2023 (7) TMI 222 - AT - Income Tax

Addition u/s. 68 - cash received by assessee (co-operative society) from its members during the demonetisation period in Specified Bank Notes - As per AO assessee ought not to have accepted SBN s which were no longer a legal tender - Assessee submitted by the AR that except for a few depositors who expired during covid period KYC of the rest of the depositors have been furnished in the said paper book - whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money? HELD THAT - The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. The burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Grounds raised by the assessee stands allowed for statistical purposes.

Summary

Issues involved:
The only issue in the present appeal is the addition made u/s. 68 for cash received during demonetization period in Specified Bank Notes.

Details of the Judgment:

Issue 1: Addition made u/s. 68 for cash received during demonetization period:
The assessee submitted a list of depositors, KYC documents, cash book, and bank statements to support the claim. The assessee argued that no benefit accrued from the deposit of demonetized currency notes and acted as an intermediary. The authorities did not verify the documents provided. The Ld.DR suggested remanding the case for further verification as per CBDT circulars. The Tribunal noted the cash deposits made by the assessee during demonetization. The authorities rejected the claim, considering the deposits as unexplained cash credit. The Tribunal observed that the cash book and confirmations should have been verified.

The Tribunal examined various standard operating procedures issued by the CBDT related to such cases. Instructions highlighted the need for investigation, enquiry, and evidence collection by the assessing officer. Specific instructions emphasized the comparative analysis of cash deposits and sales, indicators of backdating or fictitious sales, and the burden on the assessee to establish the genuineness of deposits. The Tribunal directed the assessing officer to verify all details and evidence, considering the applicable instructions and granting the assessee a proper opportunity to be heard.

The Tribunal allowed the appeal for statistical purposes, emphasizing the need for thorough verification and adherence to legal procedures. The order was pronounced on 09th May, 2023.