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TMI Blog2023 (10) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has not examined the veracity of source of cash deposits. The Bangalore Bench of the Tribunal in the case of Anantpur Kalpana i[ 2021 (12) TMI 599 - ITAT BANGALORE] held that accepting SBNs subsequent to 08.11.2016 cannot be sole reason for making addition under section 69A Also in the case of ITO Vs. Sri Tatiparti Satyanarayana [ 2022 (3) TMI 896 - ITAT VISAKHAPATNAM] held that dealing in SBNs prior to the appointed day i.e., 31.12.2016 cannot be prohibited and the source of deposit needs to be examined. We hold that both the AO and the CIT(A) have erred in holding that assessee, prior to the appointed day i.e., 31.12.2016, was prohibited from accepting the SBNs and addition of the same u/s 69A of the Act is warranted. AO and the CIT(A) have not examined the source of the aforesaid cash deposits. For the limited purpose of examining the same, the issue is restored to the files of AO -Appeal filed by the assessee is allowed for statistical purposes. - SHRI GEORGE GEORGE K, VICE PRESIDENT For the Assessee : Ms. Sunaina Bhatia, CA For the Revenue : Shri. Ganesh R Ghale, Advocate, Standing Counsel for Revenue. ORDER This appeal at the instance of the assessee is directed against C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income was selected for scrutiny to verify the cash deposit made during the demonetization period. It was noticed that assessee had deposited a sum of Rs. 34,55,000/- in her bank account in Canara Bank, Chitradurga. Out of the total sum deposited of Rs. 34,55,000/- into the account during the aforesaid period, the demonetized notes were Rs. 25,41,000/- and Rs. 9,14,000/- in new currency. The assessee, in her books of accounts, had cash in hand as on 08.11.2016 at Rs. 8,13,384/-. After giving credit of cash in hand as on 08.11.2016, the assessee was directed to substantiate the source of deposits to the extent of Rs. 17,28,000/- (Rs.25,41,000 Rs. 8,13,384/-). The assessee, in response to the same, filed a letter stating that sales during the months of November, 2016 and December, 2016, were Rs. 45,30,847/- and Rs. 71,22,301/- respectively. Further, assessee filed copies of the VAT returns for the months November and December, 2016. It was stated that cash deposits are realization of sundry debtors. The AO, however, by referring to the Govt. of India s Notification S.O.3408(E) dated 08.11.2016, issued by the RBI, held that old bank notes in the denominations of Rs. 500/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had also filed confirmation of debtors and the address of debtors. However, the CIT(A) dismissed the appeal and confirmed the view taken by AO. The CIT(A) also held that after 08.11.2016, demonetized notes were not legal tender and assessee was not entitled to receive the same. The relevant finding of the CIT(A) reads as follows: 6.14 In view of the above, I have perused the various Gazette Notifications issued by the Government of India i.e., Ministry of Finance permitting cash purchases/sales in SBNs i.e., in the denomination of Rs. 1000/- and Rs. 500/- in respect of certain categories of transactions during demonetization period. While doing so, it is observed that the line of business activity carried on by the assessee i.e., poultry business, is not covered by the specified business transactions/activities wherein the Government has allowed to transact in demonetized currency. In the regard, the relevant portion of Notification in S.O. 3408(E) dated 08.11.2016 is reproduced below for ready reference. Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexplained money of the assessee u/s. 69A of the Act. Thus, the grounds of appeal raised by the assessee on this issue are dismissed. 5. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. The learned Counsel for the assessee has filed a Paper Book enclosing therein written submissions, notifications issued by the RBI, the case laws relied on, the audited financial statements of the assessee, copy of the notices issued under sections 143(2)/142(1) of the Act, etc. The learned AR reiterated the submissions made before the AO and the CIT(A) and relied on the case laws cited. 6. The learned Standing Counsel supported the order of the Income Tax Authorities. 7. I have heard the rival submissions and perused the material on record. During the demonetization period, a sum of Rs. 25,41,000/- was deposited in SBN in the bank account of the assessee. The assessee had explained the said source of cash deposit of Rs. 8,13,384/- as made out of the closing cash balance as per books of account on 08.11.2016, which has been accepted by the AO. The balance sum of Rs. 17,28,000/- was explained by the assessee to be from out of amounts realized from debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 225/363/2017-ITA.II dated 15/11/2017; [d] Circular in F No. 225/145/2019-ITA.II dated 09/08/2019 10. On perusal of Circular F.No.225/145/2017-ITA 11 dated 09.08.2019 (enclosed as Annexure 6 to the written submission), it is evident that AO has to examine the cash deposits made during the demonetization period in the case of businesses in accordance with the SOP laid down in the aforesaid circular. Only in cases where the assessee is unable to explain the source of the cash deposits made, can the said sum be treated as unexplained. In the instant case, it was claimed by the assessee that the entire sales made by her are recorded in the books of accounts and offered to tax. The sole reason for both AO and CIT(A) for making / sustaining the addition under section 69A of the Act was that subsequent to 08.11.2016, the SBNs were not legal tender and assessee was not person authorized to collect SBNs. The AO and the CIT(A) has not examined the veracity of source of cash deposits. 