2023 (8) TMI 40 - AT - Income Tax

Addition of unaccounted cash u/s. 69 - deposits of Specified Bank Notes (SBNs) during demonetization period - As argued unaccounted cash has wrongly been assessed u/s. 69 whereas if at all assessment is to be made, it should be made u/s. 69A - HELD THAT - DR,could not answer what is the quantum of demonetized currency in this cash deposits and what is the quantum of new currency. Further, he could not controvert the sale effected by assessee of Nestle products to various vendors and traders because the entire cash receipts is attributable to sales only, which has been deposited by the assessee in to its bank account. Admittedly, this cash deposit in OD bank account by the assessee is not clearly established by the Revenue whether it is in demonetized currency or in the new notes but it is an explained source and out of sale proceeds. At best, some profit element can be added in this cash sales of Rs. 31,21,000/- because the assessee also could not back the sales by evidences that the entire cash deposits are on account of sale proceeds or sale receipts. Hence, estimate a reasonable disallowance of 10% on this and direct the AO to tax the same under normal rates because being business income this is not to be assessed u/s. 115BBE of the Act. Appeal of the assessee is partly allowed.

Summary

Issues involved:
The appeal concerns the addition of unaccounted cash under section 69 of the Income Tax Act, 1961, related to deposits of 'Specified Bank Notes' during the demonetization period.

Summary:

Issue 1: Addition of unaccounted cash under section 69 of the Act

The assessee, a distributor for Nestle India Ltd., filed its return for the assessment year 2017-18 declaring total income at Rs. 8,460. A survey under section 133A was conducted at the business premises where unexplained cash deposits of Rs. 31,21,238 in demonetized currency were found. The partner of the assessee firm admitted to these deposits but did not declare them in the income tax return. The AO reopened the case and made an addition of unaccounted cash under section 69 of the Act. The CIT(A) upheld this decision, stating that the diary found during the survey clearly disclosed the unaccounted cash, and the partner's admission was not retracted promptly. The Tribunal noted that the entire cash deposits were from sales proceeds, but the exact breakdown between demonetized and new currency was not clear. It estimated a reasonable disallowance of 10% on the cash sales and directed the AO to tax it under normal rates as business income, not under section 115BBE. The appeal was partly allowed based on this analysis.

Separate Judgement:
No separate judgment was delivered by the judges in this case.