TaxTMI 
TaxTMI 
2025 (6) TMI 796
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....wholly illegal. 4. The CIT(A) erred in upholding the levy of interest u/ss. 234A and 234B of Rs. 12,55,236/- and Rs. 14,28,372/- respectively by the Assessing Officer. 5. Any other grounds that may be raised during the time of hearing. 3. The brief facts of the case are that the assessee is a firm consisting of 3 partners and formed partnership firm on 09.03.2015 to carry on the business of two wheeler agency, but the business not commenced due to financial crisis and non-supply of vehicles from principal. The assessee firm has not filed the return of income for the A.Y.2017-18. The case was selected for scrutiny under OCM cases and accordingly, statutory notices were issued to the assessee. However, the assessee did not participate in the assessment proceedings and hence the assessing officer completed the assessment exparte u/s. 144 of the Act dated 29.12.2019 on best judgment basis by making an addition of Rs. 50,33,000/- u/s. 69A r.w.s. 115BBE of the Act on account of unexplained money and brought to tax. The AO also made addition of Rs. 14,25,412/- on an estimate basis at the rate of 8% of the total turnover of the assessee. Subsequently, the assessee file....
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....of Rs. 61,17,654/- is relates to the borrowings from friends and relatives. In respect of additions made on account of demonetised currency of Rs. 50,33,000/- the assessee explained that the source has already been proved and mere deposit of SBNs cannot be treated as unexplained money u/s. 69A of the Act. money u/s. 69A of the Act. 3.3 On perusal of the submissions, the ld.CIT(A) partly allowed the appeal of the assessee by deleting the addition made by the AO on an estimate basis in regard to business income of the assessee amounting to Rs. 14,25,412/- and confirmed the additions made by the AO on account of deposit of SBNs to the tune of Rs. 50,33,000/-. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. 4. The ld.AR for the assessee submitted the ld.CIT(A) has erred in confirming the addition only for the reason that the deposit of cash made in SBNs during the demonetisation period. The ld.AR filed a paper book of 97 pages containing the replies filed before the AO, Ld.CIT(A), confirmation from the lenders like friends and relatives, letter issued to manufacturer by the bank. The ld.AR submitted that the assessee had entered an agreement with the....
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....g the name, identity and genuineness of the cash deposited by providing the confirmation, PAN and identity of the lenders. As argued by the ld.AR even the cash deposited in SBN had been collected during the demonetisation period, which was not prohibited as per the Specified Bank Notes (Cessation of Liabilities) Act, 2017. As observed and confirmed in para 7.1.4 of the order by the ld.CIT(A), the assessee was not legal authority to make legal transactions in SBNs during the demonetisation period is not acceptable relying on the various decisions of this tribunal, wherein it is confirmed that the 'appointed date' for 'not transacting in SBNs' as 31.12.2016. Therefore, we find force in the argument of the ld.AR, since this issue is covered in favour of the assessee by the decisions of this Tribunal in the following case Shri Raju Dinesh Kumar vs DCIT (Supra), where the Tribunal under the identical set of facts deleted the additions made by the Assessing Officer, after considering this tribunal's following decisions M/s. Micky Fireworks Industries Vs. ACIT - ITA No.264/2023 dated 26/07/2023, Mrs. Umamaheshwari Vs. ITO - ITA No. 527/Chny/2022 dated 14/10/2022, Amar Sparklers Factory vs....
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.... not violation of Specified Bank Notes (Cessation of Liabilities) Act, 2017. We find that although, the Government of India & RBI issued various notifications and circulars barring people transacting in SBNs, but, as per Specified Bank Notes (Cessation of Liabilities) Act, 2017, no person shall accept or transact any SBNs from the appointed date. As per said Act, appointed date is 31.12.2016. From the above, it is very clear that up to appointed date, persons can transact in SBNs. However, the only requirement is, they should be able to establish source for said cash deposits. This principle is further fortified by the decision of the ITAT Chennai Bench in the case of Amar Sparklers Factory v. ITO in ITA No.808/Chny/2023 order dated 11.10.2023, where the Tribunal after considering relevant facts has held as under: 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. In so far as addition of Rs. 6,62,783/-, we find that the assessee itself has admitted shortage of source in their cash flow statement filed before the AO. Therefore, from the above, it is undoubtedly clear that the assessee could not explain....
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.... maintained for business, cash balance as per cash book etc. All these details were duly submitted by assessee vide reply dated 12-12- 2019. The assessee also submitted month-wise cash deposits in all bank accounts, details of old notes deposited at the time of demonetization period. Pertinently, the assessee also furnished details of name, address and PAN of cash depositors who deposited cash during demonetization period. The same has been detailed on pages 24 to 35 of the paper book. Apparently, the same could not be faulted with by Ld. AO. There is no allegation of any irregularity in the books of accounts. 6. We find that the only reasoning to treat the said deposits as unexplained cash credit u/s 68 is that the assessee was debarred from dealing in SBN after 08-11-2016. However, in the present case, the cash so received by the assessee is backed by sales carried out by the assessee as recorded in the books of accounts. Therefore, the source of cash is duly explained. The provisions of Sec.68 could be invoked only in cases when there was unexplained cash credit in the books of accounts maintained by the assessee. However, the assessee has duly identified the debtors fr....