11. The Bangalore Bench of the Tribunal in the case of Anantpur Kalpana in ITA No. 541/Bang/2021 held that accepting SBNs subsequent to 08.11.2016 cannot be sole reason for making addition under section 69A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited to profit loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. 5. The CIT(A) however did not accept the contention of the assessee. He held that once the Rs. 500 and Rs. 1000 notes are declared as not valid legal tender on 09.11.2016, the assessee cannot accept cash payments after 09.11.2016 that are demonetized and doing so was patently illegal. The CIT(A) therefore held that the plea of the asessee cannot be accepted and accordingly dismissed the appeal of the assessee. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal. 6. I have heard the rival submissions. Learned Counsel for the assessee submitted that both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. He submitted that the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Hon'ble Tribunal while considering the issue of implication of Sec. 68 of the Act during demonetization held as under: 9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. 10. The assessee filed cross objections supporting the order of the Id. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of the Tribunal reads as follows: 8. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from records indicates that the assessee is in the business of distribution of pharmaceutical goods, surgical and diagnostics goods, which is considered to be essential goods. The assessee has deposited a sum of Rs. 1,82,37,000/- during demonetization period in specified bank notes to various bank accounts. The assessee claims that source for cash deposit is out of realization of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deviation of cash sales and cash deposits when compared to earlier financial year and demonetization period. Further, the assessee is dealing in essential commodities like medicines, surgical and diagnostics equipment through medical shops, hospital, doctors etc. The agents of the assessee come and collect cash from parties and directly deposit to bank account of the assessee. It is also not in dispute, in this line of business the majority of sales is in cash, because doctors, hospitals and medical shops mainly deals with cash. Therefore, from the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy from the date of demonetization and up to 31st December, 2016. Therefore, under those circumstances, some persons continued to accept and transact the specified banknotes 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 Assessing Officer makes out a case that the assessee has deposited unaccounted 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under: The Hon'ble Indore ITAT Bench in the case of DEWAS SOYA LTD, UJJAIN vs. Income Tax (Appeal No. 336/lnd /2012 has held that, the claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit 8: loss account) and on the other hand amounts received from above parties has also been added u/s 68 of the Act. This view has been 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the specified bank notes can be measured in monetary terms since the guarantee of the Central Government and the liability of Reserve Bank of India does not cease to exist till 31.12.2016. In view of the above, the contention of the Ld.DR, treating the receipt of SBNs from cash sales as illegal and thereby invoking the provisions of section 69A is not valid in law. Therefore, we dismiss this ground of the Revenue. 14. In view of the aforesaid reasoning and judicial pronouncements cited supra, we hold that both the AO and the CIT(A) have erred in holding that assessee, prior to the appointed day i.e., 31.12.2016, was prohibited from accepting the SBNs and addition of the same under section 69A of the Act is warranted. 15. However, in the instant case, I notice that the AO and the CIT(A) have not examined the source of the aforesaid cash deposits. For the limited purpose of examining the same, the issue is restored to the files of AO. The AO is instructed to examine the source of cash deposits. The assessee shall produce necessary evidence in support of her case. It is ordered accordingly. 16. In the result, appeal filed by the assessee is allowed for statistical purposes. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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