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TMI Blog2023 (7) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... een accounted in the books of accounts of the assessee and further, there is no deviation in cash deposits during demonetization period when compared to earlier period in same financial year and in earlier financial year. AO erred in making additions towards cash deposits during demonetization period u/s. 69 - Decided in favour of assessee. - ITA No. 489/Chny/2022 - - - Dated:- 31-5-2023 - SHRI V. DURGA RAO , HON BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G , HON BLE ACCOUNTANT MEMBER For the Appellant : Shri. R. Vijayaraghavan , Advocate For the Respondent : Shri. D. Hema Bhupal , JCIT ORDER PER MANJUNATHA. G , ACCOUNTANT MEMBER : This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 28.04.2022 and pertains to assessment year 2017-18. 2. The assessee has raised the following grounds of appeal : 1. The order of the National Faceless Appeal Centre (NFAC) / Commissioner of lncome tax (Appeals) /CIT(A) is contrary to law, facts and circumstances of the case. 2. The NFAC / CIT(A) erred in confirming the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced by that extent. 13. The Appellant craves leave to adduce additional grounds at the time of hearing. 3. The brief facts of the case are that, the appellant company is engaged in the business of distribution of pharmaceutical goods, surgical and diagnostics goods, filed its return of income for the assessment year 2017-18 on 31.08.2017, declaring total income of Rs. 5,71,25,541/- under normal provisions and book profit of Rs. 6,34,49,230/- under the provisions of section 115JB of the Income-tax Act, 1961 (herein after referred to as the Act ). The case was selected for scrutiny to verify large value cash deposit during demonetization period and high value receipt of cash from third parties in response data and accordingly, notice u/s. 143(2) and 142(1) of the Act, was issued and called upon the assessee to file necessary details including books of accounts to verify cash deposits during demonetization period. During the course of assessment proceedings, the AO noticed that the assessee has made huge deposits during demonetization period in specified bank notes as well as new currency notes amounting to Rs. 1,82,57,000/-. However, the closing cash balance avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the demonetization period. Hence the amount of cash deposits of Rs.1,82,37,000/- in the bank account from 09.12.2016 to 30.12.2016 is treated as unexplained Investment u/s 69 and u/s 115BBE of It Act 1961 added to the total income and taxed accordingly. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the ld. CIT(A), the assessee has filed detailed written submission on the issue, along with analysis of cash sales/collection from debtors during the period of demonetization and compared with corresponding period of previous financial year and argued that, it has collected cash from debtors towards sales made in cash prior to demonetization period. Therefore, simply because the assessee has deposited cash to bank in specified notes after demonetized period, it cannot be held that the assessee has deposited unaccounted income to the bank account. The assessee has filed analysis on sale made during financial year 2015-16 and financial year 2016-17 along with bifurcation of cash sales to total sales, cash deposits to bank in earlier financial year and argued that if you see pattern, the cash sales and cash deposits to bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te notification no S.0.3408(E) dated 8th November 2016 and S.0.3416(E) dated 9th November 2016, (and according to which the assessee company was not permitted to accept SBN and is not exempted category to trade in the SBN), there was another notification/ Extraordinary gazette issued by GOI Ministry of Law and Justice no. 2 of 2017 and known as THE SPECIFIED BANK NOTES (CESSATION OF LIABILITIES) ACT, 2017 was issued. As per para no. 4 of the same; only 2 following types of persons holding Specified Bank Notes on or before the 8.11.2016 were declared to be entitled to tender within the grace period with such declarations or statements, at such offices of the Reserve Bank or in such other manner as may be specified by it, namely: - i. A citizen of India who makes a declaration that he was outside India between the 9th November, 2016 to 30th December, 2016, subject to such conditions as may be specified, by notification, by the Central Government; or ii. Such class of persons and for such reasons as may be specified by notification, by the Central Government. 5.1.5 The Ld. A/R has, in these appeal proceedings more than once tried to take the plea that the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of confiscated Specified Bank Notes where such SBNS were confiscated or seized by a Law Enforcement Agency. However, in between on 22.04.2022, it was found that pending these appeal proceedings; a one-page Writen Submission dated 22.04.2022 was uploaded in which besides mentioning different submissions (4 in number) submitted by the appellant, from the beginning till the end, throughout these appeal proceedings; five such notifications were also uploaded. These notifications were chronologically dated 08.11.2016 [S.0. 3408 (E)], 09.11.2016 (S.O. 3416(E)] and amended only the earlier notification dated 08.11.2016; an PIB notification dated 11.11.2016; Notification dated 14.11.2016 (S.0, 3448 (E)) and lastly another PIB Notification dated 24.11.2016 by which it was declared that after mid night of 24.11.2016 there would be no over the counterexchange of old currency notes of Rs. 500 and Rs. 1000 denomination (the reason given was that over the counter exchange was showing a declining trend). 