TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 685
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.... the said section. 4. The Appellate Commissioner ignored the fact that the deposits in the bank are proceeds of regular sales of the assessee. 5. The Appellate Commissioner, erred in coming to a conclusion similar to that of the A.O, that having accepted that the deposits are sale of ITC products should not have added the same as unexplained credits u/s. 69A of the Income Tax Act. 6. The Appellate Commissioner ought to have seen that, the A.O has no jurisdiction to decide on the legality of specified bank notes and should have accepted the same as legal tender. 7. Any other grounds which the Assessee may urge either before or at the time of the hearing." 3. The assessee company is engaged in the business of wholesale and retail sales of ITC products. The assessee filed its return of income for the year under consideration on 23.09.2017 declaring total income of Rs. 10,86,174/-. The case was selected for scrutiny through CASS. During the assessment proceedings, the Assessing Officer noted that there was a cash deposit of Rs. 17,16,22,035/- during the demonetization period, out of which, a sum of Rs. 3,37,31,318/- was deposited in Specified Bank....
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....for the rest of the financial year relevant to the assessment year under consideration. Thus, he has submitted that once the books of accounts of the assessee are duly audited and also accepted by the Assessing Officer, then the deposits made out of the sale proceeds cannot be added u/sec.69A of the Act. In support of his contention, he has relied upon the decision of ITAT, Surat Bench, in the case of Anuj Satishkumar Bansal vs. ITO [2025] 177 taxmann.com 251 (Surat-Trib.) and submitted that the Tribunal has considered an identical issue and held that once the transactions of sales are duly recorded in the books of accounts, then the addition made by the Assessing Officer u/sec.69A of the Act towards the cash deposit during the demonetization period is not sustainable in law as the scope of sec.69A is limited to the money, bullion, jewellery or other value article found but not recorded in the books of accounts. The learned Authorised Representative of the Assessee has relied upon the decision of ITAT, Chennai Benches, Chennai of the Tribunal in the case of Tamilnadu State Marketing Corporation Ltd., vs. ACIT [2025] 170 taxmann.com 641 (Chennai - Trib.) and submitted that the Tribu....
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....ld denomination during the demonetization period turns out to Rs. 3,37,31,318/-." 7. Thus, out of the total deposit of cash during the demonetization period [November and December 2016] of Rs. 17,16,22,035/-, the Assessing Officer found that a sum of Rs. 3,46,37,500/- was deposited in the old SBNs of Rs. 1000/- and Rs. 500/- which were not a legal tender after the notification of demonetization. The Assessing Officer then made the disallowance by giving the reasoning in Paras 3.5 and 3.6 as under: "3.5. That being the case question arises as to whether any person who received such SBN note after 09.11.2016 can bring it into books of account. "Here the basic principle of accountancy has to be relied upon. The money measurement concept underlines the fact that in accountancy and economics generally, every recorded event or transaction is measured in terms of money i.e. local currency, monetary unit of measure. Since, the SBNs were just a piece of paper and they stand no virtue on 09.11.2016 or after, as Central Government, the guarantor has withdrawn its guarantee. Therefore, it can't be measured in monetary terms and hence, it can't be journalized in books of acc....
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.... 5 - - - - - 6 1,823 8,231 25,727 1,06,860 86,18,060 7 100 14,500 22,946 1,33,390 97,77,990 8 632 11,971 8,805 35,270 75,33,270 9 2,792 5,201 14,699 54,920 69,17,320 10 - - - - - 11 - - - - - 12 1,192 15,554 20,470 58,630 1,10,74,630 13 - - - - - 14 856 20,427 20,898 1,51,470 1,33,10,770 15 - - - - - 16 429 3,470 13,720 43,550 35,79,550 17 282 6,162 21,720 69,180 56,04,180 18 - - - - - 19 252 13,716 16,136 96,960 88,20,560 20 708 15,605 20,050 51,390 1,05,66,890 21 432 8,817 29,362 1,20,990 78,97,690 22 430 10,619 7,310 45,200 65,15,700 23 207 1,446 7,549 98,720 17,83,620 24 - - - - - 25 - - - - - 26 1,012 8,089 19,974 1,35,020 71,88,920 27 - - - - - 28 93 15,586 18,606 1,82,470 99,29,070 29 135 3,049 4,328 37,270 21,29,570 30 596 ....
