2023 (5) TMI 1380 - AT - Income Tax

Unexplained credit u/s 68 r.w.s.115BBE - Depositing of Specified Bank Notes (SBNs) during the demonetization period - HELD THAT - Assessee has produced all the details including audited books of accounts as was produced before the AO - From the cash book of the assessee, CIT(A) has noted that the cash in hand and balance available with the assessee has increased slowly but steadily from 01.04.2016 till 08.11.2016 and the assessee had maximum cash in hand of ₹.427.19 lakhs as on 12.10.2016 much before the announcement of demonetization of SBN on 08.11.2016. Assessee has shown particular stream of income in his books of account and the inflow/receipts have been recorded in the books of account as income, we are of the opinion that the AO cannot treat it as unexplained credits. From the records, CIT(A) has noted that the assessee has shown the receipts as being payment received from the debtors an also these debtors were all emanating from the sales made and recorded in the books and these facts were not disputed by the Revenue. When the demonetization was announced by the Government, there was heavy tension among the public for depositing the SBN. We cannot question as to why the deposits were not made in single day. From the point of Revenue, if the assessee has to make deposit on single day, why the AO has allowed the deposits made on 10.11.2016 12.11.2016 to the extent of ₹.53,40,000/- In fact, it was announced that the Reserve Bank of India would allow all the banks to receive old currency from 08.11.2016 to 31.12.2016 and the assessee made deposit before the end date announced by the Government. Under these facts and circumstances and once the cash in hand was not disputed, we are of the considered opinion that the CIT(A) has considered all aspects and rightly allowed the appeal of the assessee. We find no reason to interfere with the order passed by the CIT(A). Thus, the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Delay in filing the appeal by the Revenue.
2. Reliance on the cash book produced by the assessee.
3. Depositing of Specified Bank Notes (SBNs) during the demonetization period.
4. Cash in hand shown by the assessee for the last three years.
5. Addition under section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Delay in Filing the Appeal by the Revenue:
The appeal filed by the Revenue was delayed by 394 days due to the outbreak of the COVID-19 pandemic. The Tribunal condoned the delay and admitted the appeal for adjudication.

2. Reliance on the Cash Book Produced by the Assessee:
The Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in relying on the cash book produced by the assessee without appreciating the veracity of the entries. The CIT(A) observed that the Assessing Officer (AO) did not raise any doubt regarding the availability of adequate cash in hand as on 08.11.2016. The CIT(A) noted that the AO did not question the cash book and balance of cash in hand as on 08.11.2016, and the cash receipts were recorded in the books of accounts regularly maintained by the assessee.

3. Depositing of Specified Bank Notes (SBNs) During the Demonetization Period:
The Revenue contended that there was no cap on depositing SBNs into banks during the demonetization period, and the assessee's argument that cash was deposited on various dates due to bank restrictions was not true. The CIT(A) noted that the Government allowed 50 days for depositing SBNs, and it was the assessee's discretion to decide when to deposit the money. The CIT(A) emphasized that the AO's interpretation based on human probability was arbitrary and not reasonable, given the dynamic and fluctuating scenario during demonetization.

4. Cash in Hand Shown by the Assessee for the Last Three Years:
The Revenue argued that the assessee failed to explain the reason for the huge cash in hand properly. The CIT(A) observed that the cash in hand and balance available with the assessee increased steadily from 01.04.2016 till 08.11.2016, with a maximum cash in hand of Rs. 427.19 lakhs on 12.10.2016. The AO did not investigate the availability of cash in the books of the assessee, and the addition made under section 68 was deemed arbitrary and based on conjectures.

5. Addition Under Section 68 of the Income Tax Act, 1961:
The AO treated the remaining deposit of SBNs to the extent of Rs. 2,66,12,500/- as unexplained credit under section 68. The CIT(A) deleted the addition, noting that the assessee had shown the receipts as payments received from debtors, emanating from sales recorded in the books. The CIT(A) stated that once the cash in hand was not disputed, it could not be treated as unexplained cash, and the addition under section 68 was not justified.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, agreeing with the CIT(A) that the assessee had adequate cash in hand and the deposits made during demonetization were within the permissible period. The Tribunal found no reason to interfere with the order passed by the CIT(A). The appeal filed by the Revenue was dismissed.