TaxTMI 
TaxTMI 
2025 (10) TMI 1477
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....ern Rice Mill, Puduvayal, filed the return of income for the AY 2017-18 on 29.10.2017 admitting total income of Rs..18,21,510/-. The Assessing Officer noticed that the assessee made cash deposits to the tune of Rs..3,24,37,580/- during the period of demonetization. A survey under section 133A of the Act was conducted on 02.03.2017 in assessee's business premises in order to verify the source for cash deposits. During the course of survey, statement recorded, the assessee's explanations are extracted at page 2 of the assessment order. After considering the submissions of the assessee and in the absence of corroborative evidence for the sources for deposits of old denomination notes during the period of demonetization, the cash deposited during 10.11.2016 to 30.12.2016 to an extent of Rs..3,14,15,030/- is treated as unexplained money and added to the total income of the assessee. The ld. CIT(A) confirmed the addition made by the Assessing Officer. 4. The Id. AR Shri M.K. Rangasamy, C.A. submits that in the rice mill business, the trade practice followed for procurement of paddy, the assessee used to engage agents by giving advances to them to procure paddy from the farmers....
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....ve said period. She further submits that the assessee also failed to give explanation whether such big cash would available in rice mill to question No. 4 during the course of survey on 02.03.2017. Further, she argued that the contention of the assessee that the amount offered to the agents for procurement of paddy were returned back in cash due to demonetization and were deposited into the bank is not acceptable since the assessee did not furnish any documentary evidence. She vehemently argued that by no stretch of imagination it is believable that without any record or receipt or any other means of evidence, the assessee can offer advances to agents ranging from Rs..10 lakhs to 15 lakhs and in totality, whatsoever explanation offered by the assessee is not backed by material evidence for the above huge cash transaction. Since the onus cast upon the assessee has not been proved with cogent documentary evidence, the ld. CIT(A) has rightly confirmed the view of the Assessing Officer and prayed to sustain the same. 7. Heard both the parties and perused the material available on record along with paper book filed consisting of 83 pages. Admittedly, the Assessing Officer, in order t....
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....ficer did not accept the explanation offered by the assessee nor any adverse remark given on the cash book, which is evident from the assessment order. The assessee placed on record ITR acknowledgement for AY 2016-17 from pages 1 to 14 along with balance sheet, Trading & Profit & Loss account and Profit & loss account. We find the audit report in Form No. 3CB at page 2 of the paper book. Admittedly, the said audit report was available before the Assessing Officer and no reference or discussion, whatsoever was made with regard to the authenticity of audit report. Further, we find the e-proceeding response acknowledgement dated 10.03.2021 before first appeal proceedings placed at page 70 of the paper book, wherein, it clearly shows that the assessee filed reply letter, cash book folio, Bank of Baroda statement, ledger folio & cash deposit summary. On perusal of the impugned order, wherein, the ld. CIT(A) discussed the issue vide para 4 at page 2 of the impugned order and relevant paras are reproduced herein below: 4.1 Ground No.1, 2 and 3: The appellant has contended the fact that the A.O should have accepted the genuineness of the cash deposits of Rs. 2,11,75,341/- and the ....
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....posit in his bank account. The onus lies on the appellant to support any claim by bringing in cogent documentary evidence. In absence of any evidence in support of its grounds of appeal, I have no basis to take a contrary view in the appellate proceedings, I have no reason to interfere with the assessment order. As such, I do not find any infirmity in the order of Assessing Officer. Therefore, addition of Rs. 3,14,15,030/- is hereby sustained on merits. 9. On examination of the above observations of the ld. CIT(A), we find that no discussion whatsoever made by the ld. CIT(A) with reference to documentary evidence in respect of cash book folio, ledger folio and cash deposit summary in the impugned order. We note that the ld. CIT(A) simply concluded that the assessee failed to provide cogent documentary evidence for the amounts claimed to have been received without referring to the documentary evidences furnished at page 70 of the paper book. Further, we note that the Assessing Officer and the ld. CIT(A) completely ignored the cash balance as per the books of the assessee as on 08.11.2016 with reference to answer to question No. 4 of the sworn statement recorded from Mohammed Meer....
