11/2016 that the patsansthas should not accept SBNs. Therefore after 6.15 p.m. of 11/11/2016, the appellant submitted that it had not accepted any SBNs from its members. 5.3 The appellant submitted that during the assessment proceedings, the appellant had filed details of members along with their ledger extracts, showing amounts received from them as deposit in saving account, current account, loan account and fixed deposit account on 10/11/2016 & 11/11/2016. The details of members includes their names, addresses, PANs, amount deposited, the details of which are on the record of the patsanstha. The appellant submitted that the AR of the appellant has also shown his willingness to produce the impugned members before the AO for verification, if needed. The appellant has also submitted to the AO vide submissions dated 20/04/2019, 27/08/2019, 21/11/2019 and 09/12/2019 that in view of the facts of the case and submission filed, the identity & creditworthiness of the members stands proved and genuineness of the ....
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....es were declared not to be legal tender. The A.O. took the view that the assessee has collected the above said amount after 8.11.2016, which is not permitted. Accordingly, the A.O. took the view that the above said amount represents unexplained money of the assessee and assessed the same u/s 68 of the Act. The A.O. also charged income tax on the above said deposit as per provisions of section 115BBE of the Act. The Ld. CIT(A) also confirmed the same. 13. The Ld. A.R. submitted that, under the provisions of section 68 of the Act, the assessee's liability is to explain the nature and sources of the money. He submitted that the assessee has explained the nature as well as sources i.e. the above said deposit was made out of its collections in the ordinary course of carrying on business, i.e., it represented money deposited by its members towards repayment of loans, pigmy deposits, etc. Accordingly, he submitted that the assessee has discharged its responsibility u/s 68 of the Act. Further, the collections and deposits have been duly recorded in the books of account and hence, there is no reason to treat the same as unexplained money of assessee. The Ld. A.R. further submit....
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....he rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts....
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....on of money in the normal course of carrying on of business of the assessee. I find that the appellant has duly recorded in its books of account the transactions of collections of money as well as deposits made into bank account. The appellant during the assessment proceedings had filed details of members along with their ledger extracts, showing amounts received from them as deposit in saving account, current account, loan account and fixed deposit account on 10/11/2016 & 11/11/2016. The details of members includes their names, addresses, PANs, amount deposited, the details of which are on the record of the patsanstha. The AR of the appellant had also shown his willingness to produce the impugned members before the AO for verification, if needed. The AO has not carried out any enquiries from the members to verify the evidences and submissions of the appellant. It has not been proved by the AO that the cash deposited did not belong to the members. Therefore, I find that the identity & creditworthiness of the members stands proved and genuineness of the transaction is also proved. Hence, the above said deposits cannot be considered as "unexplained money" in the hands of the appellan....
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....t entitled to receive the same in any capacity; whatsoever; the Assessing Officer had rightly invoked sec.68 of the Act. 5. This Revenue's stand fails to evoke our concurrence in the foregoing terms once it has come on record that the assessee had fully proved identity, genuineness and creditworthiness of it's members having deposited these specified bank notes. We deem it appropriate to observe here that the Income-tax Act is a self-contained code wherein an assessee has to prove the foregoing three limbs in order to get out of the rigor of sec.68 of the Act. This tribunal's recent coordinate bench's order in Shrijeet Finance (P) Ltd., vs. ACIT [2024] 162 taxmann.com 243 (Pune-Tribu.) has also rejected the Revenue's identical stand as under : "5. During the assessment proceedings, the AO observed that the assessee has received cash in old currency during the demonetization period between 08.11.2016 to 13.12.2016 of Rs. 12,34,000/ -. The assessee submitted before the AO that these amounts were deposited by their customers towards the loan installments. Assessee submitted list of customers. Assessee also submitted that all the customers were hav....