TaxTMI 
TaxTMI 
2026 (7) TMI 961
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....ing the demonetisation period. In respect of this issue the assessee raised multiple grounds in their appeal memo. 3. The brief facts of the case emanating from the records are that the assessee is a partnership firm engaged in the business of manufacture of MS Billets, MS Ingots & TMT Rods. The assessee filed its return of income for the AY 2017-18 on 31.10.2017 by declaring a loss of Rs. 11,84,50,927/-. The case was selected for comprehensive scrutiny under CASS. Accordingly, statutory notices were issued to the assessee. As per the information available with the Department, the assessee had made cash deposits in the bank accounts of Rs. 72,15,000/- during the demonetization period in the form of SBNs. Accordingly, the AO asked the assessee to furnish the details in support of the cash deposits made. The assessee filed the details called for like opening cash in hand, cash deposits and withdrawals made both during the financial year 2015-16 and 2016-17. The assessee also provided the copy of cash book for explaining the details of opening and closing cash and cash deposits and withdrawals during the impugned assessment year. On perusal of the submissions along with the cash bo....
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....he authorities have erred in making the addition of Rs. 61,19,250/- u/s. 68 of the Act on account of cash deposits made in SBNs during the demonetization period. In support of the appeal, the ld.AR filed a paper book consisting of 145 pages containing the return of income, tax audit report for the impugned year, audited financials as on 31.03.2017, details submitted before the AO like statement of bank accounts, ledger account of import of scrap purchases, written submissions made before the ld.CIT(A), etc. The ld.AR further submitted that the assessee's turnover has increased from Rs. 43.96 crores to Rs. 61.78 crores from the F.Y. 2015-16 to 2016-17. Further, he submitted that the cash deposits are made in the course of regular business transaction i.e. out of sales and other advances received / refunded. During the financial year 2015-16, the assessee had deposited Rs. 15.74 crores as against the cash deposits made during the financial year 2016-17 of Rs. 8.25 crores only. The ld.AR further stated that the cash deposits between 09.11.2015 to 31.03.2016 was Rs. 7.3 crores compared to cash deposits of Rs. 2.25 crores from 09.11.2016 to 31.03.2017. Therefore, there was no abnormal i....
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....ned by the assessee are incorrect or incomplete. The AO has not invoked the provisions of section 145 of the Act nor rejected the books of account. Therefore, the entries recorded in such regularly maintained books carry due evidentiary value unless rebutted by cogent material. 10. The records further reveal that during the assessment proceedings, the assessee furnished complete details explaining the source of the cash deposits. The assessee produced the cash book, ledger accounts, bank statements, details of opening cash balance, details of cash withdrawals and deposits, and a detailed statement containing the names of 57 purchase agents along with the amounts refunded by each of them. The consistent explanation of the assessee was that advances had been made to these purchase agents in the ordinary course of business for procurement of metal scrap from various small suppliers situated in different locations. Since the procurement could not be completed in certain cases, the advances were returned by the purchase agents during the demonetisation period and the same were deposited into the bank account. These transactions were duly recorded in the regular books of account and f....
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....inancial Year 2016-17 were only Rs. 8.25 crores as against cash deposits of Rs. 15.74 crores in the immediately preceding year. Similarly, the cash deposits during the period from 09.11.2016 to 31.03.2017 amounted to only about Rs. 2.25 crores, whereas during the corresponding period of the preceding financial year, the assessee had deposited approximately Rs. 7.30 crores. These figures clearly demonstrate that there was no abnormal increase in cash deposits during the demonetisation period. On the contrary, the cash deposits during the relevant year were substantially lower than those made in the preceding year. This factual aspect completely demolishes the foundation on which the Revenue has proceeded to treat the impugned deposits as suspicious. 14. We further find considerable force in the submissions advanced by the ld.AR regarding the legal permissibility of receipt of SBNs during the demonetisation period. The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, subsequently enacted as the Specified Bank Notes (Cessation of Liabilities) Act, 2017, provided that the cessation of liability in respect of SBNs would take effect from the specified date, namely 31.1....