2024 (12) TMI 372 - AT - Income Tax

Addition u/s. 69A r.w.s. 115BBE - unexplained income - cash deposits during demonetization period - HELD THAT - Assessee deposited cash out of sale proceeds and collection from sundry debtors / trade debtors. In response to notice u/s. 142(1) of the Act, the assessee had furnished cash book, sales register, purchase register, bank statements. Assessee has maintained proper books of accounts which are subjected to tax audit u/s. 44AB. The books of accounts of the assessee have been accepted by the lower authorities while framing the assessment and not rejected by pointing out any defects. We are of the considered opinion that when the sales has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales / collections made from debtors by the assessee have been credited in the books of accounts and the same form part of the assessee s cash book. On these facts, it could be very well said that the assessee claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the AO failed to rebut the same. The allegations/statistics relied upon by AO to take an adverse view is not backed up by relevant evidence/material and therefore the impugned action of authorities below cannot be countenanced. Since cash generated out of sales / collection from debtors has been recorded in the books of accounts, the provisions of section 69A. Objection on legal tender of Specified Bank Notes on or after 08.11.2016 - We find that as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which came into effect from 31.12.2016 appointed date for this purpose means 31.12.2016. As per Sec.5 of said Ordinance, from the appointed date, no person shall, knowingly or voluntarily, hold or transfer or receive any Specified Bank Notes. From the above what is clear is that up to the appointed date i.e.31.12.2016, there is no prohibition for dealing with Specified Bank Notes. Therefore, in our considered view, the objection of the Ld.CIT(A) and that of AO on this issue in light of said Act is devoid of merits. Tribunal after considering relevant provision of Specified Bank Notes (Cessation of Liabilities) Act, 2017, held that there is no prohibition under the Act to deal with Specified Bank Notes up to 31.12.2016. Assessee appeal allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Addition of Rs. 88,23,659/- as unexplained income under Section 69A read with Section 115BBE of the Income Tax Act.
3. Legality of transactions in Specified Bank Notes (SBNs) during the demonetization period.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 8 days. The Tribunal considered the reasons provided for the delay and found them satisfactory, thereby condoning the delay in filing the appeal.

2. Addition of Rs. 88,23,659/- as Unexplained Income:
The primary issue was the addition of Rs. 88,23,659/- under Section 69A read with Section 115BBE of the Income Tax Act, which was treated as unexplained income. The assessee, engaged in the business of trading silk sarees, deposited Rs. 2,33,03,000/- in SBNs during the demonetization period. The Assessing Officer (AO) accepted Rs. 1,44,79,341/- as explained cash balance as of 08/11/2016 and treated the remaining Rs. 88,23,659/- as unexplained. The assessee argued that the deposits were from sales proceeds and collections from debtors, supported by books of accounts, sales registers, and other documents. The CIT(A) partially accepted the assessee's explanation, deleting the addition of Rs. 82,48,840/- but sustained the addition of Rs. 88,23,659/-. The Tribunal found that the assessee maintained proper books of accounts, and the sales and collections were duly recorded. It was held that since the transactions were reflected in the books and offered to tax, adding the same again would result in double taxation, which is impermissible. The Tribunal concluded that the provisions of Section 69A could not be invoked as the source of cash was adequately explained.

3. Legality of Transactions in Specified Bank Notes (SBNs) During Demonetization:
The Tribunal examined the legality of transactions in SBNs post-demonetization. The Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, effective from 31/12/2016, prohibited the holding or transfer of SBNs post the appointed date. The Tribunal noted that until 31/12/2016, there was no prohibition on dealing with SBNs. The Tribunal referenced several decisions where similar issues were resolved in favor of the assessee, establishing that transactions in SBNs before the appointed date were permissible. Consequently, the Tribunal found the objections of the CIT(A) and AO regarding the legality of SBN transactions to be without merit.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 88,23,659/- as unexplained income. The decision emphasized the importance of maintaining proper books of accounts and the impermissibility of double taxation. The Tribunal also clarified the legal standing of transactions in SBNs during the demonetization period, upholding the assessee's position based on the Specified Bank Notes (Cessation of Liabilities) Act, 2017.