2022 (12) TMI 581 - AT - Income Tax

Unexplained income/Debtors - violation for receiving SBN Specified Bank Note - assessee explained that the cash was received from Sundry Creditors the amount was received in SBN - assessee submitted the confirmation of AD Traders, bank account as proof of deposited amount during demonetization - HELD THAT - Considering the order of the revenue authorities the assessee was not able to submit the confirmation from the sundry debtor, M/s AD Traders. The assessee received SBN during demonetization period on dated 10.11.2016. The amount was deposited in the bank account. The amount was received before the appointed day i.e.,dated 31.12.2016. So, the assessee shall not in a violation for receiving SBN as per the Act. In Income tax Act the source was unexplained before the revenue authorities as the evidence was not able to submit before any of the lower authorities by the assessee - we direct to set aside the matter before the ld.AO for necessary verification denovo . Both the revenue and the counsel of the assessee had not made any objection for remanding back the issue before the ld. AO. AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. Appeal of the assessee allowed for statistical purposes.

Issues:
1. Addition of unexplained income.
2. Treatment of agriculture produce sale proceeds post-demonetization.
3. Verification of cash deposits during demonetization.
4. Adequacy of assessment process.
5. Timeliness of assessment order.
6. Compliance with Specified Bank Notes (Cessation of Liability) Act, 2017.
7. Admissibility of evidence in defense.

Analysis:
1. The appeal concerned the addition of Rs. 3,84,706 as unexplained income by the ld. Commissioner of Income Tax (Appeal) and the ld. AO. The appellant contested this addition, arguing that if the agriculture produce sold before demonetization and part of the sale proceeds received after demonetization constituted unexplained income, it should also be considered a bad debt. The appellant emphasized the need for correct assessment and challenged the timeliness of the assessment order.

2. The brief facts revealed that the assessee deposited cash during the demonetization period, attributing the amount to Sundry Creditors M/s AD Traders. The AO, unable to verify the party and the cash being in Specified Bank Notes during demonetization, treated it as unexplained income. The appellant presented evidence, including a confirmation from AD Traders and bank account details, to support the deposited amount's legitimacy. The appellant also cited relevant legal provisions and relied on a similar ITAT order.

3. During the hearing, the appellant's counsel submitted a paper book with relevant documents. The appellant argued that the deposited amount was received before the appointed day under the Specified Bank Notes (Cessation of Liability) Act, 2017. The Senior DR supported the ld. CIT(A)'s order, emphasizing the lack of clarifications and supporting evidence from the appellant.

4. After considering the submissions and available documents, the Tribunal noted the absence of confirmation from the sundry debtor, M/s AD Traders, and the failure to provide conclusive evidence before the revenue authorities. The Tribunal concluded that the appellant did not violate the Act by receiving Specified Bank Notes before the appointed day. Due to insufficient evidence submitted by the appellant, the matter was remanded back to the ld. AO for proper verification and adjudication, ensuring the appellant's right to be heard.

5. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a thorough verification process and proper opportunity for the appellant to present evidence. The decision was pronounced in open court on 08.12.2022, providing a fair resolution to the issues raised in the appeal.

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