TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 1584
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....pliance to the above notices issued by the AO, he issued a show cause notice under section 144 of the Act. In response to the said notice, assessee furnished a chart, showing the details of month-wise opening cash-in-hand, cash sales, payments received in cash, payments made in cash, cash deposited in bank, cash withdrawals from bank and closing cash-in-hand. From the chart so furnished by the assessee, the AO noticed that there was substantial increase in realization of receipts from debtors in cash during the period from 09.11.2016 to 30.12.2016 (demonetization period) to the tune of Rs.5,65,74,051/- and out of this realization, the assessee had made payments in cash to the tune of Rs.4,37,33,519/- and had deposited cash of Rs.1,25,82,000/- in Specified Bank Notes (SBNs) in its bank account(s). After considering the material available on record and also gathered during the course of assessment proceedings, the AO was of the view that the assessee had created bogus entries of debtors and had transacted in prohibited currency notes during the demonetization period and, therefore, the same was to be added to the income of the assessee. The AO held that "The alleged sale shown during....
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....ng addition u/s 68 of the Act which addition is contrary to facts, bad in law, be deleted. 04. Because there being no "cash credits" as defined in section 68, in as much as the amounts outstanding being realized and the sales proceeds, are all part of the revenue receipts which have already been considered while preparing the income and expenditure account of the business, as such to treat the same as "cash credit" and tax it again under section 68 is contrary to the spirit and the provisions of the Act, besides being a case of double taxation, once as part of the sales and the again as unexplained credits, the addition of Rs.1,18,82,000/- upheld by CIT(A) be deleted. 05. Because the authorities have erred on facts and in law in holding that the assessee was not eligible to accept SBNs overlooking the provisions of the Notification on SBNs issued by RBI which permitted the deposit of SBNs till 30.12.2016, as such the deposit of SBNs prior to 30.12.2016 cannot be held to be unexplained income of the assessee, the addition made by the authorities below and upheld by the CIT(A) amounting to Rs.1,18,82,000/- be deleted. 06. Because the CIT(A) has failed to ap....
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....at the Ledger accounts/details of purchases and sales were also filed before the AO as well as copies of accounts of various parties, from whom cash payments had been received, were also filed along with list of debtors. The Ld. A.R. also submitted that no discrepancy was pointed out with respect to the stock also. 5.1 It was further argued by the Ld. A.R. that acceptance of SBNs and making payments in SBNs after 08.11.2016 and depositing the balance, i.e. Rs.1,25,82,000/-, which was added to the income of the assessee, was not in violation of the demonetization Ordinance issued by the Reserve Bank of India. It was submitted that as per the Specified Bank Notes (Cessation of Liabilities), Act, 2017, the appointed day was 31.12.2016, after which no person could either accept or make payments in Specified Bank Notes. It was submitted that the said Act also deals with prohibition of holding, transferring or receiving Specified Bank Notes on or after the appointed day, i.e., 31.12.2016 and, accordingly, there was no prohibition either in transferring or holding or receiving the Specified Notes till 31.12.2016. It was submitted that, therefore, it remains undisputed that SBNs were le....
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....sakhapatnam in ITA No.76/VIZ/2021, (2) Polepalli Srinivasulu Gupta, anantapur vs. DCIT, Guntur in ITA Nos. 240, 241, 242,243,244, 245 & 246/VIZ/2021. 5.5 The Ld. A.R. submitted that vide orders dated 16.03.2022 and 28.06.2022 respectively, the Visakhapatnam Bench (Supra) had held that as there was sufficient cash balance with the assessee, the contention of the Department, treating the receipt of SBNs from cash sales as illegal and thereby invoking the provisions of section 69A of the Act, was not valid in the eyes of law, as the SBNs could be measured in monetary terms since guaranteed by the Central Government and the liability of the Reserve Bank of India did not cease to exist till 31.12.2016. 5.6 The Ld. A.R. prayed that the appeal of the assessee may kindly be allowed. 6.0 In response, the Ld. Sr. D.R. referred to the order of the Ld. First Appellate Authority in detail and submitted that paragraphs 9.1, 9.2, 9.3, 9.4 and 9.5 succinctly express the view of the Department inasmuch as although the books of account have not been rejected by the AO, there is no evidence filed by the assessee to prove that the realization from debtors had not been realized at a l....
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....d SBNs from its debtors during the demonetization period, whereas the Reserve Bank of India had authorized only Commercial Banks and Co-operative Banks and some other entities, such as Petrol Pumps, Hospitals, etc., to accept SBNs, but other companies, persons were never authorized to accept SBNs after 08.11.2016, as the character of bank notes in denominations of Rs.500/- and Rs.1,000/- issued by the Reserve Bank of India stood withdrawn. As per the AO, the assessee had generated bogus cash receipts from debtors during the demonetization period to generate cash in hand in the books of account with a view to deposit the unaccounted cash lying with the assessee in the form of SBNs. Although the assessee produced the books of account as well as sales invoices, bills, etc. issued during the demonetization period, the AO was of the view that the assessee failed to prove the genuineness of the cash realization from the debtors. The AO was of the view that the assessee had fabricated a story for justifying the cash deposits in the bank during the demonetization period. It was also observed by the AO that all the payments received from various debtors and as shown in the books of account ....
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.... 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 agencies, or any other person authorised by the Reserve Bank, (c) by any person on the direction of a court in relation to any case pending in the court. 7.2.1 Therefore, the bar on holding and transferring or receiving SBNs is only after the 'appointed day' which is 31.12.2016. In view of the above, it is our view that there is no violation by the assessee of any law in accepting SBNs against sales made in cash and in receiving cash from debtors. 7.3.0 Furthermore, even the CBDT had issued various Standard Operating Procedures (SOPs) instructing the AOs on the nature of verification to be made in cases where cash has been deposited in SBNs. The following instructions have been issued: [a] Ins....
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....ogent evidences were required by the AO to be submitted by the assessee and which the assessee had failed to do, is not mentioned anywhere in the assessment order. Also, the behavior of the assessee, as commented upon by the AO, could have been abnormal and unusual, given the huge cash transactions during the demonetization period, but without any evidence of the assessee indulging in passing bogus entries in its books of account, addition cannot be made on mere apprehensions and conjectures. As far as the stand of the Department regarding the assessee or any person not having the authorization to deal in SBNs during the demonetization period is concerned, the case of the assessee is squarely covered by the two orders of the ITAT, Vishakhapatnam Bench in the cases of ITO, Visakhapatnam vs. Srio Tatiparti Satyanarayana, Visakhapatnam and Polepalli Srinivasulu Gupta, Anantapur vs. DCIT, Guntur (supra). Apart from this, the ITAT Bangalore Bench in the case of Smt. Malapur Mounika, Chitradurga vs. ITO, Chitradurga in ITA No.599/BANG/2023, vide order dated 30.10.2023, held that accepting SBNs subsequent to 08.11.2016 cannot be the sole reason for making addition under section 69A of the....