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....cy notes, all the agents paid back the advances received by them. As we could not transact or make use of those SBNs, we deposited all such monies into the bank account. Qn. No. 6: What is evidence for your claim? Do you possess records for the payment of advance and return of such advances? Ans: In this line of business, payment of advances to known agents is purely on mutual trust and adjust such advances at the time of purchase of paddy. Such a practice is in vogue for years and decades. This is applicable to all rice mills. It is customary to pay advances to agriculturists even at the time of planting of rice sapling. I am unable to instantly give you evidence for the same. I wish to remind that even at the time of survey on 02-03-2017, 1 had furnished the full list of village-wise agents. Qn. No. 7: At the time of recording of statement on 02-03-2017, you gave the very same explanation. Further, you promised to furnish details of advances returned by agents and amounts collected from your trade debtors the next day. But, you have not furnished the details. Even now, you are unable to furnish details. What is your explanation? Ans: Immediatel....
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....ining the same. However, the Assessing Officer and the ld. CIT(A) proceeded to add entire cash deposits made from 08.11.2016 to 22.12.2016 ignoring non-SBN currency. Therefore, the Assessing Officer and the ld. CIT(A) did not consider the evidence on record in proper perspective. 11. Further, we find the statement of assessee recorded under section 133A(iii) of the Act at page No. 73, which is reproduced herein below for better understanding: 4. Addition of Rs. 3,14,15,030/-:- Even at the time of survey conducted on 02-03-2017, the appellant clearly explained the reasons for the high cash balance kept by her for business purposes. It was explained that there are agents at village level to whom advances are paid and that immediately after announcement of the demonetization on 08-11-2016, all the agents returned the deposits paid to them. In her reply to Qn. No. 10 of the statement recorded under sec. 133A(3)(iii), the appellant explained/replied thus- On. No. 10: It is noticed that you have between Nov. 08, 2016 and Dec. 22, 2016 deposited in cash on various dates a total amount of Rs. 3,24,15,030- into your Bank of Baroda Account No. 26630500000029. Please expl....
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.... advances returned amounting to Rs..1,30,00,000/- was remitted into her bank account. Further, assessee also recovered amounts due from trade debtors to whom credit sale of rice was made earlier. The amounts so received from the trade debtors was also remitted into the bank account, further, she said the cash received on retail sale of rice was also deposited into the bank account. We find the AO did not dispute the trade practice and also cash deposits from agents, debtors and retail sales. Having same on record, the ld. CIT(A) did not appreciate the veracity of statement and simply proceeded to confirm the order of Assessing Officer having the impression that the cash deposits made during the demonetization attracting provisions under section 69A of the Act, in our opinion, is not justified. 13. Further, we find the statement of one of the agents, Sri RM. Manoharan who was examined u/s. 131 at page No.75 of the paper book which is reproduced herein below: 4.2. Pursuant to the survey u/s. 133A conducted on 02-03-2017, the appellant's husband paraded some 10 agents before the A.O. for the purpose of examination on 06-03-2017. One of the agents, Sri RM. Manoharan alo....
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....agriculturists, there is no record with signature or the like Q.No. 4: What is the reason for the agriculturists to return the advances to you ? Ans The advance amounts were in the denomination of Rs. 500 and Rs. 1000. The agriculturists were not in position to make use of those currency notes after demonetization. Hence, the advance amounts were returned. Q.No. 5: You claim that Sri Malairaju, Narikudi, Sri Shanmugam, Aruppukottai and Sri Nagarajan, Muppaiyur returned the advance amounts. Do you know their addresses or their mobile Nos. ? Ans: I do not know their addresses, nor their mobile Nos. (True translation from Tamil to English). 14. We find his statement supporting the statements of assessee and assessee's husband which are discussed in the aforementioned paras. He stated that the assessee's husband was informed that the rest of the agents will be summoned as and when needed, but, there was no communication from the Assessing Officer. He states that he derives his livelihood as a paddy commission agent. He used to pay advances to agriculturists in nearby villages around Thiruvadanai, Vellaiapuram, Thondi, Kalaiyarkovil, Siv....
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....ce contrary to the above said three statements. In similar situation, the Chennai Benches of ITAT in the case of Tamil Nadu State Marketing Corporation Ltd. V. ACIT (supra) has observed and held as under: 8.1 Now the question arises whether the demonetized currency received by assessee on account of sale of IMFS and beer to the customers and accepted demonetized currency in return is to be assessed u/s.69 of the Act or not as unexplained investment. The ld. Senior DR has raised a question on this that when there was an express bar by Government on transacting business from 09.11.2016 in SBNs in view of Question No.2 of FAQ issued by RBI on 08.11.2016 vide Circular No.DCM(Plg) No.1226/10.27.00/2016-17. The ld. Senior DR has argued that vide this very circular, the Government of India has declared the SBNs as not a legal currency w.e.f. 09.11.2016 except only from few notified business transactions were permitted to transact in SBNs and that too for a limited period upto 24.11.2016 as far as demonetized currency of Rs. 1000/- and Rs.500/- and then it was extended upto 15.12.2016. The ld. Senior DR has also argued that the assessee's nature of business is not covered unde....