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.... - 181 6,490 7,215 1,037 676 2,427 - 42,37,140 9 - - - - - - - - - 10 - 9,092 29,835 - 91 305 1,643 - 2,40,36,580 11 - 5,290 2,000 70 6 2 - - 62,97,340 12 - 3,652 4,602 89 575 250 578 4 60,01,450 13 - 352 1,252 16 360 500 3,741 - 10,45,010 14 - - - - - - - - - 15 - - - 10,246 2,271 1,350 8,132 - 12,46,470 16 - - - 22,141 6,186 1,743 3,319 - 25,91,450 17 - - - 20,527 2,586 965 4,416 - 22,45,460 18 - - - 14,514 2,338 880 5,104 4 16,36,960 19 138 - - 4,329 1,548 1,160 3,941 - 8,48,910 20 - - - - - - - - - 21 322 - - 8,083 2,501 1,905 5,493 - 16,70,380 22 565 - - 9,446 2,098 971 6,027 - 22,59,190 23 252 - - 11,373 1,424 911 5,556 - 17,86,280 24 292 - - 14,171 3,824 2,690 5,935 - 23,05,450....
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....sit was at Rs. 11,43,21,610/-; in the month of November, 2016 the total deposit was at Rs. 12,86,12,300/- and in the month of December, 2016 the total deposit was at Rs. 10,89,70,830/-. These details duly reflected in the bank account of the assessee manifest the fact that the deposits during the months of November and December, 2016 were in line of the deposits made in the preceding months and, therefore, there is no abnormal or excess deposit of cash during the month of November and December, 2016. The learned DR has not contradicted these facts otherwise evident from the bank account statement of the assessee and part of the turnover/sales recorded in the books of accounts of the assessee. On appeal, the learned CIT(A) has confirmed the addition made by the Assessing Officer by giving the findings in Paras 4.3 and 4.4 as under : "4.3. I have gone through the assessment order and record available. The appellant has argued that the Cash Deposits Form Part of Recorded Turnover of Rs. 3,37,31,000 is part of the declared turnover and duly recorded in the appellant's books of accounts, supported by Sales data verified by both the AO and the Commercial Tax Department. Copl....
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....ate any unusual increase or irregularities during the months of November and December 2016. However, the learned CIT(A) has not appreciated these facts and given the reasoning that the assessee has not produced valid evidence such as ledger entries, sales invoice, cash book etc., It is pertinent to note that these reasonings as given by the learned CIT(A) are contrary to the reasoning given by the Assessing Officer who has not disputed the correctness of the books of accounts of the assessee and turnover declared by the assessee. Therefore, without verifying the relevant record and pointing out the specific defects in the books of accounts and other records, making a statement not emerging from the record is not justified. Even otherwise, once the transactions are duly recorded in the books of accounts and accepted by the Assessing Officer as well as the Commercial Tax Department, then the provisions of sec.69A are not attracted. The ITAT, Surat Bench of the Tribunal in the case of Anuj Satishkumar Bansal vs. ITO (supra) has considered an identical issue in Paras 7 to 7.1 as under: "7. We have heard both the parties and perused the materials available on record. We have al....
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....ound to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 7.1. In this case, the foundational requirement of the provision that the money is not recorded in the books of account is absent. Therefore, the addition made u/s. 69A of the Act, is legally untenable. Be that as it may, the appellant has also furnished all necessary details in support of the unsecured loans, which has not been controverted by revenue at any stage including before the Tribunal. In absence of any adverse finding regarding the genuineness or completeness of the books of account, the reliance on section 69A appears misplaced. It may be stated that mere d....
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....ounts of designated bank branches. The assessee before AO and before CIT(A) and even now before us in its paper book consisting of 238 pages filed complete details giving the branch-wise cash deposits, date-wise deposits of SBNs. Admittedly, during demonetization period from 09.11.2016 to 30.12.2016, all retail vending shops throughout the state have deposited a sum of Rs. 3506 crores including closing balance as on 08.11.2016. These deposits are consideration received for sale of IMFS and beer sold to the ultimate customers as contended by assessee but contested by revenue. During the period 09.11.2016 to 30.12.2016, the assessee found to have exchanged for value by deposit of Specified Bank Notes or demonetized currency notes totalling to Rs. 145.21 crores in its bank account during the permitted window period for such exchange commencing from 10.11.2016 to 30.12.2016. The assessee found to have been in possession of cash balance of Rs. 81.57 crores (including demonetized currency and regular currency) at close of 08.11.2016. The balance sun of Rs. 57.29 crores, the assessee claimed that such SBNs have been obtained from its customers in exchange of liquor sold to them during dem....
