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TMI Blog2024 (9) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 can t be countenanced . Assessee had filed the books of accounts and relevant documents to prove the nature and source of cash/SBNs deposited during demonetization; and asserted that it was trade receipt and had been part of the turnover, which has been offered to tax. However, the AO without finding any infirmity in the books regularly maintained by the assessee and which has been audited, has added. Amount deposited in bank-account was part of the total turnover of the assessee and has been offered for taxation. Therefore, making a separate addition would tantamount to double addition - Decided in favour of assessee. - Shri Aby T. Varkey, Judicial Member And Shri S.R.Raghunatha, Accountant Member For the Appellant : Ms. Vidhya, CA For the Respondent : Mr. Hema Bhupal, JCIT ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short the Ld.CIT(A) ), Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained. However, the Ld.CIT(A) was not convinced and according to him, the assessee ought not to have accepted SBNs after 08.11.2016 and therefore, he confirmed the action of the AO making addition of Rs. 28,13,900/- ( erroneously adopted this figure, whereas, AO added only Rs. 25,46,290/-) u/s. 69 of the Act. 5. Aggrieved, the assessee is in appeal before this Tribunal. 6. We have heard both the parties and perused the material available on record. We note that the assessee is an individual, who is in the business of trading of milk milk products; and had filed his return of income declaring Rs. 4,56,870/-; and later, the return was taken up for scrutiny and AO noted that in the relevant year, there was deposit of cash during demonetization in assessee s two bank accounts i) Canara Bank - Rs. 3,34,000/- ii) Lakshmi Vilas Bank - Rs. 28,13,900/-, totaling Rs. 31,47,900/- and the AO asked the assessee to explain/prove the nature and source of cash deposits of Rs. 31,47,900/- deposited in the bank accounts. Pursuant to the same, the assessee filed audited financials, P L A/c, balance sheet of the relevant assessment year and explained to the AO that the SBNs were trade receipts/sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO has not rejected the purchases, sales or audited books of accounts of the assessee. And it is common knowledge that the milk products were essential commodity for human consumption and were perishable items and were being supplied on day to day basis which fact is also discernable from the customers statement placed before us for the period from 01.04.2016 to 31.03.2017. Thus, it is noted that assessee s total sale consideration from sale of milk/milk products was to the tune of Rs. 3,13,70,274/- which included cash deposits/sales of Rs. 31,47,900/-. However, the AO having taken note that out of the total deposit of Rs. 31,47,900/-, cash deposits of Rs. 6,01,610/- was valid currency and therefore, the AO has added only Rs. 25,46,290/-. In other words, profit derived from the total sales of Rs. 3,13,70,274/- includes cash/SBNs of Rs. 25,46,290/- which was shown as total income for the purpose of Income Tax and the assessee has paid tax on the said income. 7. In the light of the discussion, it can be safely inferred that the profits embedded in the total sales of Rs. 3,13,70,274/- has been accepted by the AO. However, the AO has made separate addition of Rs. 25,46,290/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee even told the AO that he was ready to give the details, name address of his customers to whom he was regularly supplying milk milk products. Despite that the AO didn t ask the details of the customers and went ahead and made the addition u/s. 69 of the Act, which action can t be countenanced, because, assessee who deals with supply of milk products to customers on daily basis has recorded the sum of Rs. 25,46,280/- as well as Rs. 6,01,640/- cash but valid currency during demonetization period shows that cash deposit of Rs. 25,46,290/- was also from sale of milk/milk products; and when AO accepted the nature and source of cash deposit of Rs. 6,01,640/- (being valid currencies) during demonetization period, in the absence of or without incriminating material, the AO couldn t have rejected the explanation backed by audited books of accounts. 10. Further, we find that the assessee had recorded Rs. 25,46,290/- in its books as trade receipts and when confronted by the AO to prove the nature and source of the same, the assessee produced the relevant documents to prove it and thus, discharged the burden on him to prove the nature and source of the SBNs deposited during the demo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee also declared sales made in their books of accounts and has filed return of income and paid tax on the said income and as noted, the assessee has also been regularly depositing the cash in the suppliers account (M/s.CDPL) up to 15.11.2016 and thereafter, only deposited Rs. 25,46,290/- in the assessee s own account and immediately thereafter issued cheques to M/s.CDPL. The AO has not disputed the claim of the assessee, the nature and source of the deposits were from sale of milk milk products and only reason given by the AO to make addition was that the assessee could not have transacted/received SBNs after 08.11.2016. 12. Further, the assessee had brought to our notice the notification issued by the Ministry of Finance (Department of Economic Affairs) S.O.3408 (E), whereby, Government of India notified certain exemptions for the convenience of the members of public in carrying out certain emergent and urgent transactions using the SBNs like viz, a) for making payments in government hospitals for medical treatment and pharmacies in government hospitals for buying medicines with doctor s prescription; b) at railway ticketing counters, ticket counters of Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated as 31st December, 2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization to 31st December, 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 can t be rejected, unless the Assessing Officer makes out a case that the assessee has deposited unaccounted cash into bank account in Specified Bank Notes. 14. We further, notes 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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