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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 ..... Appellant as well as explanation offered by the Appellant regarding cash deposits. 4 The NFAC / CIT(A) ought to have appreciated that the Appellant is engaged in supply of medicines in which, it is a normal trade practice but the clients to pay for the purchases in cash. 5 The Appellant had deposited the sale consideration realized in cash with the banks and hence no part of the same can be considered as unexplained income. 6 The NFAC / CIT(A) ought to have appreciated that the entire deposits and cash in the bank has been explained and correlated with individual transactions including the bills for sate and hence no part of the cash deposits represents any unaccounted entries in the books of account of the Appellant. 7 When the entire cash deposits have been accounted as sale realization, the* department cannot consider part of it as unaccounted income merely because the sale consideration was realized in cash. 8 The NFAC/ CIT(A) ought to have appreciated that the quantum of deposits is in line with the sales. Sates is supported by VAT returns and the sate volume is also commensurate with Purchases. There are no extraordinary transactions which can lead to any suspi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash collection has been made, but as per the Gazette notification dated 09.11.2016, the assessee company was not permitted to accept specified bank notes and is not in exempt category to transact in the specified bank notes. Therefore, the Assessing Officer opined that the assessee could not justify availability of cash in hand to explain cash deposits to bank account during demonetization period in specified bank notes. Therefore, rejected arguments of the assessee and made additions towards total cash deposits in specified bank notes amounting to Rs. 1,82,37,000/- as unexplained investment u/s. 69 of the Act and levied tax u/s. 115BBE of the Act. The relevant findings of the AO are as under: "7.7 To conclude, as the assessee company is not one of the entities authorized by the Central Government to accept SBNs during demonetization period in exchange for goods/services, and as the assessee has claimed that they have carried out valid sales during the demonetization period by duly paying VAT and by reporting such sales to the VAT authorities through statutory returns, such sales, by virtue of the provisions of Sec.4 of the Sale of Goods Act, 1930, pre suppose the receipt of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonetization period to GST authorities and paid necessary tax. The assessee had also filed party wise collection from debtors and furnished details in response sheet immediately after demonetization period. The AO never disputed details filed by the assessee and also analysis of cash sales and cash deposits. However, made additions only for the reason that the assessee cannot accept specified bank notes after 09.11.2016, ignoring the fact that for the purpose of section 69 of the Act, what is required to be seen is source for deposit but not the legality or otherwise of restrictions imposed under other laws. If you go through the details filed by the assessee, it is abundantly clear that the assessee has explained source for cash deposit during demonetization period in specified notes and thus, the AO is erred in making additions towards cash deposits u/s. 69 of the Act. 5. The ld. CIT(A), after considering relevant submissions of the assessee and also taken note of relevant GOs issued by the Government of India and RBI to deal with specified bank notes on or after 08.11.2016, opined that although the assessee has filed necessary evidences to prove that it has collected cash from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and medical related products to patients, hospital and doctors to maintain the supply uninterrupted. It was further argued that the same cannot be treated on par with cash deposited without explanation to the satisfaction of the AO and therefore, the source of the cash deposit of Rs. 1,82,57,000having been explained, the addition could not be made. 5.1.6 Though, the Ld. A/R of the appellant company could not produce any such notification either in the assessment proceedings or in these appeal proceedings to show that assessee of its business i.e.,business of supply of medicines and medical related products to patients, hospital and doctors were entitled to acceptSBN for a grace period but it is known that upto 11.11.2016 and even thereafter ie., upto 31.12.2016 different classes of person like Govt. Hospitals, Petrol Pumps were allowed to receive SBN. 5.1.7 Therefore, during these appeal proceedings, in absence of any furnishing of such notification in support of the case of the appellant company, a letter dated 15.03.2022was written by this office to RBI Branch, Nagpur and SBI local office to furnish such notification. Though, the local SBI Head Office has not been able t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to only water and electricity (continued to be available only for individuals and households); toll payment at toll plazas through old Rs. 500 notes; etc. However, this does not mention any payment to hospitals as is the case of the appellant company. 5.1.10 Such mention was found only in notification dated 08.11.2016 and 09.11.2016 (which was only an amendment of the earlier notification dated 08.11.2016). It is interesting to note that in the 1st Notification the eligible assessee/taxpayers who were allowed window/grace period (to receive payments in SBNs)were also including government hospital to whom payments for medical treatment were being made and pharmacies in government hospitals for buying medicines (that too with doctor's prescription). Further, in 2nd notification dated 09.11.2016 again the allowance was extended only to payments in all pharmacies on prescription of doctor and proof of identity. Thus, it is categorically clear that appellant company like private hospitals were not allowed to have window/grace period to receive payments in SBNs. 5.1.11 In the light of such facts, I am afraid; there is no such occasion to give any relief to the appellant com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained source of cash deposits during demonetization period and thus, the same cannot be treated as unexplained investment u/s. 69 of the Act. In this regard, he relied upon the following judicial precedents: 1. order of Bangalore Tribunal in the case of Sasanur Hospital vs PCIT - ITA No. 415/Bang/2022 - Asst year 2017-18 dated 27.09.2022 2. Order of Mumbai Tribunal in the case of Jet Freight Logistics Limited vs CIT - ITA No 683/Mum/2022 - Asst year 2017-18 dated 23.09.2022 3. Order of Visakhapatnam bench in the case of ACIT vs Hirapanna Jewellers - ITA No 253/Viz/2020 etc dated 12.05.2021 4. CBDT Circular No. F No. 225/145/2019 - ITA-II dated 09.08.2019 5. Order of Chennai Tribunal in Uma Maheswari vs ITO - ITA No. 527/Chny/2022 dated 14.10.2022 7. The Ld. Senior DR, Shri D. Hema Bhupal, JCIT, supporting the order of the CIT(A) submitted that the assessee could not explain as to how it can accept specified bank notes after 09th November, 2016 with reference to government notification for withdrawal of bank notes issued by Government of India and RBI. Further, the notification issued by the RBI and Government of India, specifically allowed certain categories to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue whether the assessee can accept specified bank notes even after it was banned for legal tender after 09th November, 2016 and further, the same can be added u/s. 69 of the Act as unexplained investment and also can be taxed u/s. 115BBE of the Act, it is necessary to examine the case in light of business model of the assessee, and evidence filed during the course of assessment proceedings. 9. The provisions of section 69 of the Act, deals with unexplained investment, where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of accounts, if any, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory, then the value of the investments may be deemed to be the income of the assessee of such financial year. In order to invoke provisions of section 69 of the Act, two conditions must be satisfied. First and foremost condition is there should be an investment and second condition is the assessee could not explain source for said investment. In this case, if you go t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same financial year and also during immediate preceding financial year. Therefore, we are of the considered view that the assessee has satisfactorily explained source for cash deposit made during demonetization period in specified bank notes and thus, the Assessing Officer is completely erred in making additions u/s. 69 of the Act. 10. Coming back to the observations of the Assessing Officer with regard to GO/notification issued by the RBI and Government of India, to deal with specified bank notes. The Assessing Officer is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argued that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 has been withdrawn from circulation from 09th November, 2016 onwards. 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. In our considered view, to bring any amount u/s. 69 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, we are of the considered view that, 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. 12. At this stage, it is relevant to consider certain judicial precedents relied upon by the ld. Counsel for the assessee. The Ld. Counsel for the assessee relied upon the decision of Delhi High Court in the case of Agson Global Pvt Ltd vs ACIT [2022] 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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