2022 (3) TMI 896 - AT - Income Tax

Addition u/s 69A - cash sales undertaken in demonetised cash after 08/11/2016 - cash sales shown by the assessee dafter 08/11/2016 in demonetised currency when the business of the assessee is not among persons permitted to accept demonetised cash after 08/11/2016 - HELD THAT - We find that there was sufficient cash balance with the assessee The Specified Bank Notes (Cessation of Liabilities) Act, 2017, defines appointed day vide Section 2(1)(a). As per Section 2(1)(a), appointed day means the 31st Day of December 2016. Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 also deals with prohibition on holding, transferring or receiving specified bank notes. Section 5 states that On and from the appointed day, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note . We therefore, find that the specified bank notes can be measured in monetary terms since the guarantee of the Central Government and the liability of Reserve Bank of India does not cease to exist till 31.12.2016. In view of the above, the contention of the Ld.DR, treating the receipt of SBNs from cash sales as illegal and thereby invoking the provisions of section 69A is not valid in law. Therefore, we dismiss this ground of the Revenue. Admission of additional evidences - As argued CIT(A) ought to have referred the evidence produced by the assessee in the form of paper book to the Assessing Officer as per Rule 46A of the Income Tax Rules - HELD THAT - AO has provided various opportunities to the assessee to explain the details of share transactions and provide documents in support of his claim, wherein, the assessee failed to produce any cogent evidence and information in support of his claim. However, the assessee produced documents before the Ld.CIT(A). That being the position, the Ld.CIT(A) must have remitted the matter back to AO for examination by applying the provisions of Rule 46A. However we find merit in the argument of the Ld.AR, that no additional evidence produced before the Ld.CIT(A) which was not disclosed in the return of income filed by the assessee. It is noted that the Ld.CIT(A) has only verified the authenticity of the claim made by the assessee in the return of income, and we find that there is no requirement by the Ld.CIT(A) to remit the matter back to AO for examination. In view of the above findings, the grounds raised by the Revenue are dismissed.

Summary

Issues:
1. Appeal against CIT(A) order under Income Tax Act, 1961 for A.Y. 2017-18.
2. Application of section 69 to sale of shares and demonetized cash.
3. Acceptance of additional evidence by CIT(A) without AO examination.

Analysis:
1. The appeal was filed by the revenue against the CIT(A) order for A.Y. 2017-18. The assessee, engaged in civil construction and jewellery business, initially declared income of ?13,62,040, but the AO assessed it at ?1,51,26,623 due to inadequate response. The CIT(A) deleted the additions based on evidence presented by the assessee.

2. Regarding the application of section 69, the revenue contended that it should apply to the sale of shares and post-demonetization cash sales. However, the AR argued that section 69 cannot be invoked if investments are recorded in the books and disclosed for taxation. The Tribunal upheld the CIT(A)'s decision on this issue.

3. The revenue raised concerns about the acceptance of additional evidence by the CIT(A) without AO examination, citing Rule 46A of I.T. Rules. The AR argued that no new evidence was presented before the CIT(A) that wasn't in the original return. The Tribunal found that the CIT(A) verified the authenticity of claims without requiring a remittance to the AO, leading to the dismissal of revenue's grounds.

4. The Tribunal dismissed the revenue's appeal and the assessee's cross objections, as the revenue's appeal was rejected. The judgment was pronounced on 16th March, 2022.