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....ection 5, shall be punishable with fine which may extend to ten thousand rupees or five times the amount of the face value of the specified bank notes involved in the contravention, whichever is higher. Offences by companies 8. (1) Where a person committing a contravention or default referred to in section 6 or section 7 is a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention or default was committed without his knowledge or that he had exercised all due diligence to prevent the contravention or default. (2) Notwithstanding anything contained in sub-section (l), where an offence under this Ordinance has been committed by a company and it is proved that the same was committed with the consent or connivance of, or is attributable to any neglect on....
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....(Cessation of Liabilities) Act 2017? On February 27, 2017 Government of India notified the Specified Banknotes (Cessation of liabilities) Act 2017. The Act repealed the Specified Banknotes (Cessation of liabilities) Ordinance 2016 providing for cessation of liabilities for the Specified Banknotes (SBNs) and for matters connected therewith and incidental thereto, with effect from December 31, 2016. The SBNs cease to be the liabilities of the Reserve Bank under Section 34 of the RBI Act and cease to have the guarantee of the Central Government. 8.2 The ld. counsel explained that till 31.12.2016, these notes i.e., SBNs in demonetized currency was not held to be illegal tender and there is no provision that holding these notes or transacting the same will amount to violation of any law. Before us, the ld. counsel compared the earlier demonetization scheme of 1978, i.e., The High Denomination Bank Notes (Demonetization) Act, 1978 with the present Demonetization Scheme, whereby the scheme was announced on 16.01.1978 wherein the high demonetization notes of value Rs.500/- Rs.1000/- or Rs.10000/- was withdrawn from circulation and there was a clear bar in the Act for tran....
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....The assessee was further required to prove the receipt of the amount of Rs. 2 lakhs therefrom in high denomination notes. In other words, the assessee was asked to prove as to when and from whom he received the amount in high denomination notes. The assessee gave reasonable explanation for his inability to give detailed account of receipts and disbursements of amounts from time to time in currencies of various denominations including high denomination notes. He could, however, satisfy the authorities about the fact that he was often in possession of Rs. 1,000 denomination notes and the probability of high denomination notes of the value of Rs. two lakhs being included therein. In fact, the Revenue itself was satisfied about the inclusion of 96 notes of Rs. 1,000 each therein. The amount of Rs. 1,04,000 was added as income from undisclosed sources only because, according to the Revenue, the assessee failed to discharge the onus cast on him to prove the acquisition of each and every high denomination note encashed by him. This approach, as earlier indicated, is not correct. The assessee having proved the source and shown satisfactorily the possibility of the inclusion of Rs. 1,000 hi....
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....e. 8.3 In view of the above provisions, as in the present case, once the receipt of SBNs by assessee is not illegal or barred by any legal provisions the receipt of SBNs cannot be put on a different footing for the purpose of Section 68 or Section 69 of the Act from other currency as the source of SBNs are same as the source of other currency. The SBNs though are not legal tender, is of no consequence for determination of source, because the SBNs can be encashed for the face value with the bank without any question being raised. We further noted from the RBI circulars or CBDT circulars that neither the RBI circulars nor any CBDT circulars including any instructions on demonetization requires any person to disclose the source of SBNs. We noted from the facts of the case placed before us that out of total deposits of Rs.2635.35 Crores were in cash for the month of November 2016, which has been accepted as the value of liquor sold for a sum of Rs.2582.56 Crores, hence it can be easy presumed, unless disproved by Revenue, that the balance sum of Rs.52.79 Crores is out of sale of liquor. There is no basis or evidences or examination of any person for reaching a conclusion that ....
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....ries of explanation offered by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the AO needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee ha....
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....in category of persons to accept and to deal with specified bank notes upto 31.12.2016. Moreover, 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. However, the Tribunal observed that there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31.12.2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. In the present case, the assessee made cash deposits from 08.11.2016 to 22.12.2016. Therefore, we find the order of this Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. v. ACIT (supra) is applicable to the facts on hand of the present appeal, following the above order of this Tribunal, we hold that the source explained for cash deposits made by the assessee during the period from 08.11.2016 to 22.12.2016 cannot be rejected and brought to tax under section 69A of the Act just because the assessee accepted SBNs in violation of notification issued by the Government ....