9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (10) TMI 1614 - AT - Income TaxUnexplained investment u/s.69 - cash deposits made in Specified Bank Notes(SBNs) during demonetization period - whether the demonetized currency received by assessee on account of sale of IMFS and beer to the customers and accepted demonetized currency in return is to be assessed u/s.69 of the Act or not as unexplained investment? HELD THAT - The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31.12.2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31.12.2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31.12.2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the AO makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. Further noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Revenue Officer to verify cash deposits during demonetization period in various categories of explanation offered by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the AO needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. When there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. For violation of any RBI notification, etc., can have any civil or criminal liability and can be dealt with under any other provision of law by the concerned authority but for the purpose of bringing the amount under Income-tax, the provisions are very clear i.e., 69 69A of the Act. In our considered view, to bring any amount u/s. 69 or 69A of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also been duly included in the return of income filed in relevant assessment year. Therefore, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account of demonetized cash in SBNs. Appeal filed by the assessee stands allowed.
Issues Involved:
1. Legality of accepting Specified Bank Notes (SBNs) during the demonetization period. 2. Applicability of Section 69 of the Income Tax Act for cash deposits made in SBNs. 3. Validity of the explanation provided by the assessee for the source of cash deposits. 4. The role of RBI and Government notifications in determining the legality of transactions in SBNs. 5. The implications of CBDT guidelines on assessing cash deposits during the demonetization period. Issue-wise Detailed Analysis: 1. Legality of Accepting SBNs During Demonetization: The primary issue revolves around whether the assessee, a government-owned entity, could legally accept SBNs during the demonetization period. The Revenue argued that the acceptance of SBNs was prohibited by law as they ceased to be legal tender from November 9, 2016. The assessee contended that the acceptance of SBNs was under duress due to customer pressure and that the transactions were accounted for in their books. The Tribunal noted that the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, did not make holding or transacting in SBNs illegal until December 31, 2016, and thus, the acceptance of SBNs by the assessee was not barred by any legal provision. 2. Applicability of Section 69 of the Income Tax Act: Section 69 pertains to unexplained investments not recorded in the books of accounts. The Revenue added Rs.57.29 crores as unexplained investment under this section, arguing that the assessee failed to provide verifiable evidence of sales made in exchange for SBNs. The Tribunal found that the assessee had accounted for these transactions in their books and provided detailed records of sales and cash deposits, thus negating the applicability of Section 69. The Tribunal emphasized that the source of the deposits was not disputed and was part of the regular business transactions. 3. Validity of the Explanation Provided by the Assessee: The assessee explained that the cash deposits were from sales proceeds during the demonetization period, and the acceptance of SBNs was due to customer pressure. The Tribunal accepted this explanation, noting that the assessee's business model involved cash transactions, and the deposits were consistent with past sales patterns. The Tribunal highlighted that the Revenue did not produce contrary evidence to dispute the assessee's claims and that the explanation was substantiated with detailed records. 4. Role of RBI and Government Notifications: The Tribunal examined the notifications issued by the RBI and the Government of India, which declared SBNs as non-legal tender but did not prohibit transactions involving SBNs until December 31, 2016. The Tribunal concluded that these notifications did not render the transactions illegal during the specified period and that the assessee's acceptance of SBNs was within the legal framework until the appointed date. 5. Implications of CBDT Guidelines: The Tribunal referred to CBDT guidelines, which emphasized analyzing business models, cash flows, and stock registers to assess cash deposits during demonetization. It noted that the assessee's deposits were consistent with historical patterns and that there was no unexplained spike in cash deposits. The Tribunal concluded that the Revenue's reliance on mere assumptions without concrete evidence was insufficient to justify the addition under Section 69. Conclusion: The Tribunal allowed the appeal, holding that the assessee's explanation for the cash deposits in SBNs was valid and substantiated. It ruled that the additions made under Section 69 were unwarranted, as the transactions were part of the regular business operations and were duly accounted for in the books. The Tribunal emphasized the importance of concrete evidence over assumptions in tax assessments.
|