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....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 ie., 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 provision of Section 5 very categorically states that no person shall knowingly or voluntarily hold or transfer any Specified Bank notes on or from the appointed day of 31.12.2016. The relevant provisions of section 5, 6, 7 & 8 reads as under- 5. On and from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note: 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 o....
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....ividuals; (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 Le., 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 incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw legal tender character of the old Bank Notes in the denominations of Rs. 500 and Rs. 1000 was introduced. 2. What is this scheme? The legal tender character of the bank notes in denominations of Rs. 500 and ....
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....yment 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 High Court in the case of Narendra G. Goradia (HUF) v. CIT reported in [1999] 101 Taxman 571/234 ITR 571 (Bombay) and stated that the Hon'ble Bombay High Court has categorically held that where the assessee is required to prove source of money, in such case and once, he is successful in proving that source, he could not be asked to produce proof of acquisition of such amount in currency notes of particular denominations. The ld. counsel for the assessee relied on para 9 of the decision, which reads as under:- "10. We have also perused the decision of A. Govindarajulu Mudaliar v. CIT, on which reliance is placed by learned counsel for the Revenue. We, however, fail to understand how the above decision helps the Revenue in the instant case. In that c....
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....ee 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 w.e.f. 9.11.2016. We noted that even the Revenue admitted that the Government has not declared the SBNs as an illegal tender and even possessing of SBNs was not an offence till 31.12.2016. Between the period from 9.11.2016 to 31.12.2016, all the public, who were holding such SBNs were permitted to exchange such holdings against valid currency notes but the scheme itself does not render the SBN as illegal or declaration does not bar in receiving or paying through the SBNs in the course of business like other documents i.e., through cheques, promissory notes, Government securities, which are not legal tender can be freely exchanged so can the SBNs. The Ordinance of December 2016 clearly specifies that on or from 31.12.2016, it is ill....
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....e 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 after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 have been withdrawn from circulation from 09.11.2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31.12.2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31.12.2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of d....
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...., Le., 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 offers no explanation about the nature and source of such expenditure or acquisition of such money, etc., or the explanation offered by him, in the opinion of AO is not satisfactory. For violation of any RBI notification, etc., can have any civil or criminal liability and can be dealt with under any other provision of law by the concerned authority but for the purpose of bringing the amount under Income-tax, the provisions are very clear i.e., 69 & 69A of the Act. In our considered view, to bring any amount w/s. 69 or 69A of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 ....
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.... TIN. 36020209552 Sub :- TGVAT Act 2005- VAT audit - M/s. M R L TRADING COMPANY, Hyderabad - Form VAT 304 issued - Books of accounts produced - Show Cause notice issued - Objections called for- Reg. Ref :- 1.Authorisation in Form ADM IB No. 36171007204729552 Dated:07-10-2017, issued by Deputy Commissioner (CT), Abids Division. 2. Form VAT 304 Dated:21-10-2017. 3.Dealers letter Dated:22-02-2018. 4. Authorization in Form ADM IC No:20180307481246 Dated:07-03-2018 issued by the Deputy Commissioner (CT) , Abids Division. ******* M/s. M R L TRADING COMPANY, are the registered dealers and assesses on the rolls of Commercial Tax Officer, Basheerbagh Circle with TIN: 36020209552 under the TGVAT Act 2005. They are Distributors in Food Products, Note Books, Diaries and Stationery . The dealers have filed monthly returns in Form VAT 200 upto June 2017 by disclosing the turnovers and paid taxes due thereon. Earlier audit was completed by the Assistant Commissioner(INT), Abids Division upto March 2016. Hence audit has been taken from April 2016. As per the authorization of the Deputy Commissioner (CT), Abids Division in the reference first cited the undersigned ha....