TaxTMI 
TaxTMI 
2026 (8) TMI 1549
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....ash accepted during the demonetization period was towards the instalment of outstanding loan on account of the borrower. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 1,53,91,500/- by invoking provisions of section 68 of the Act made by the AO without appreciating the following important facts: a. The amounts received are not credit; instead, they are the payments received towards the regular monthly instalments of the outstanding loan account. b. The said amounts are received towards the regular course of business and not specifically due to demonetization. c. The cash against loan was accepted after taking into consideration the KYC guidelines specified by the RBI. 3. The ld. CIT(A) has erred in confirming the addition of Rs. 41,02,594/-, made by the AO, disregarding the fact that the said amount has already been offered to tax by the Appellant company as Interest Income from Loans Provided for the concerned year, thereby resulting in double taxation of income. 4. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in confirming th....
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....essing Officer further observed that as per the cash book maintained by assessee, the closing cash balance as on 08.11.2016 comprised Specified Bank Notes amounting to Rs. 2,56,000/- and other denomination notes of Rs. 47,474/-. Since deposits of Specified Bank Notes aggregating to Rs. 1,56,47,500/- had been made after 08.11.2016, ld. Assessing Officer called upon assessee to explain the source of the balance amount. Vide notice issued during the course of assessment proceedings, ld. Assessing Officer required assessee to explain why the Specified Bank Notes accepted after 08.11.2016 should not be treated as unexplained cash credits under section 68 of the Act, observing that Specified Bank Notes had ceased to be legal tender after the announcement of demonetisation and that assessee did not fall within the exempted categories notified by the Central Government. In response, assessee submitted that it is a registered NBFC engaged in the business of micro-finance and that the impugned receipts represented repayments made by existing borrowers towards their outstanding loan instalments. It was explained that the borrowers largely belonged to economically weaker sections of society an....
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.... referred letter on the ground that summons issued to them were unserved. The confirmation and oath statement made by the following persons numbering 14 are submitted herewith. It may kindly be noted that the oath declaration and confirmation was made by the depondent-party before two witnesses and I view of these confirmations, it is humbly requested not to treat the amount as unexplained cash credits as all the parties are in live and existing parties, bona-Fide existence is proved beyond doubt and confirmations have been filed. Confirmation of 14 persons attached as Annexure-l Out of 17 listed persons 1" JAGANNATH PODIYAN VENILA has death and his entire family is shifted out of Mumbai, we have confirmed this through 2 witnesses which is attached along confirmation. 2nd EKBAL ABBAS KHAN is out of Mumbai we have confirmed this through 2 witnesses which is attached along with confirmation. 3rd SAYYED YASMIN entire family has shifted out of Mumbai and neighbors are afraid to sign as witnesses, as it is related to INCOME TAX matter. Additional Photographic evidence of 5 persons from 17 listed 1)SARIKA ASHOK KAMBLE 2) PRIYA PRAKASH KADAM 3)....
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....f the authorities below and carefully examined the material placed before us, including the paper book containing the audited financial statements, cash book, details of cash deposits, confirmations furnished by the borrowers and the judicial precedents relied upon by the ld. Counsel for the assessee. At the outset, we observe that the nature of assessee's business is not in dispute. Assessee is an NBFC engaged in the business of micro-finance, extending small-value loans to borrowers from economically weaker sections after complying with the KYC norms prescribed by the Reserve Bank of India. Revenue has neither disputed the genuineness of the business nor questioned the existence of the loan portfolio reflected in the books of account. The controversy is confined only to the character of the repayments received during the demonetisation period. Ld. Assessing Officer has proceeded on the premise that since Specified Bank Notes ceased to be legal tender from 09.11.2016 and assessee was not one of the notified entities authorised to receive such notes, the deposits made thereafter represented unexplained cash credits. In our considered opinion, the issue requires examination not ....
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....ere produced, the onus shifted to the Revenue to dislodge the same by bringing contrary material on record. No such exercise has been undertaken. Merely because some notices issued under section 133(6) remained unserved or did not evoke a direct response cannot, by itself, justify rejection of the entire explanation, particularly when no effort was made to invoke the powers under section 131 for enforcing attendance or examining the deponents. 7. Having examined the evidentiary record, we now turn to the applicability of section 68. The provision empowers ld. Assessing Officer to treat a sum credited in the books as income where assessee either fails to offer an explanation regarding its nature and source or the explanation offered is found to be unsatisfactory. The expression "sum found credited" presupposes the introduction of a credit whose source remains unexplained. In the present case, the impugned receipts are not fresh loans, advances or deposits. They represent recovery of amounts already advanced by assessee and reflected as loan receivables in its books of account. Repayment of an existing loan merely results in reduction of the corresponding receivable; it does not c....
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....assessed as unexplained merely because they were received in demonetised currency. The Coordinate Bench emphasised that, unless the Revenue disproves the underlying business transactions or rejects the books of account, section 68 cannot be invoked solely on account of the mode or denomination of receipt. 9.2. The ratio of the aforesaid decisions squarely applies to the facts of the present case. Assessee has established, through contemporaneous documentary evidence, that the impugned receipts represented recovery of existing loan receivables arising in the ordinary course of its micro-finance business. The audited financial statements, the cash book, the monthly cash-flow statement, the date-wise deposit details and the confirmations furnished by the borrowers together constitute a consistent evidentiary chain. The Revenue has failed to bring any material to break this chain or to demonstrate that the deposits represented assessee's own unexplained money. Accordingly, we are of the considered view that the conditions necessary for invoking section 68 are absent in the present case. We, therefore, delete the addition of Rs. 1,53,91,500/- made under section 68 of the Act. Gro....
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....anced by both sides and ld. CIT(A) has adjudicated the issue, we consider it appropriate to briefly deal with the same. Ld. CIT(A), while rejecting the contention of assessee, observed that the amendment to section 115BBE was made applicable with effect from 01.04.2017 and, therefore, governed Assessment Year 2017-18. On that reasoning, he upheld the application of the enhanced rate. Ld. Counsel for the assessee, on the other hand, relied upon various judicial precedents to contend that the enhanced rate created a substantive fiscal liability and could not be retrospectively applied to transactions that had already taken place prior to the amendment attaining finality. 15. Having regard to our decision deleting the addition under section 68, we do not consider it necessary to render any conclusive finding on the larger issue concerning the applicability of the amended rate under section 115BBE. The issue is rendered purely academic in the facts of the present case. Accordingly, Ground no.5 is allowed, being consequential to the deletion of the addition made under section 68. 17. In the result, appeal filed by assessee is allowed. Order is pronounced in the open court on 07....