5.1.9 However, by the same PIB Notification dated 24.11.2016 it was also decided and conveyed that for a further period from the midnight of 24.11.2016 upto and inclusive of 15.12.2016 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had also explained and correlated with individual transactions including the bills for sale and collection from debtors. The assessee had also filed necessary details including comparative sales / cash collections and cash deposits during financial year 2015-16 2016-17. The Assessing Officer never identified major deviations in cash collections during demonetization period when compared to earlier financial year. But, made additions only for the reason that the assessee is not eligible to accept specified bank notes after 09th November, 2016, ignoring fact that the specified bank notes (cessation of liability) Act, 2017, permits the person to hold, transfer or receive specified bank notes up to appointed date and section 2(a) defines appointed date as 31st December, 2016. The ld. Counsel submitted that the assessee has accounted sales made in cash before demonetization period and paid relevant taxes. However, the Assessing Officer made towards cash collection from very same sales after demonetization period which amounts to double taxation which is not permissible. He further referring to provisions of section 69 of the Act, submitted that in order to bring any income within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash sales made before demonetization period. The assessee has filed necessary details including copies of sales bills made in cash before demonetization period and also list of parties from whom cash collected after demonetization period and deposited into bank account. The assessee had also filed necessary details of information furnished to department immediately after demonetization period towards cash collected from third party in response data. The Assessing Officer is not disputing all these claims of the assessee including evidence filed in support of justification for source for cash deposit. But, the Assessing Officer has made additions towards cash deposit in specified bank notes after demonetization period only for the reason that the assessee is not eligible to transact or receive any specified bank notes after demonetization as per notification/GO issued by RBI and Government of India. The Assessing Officer, had discussed the issue with reference to GO issued by RBI and Government of India and concluded that since the assessee has accepted demonetized currency in violation of circular/notification issued by the Government of India, the source explained by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business model of the assessee and trade practice there is no doubt of what so ever with regard to the explanation offered by the assessee that it has collected cash from debtors towards sales made in cash before demonetization period. Further, the appellant has also regularly availing GST/VAT returns and there is also being no change or deviation in the VAT returns field for the earlier months i.e., before the announcement of demonetization. The assessee had also declared sales made in cash in their books of accounts and filed necessary return of income and paid taxes on said income. The appellant has also made cash deposits regularly before and during that period including the notes which are not banned and therefore, it is not a case of amount of deposit in specified bank notes has came out of undisclosed source or under any circumstances only to change the colour of the money. From the details filed by the assessee, it is evident that during the month of November and December, the assessee has made almost more than 5 crores cash deposit which includes various demonetized currency and regular notes. Further, the Assessing Officer has accepted fact that out of total cash deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash into bank account in specified bank notes. 11. We further, noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Assessing 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 Assessing Officer 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 Assessing Officer needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if you go through analysis furnished by the assessee in respect of total sales, cash sales realisation fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en held by the Hon'ble Supreme Court in the case of CIT vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194(SC) that It is for the assessee to prove that even if the cash credit represents income, it is income from as source, which has already been taxed. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. 14. The ld. DR, has relied upon the decision of ITAT, Hyderabad Benches, in the case of Vaishnavi Bullion Pvt Ltd vs ACIT Taxsutra 914/ITAT/2022 (Hyd). We, find that in the said case, the Tribunal noted that CFSL report, books and statement are contrary to assessee s claim which are of post demonetization period. Under these facts, the Tribunal came to the conclusion that additions made towards cash deposits during demonetization period, assessee could not explain proper source. In this case, on perusal of details and records, we find that the assessee has filed all details to explain source for cash deposits and on the basis of details filed by the assessee, the Assessing Officer never disputed fact that source for cash deposit is not out of ordinary business receipts, which has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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