Case Digest on Demonetization and Deposits

In 2016, the Indian Government demonetised Rs.500 and Rs.1,000 notes, creating havoc in the entire country. It was a joint decision of the authorities along with the Reserve Bank of India (RBI) in order to fight corruption, black marketing and other financial crimes. 8th November 2016 is probably the most remembered demonetisation date in India. Prime Minister Narendra Modi had declared in a television broadcast that Rs.500 and Rs.1,000 notes would cease to be legal tender. He also announced the issuance of the new Rs.500 and Rs.2,000 banknotes. As per sources, this move would help curb black money and stop counterfeit and illicit cash being used for funding terrorist activities.  This case digest covers the complete stories published in Taxscan.in related to demonetization and deposits. Higher Sales Shown during Demonetization Period to Cover up Cash Deposits to Bank Accounts: ITAT Directs to treat Addition as Income from Business and Tax at Normal Rates Mohamed Thajudeen Abuthahir vs The Income tax Officer 2023 TAXSCAN (ITAT) 2204 The Income Tax Appellate Tribunal (ITAT) Chennai bench while directing to treat addition as the income from business and Tax at the normal rates observed that Assessee showed higher sales during demonetization period to cover up cash deposits to bank account.

It was observed by the tribunal that sales for the earlier financial year was about roughly more than one crore. Further, assessee is claiming huge trade payables in its books of accounts. When the assessee is having sufficient cash balance of Rs. 38.41 lakhs, then why he would not paid trade payables is not properly explained. Hence it was observed that the assessee has shown higher sales during the demonetization period to cover up the cash deposits to bank account. Also the explanation of the assessee that source for cash deposits is out of business receipts and cash in hand available before the date of demonetization is not correct, the tribunal bench remarked. Explanation as Past Savings of HUF and Members, No other Deposits during Demonetization: ITAT deletes Income Tax Addition Sudhir Kumar Tiwari vs Income Tax Officer 2022 TAXSCAN (ITAT) 1464 The Income Tax Appellate Tribunal (ITAT), Allahabad Bench deleted Income Tax Addition on the ground that the explanation was past savings of HUF and its members and no other deposits were made during demonetization. A Single Bench of the Tribunal consisting of Vijay Pal Rao, Judicial Member observed that “Accordingly, in the facts and circumstances of the case when the assessee has explained the source of Rs. 1,00,000/- as past savings of the assessee HUF and its members and there are no other deposits during the demonetization the addition made by the Assessing Officer is deleted.” Cash Deposits during Demonetization Period: No Addition if AO Accepted Documents and BoA containing Cash Credits, rules ITAT Arun Garg vs ITO 2022 TAXSCAN (ITAT) 1257 The Income Tax Appellate Tribunal (ITAT), Chandigarh bench held that addition in respect of unexplained cash credit under sections 68 and 69A of the Income Tax Act, 1961 cannot be made when documents and books of account submitted by assessee accepted by Assessing Officer (AO) in respect of cash credits during demonetization period. The Bench consisting of NK Saini, Vice President, and Sudhanshu Srivastava, Judicial Member observed that “the opening stock, purchases, sales and closing stock in the hands of the assessee have been accepted by the Assessing Officer and the books of accounts of the assessee have also not been rejected u/s 145(3) of the Act and as such the entries relating to the related parties in effect stand accepted and, as such, the confirmation of the two additions i.e. both in regard to the number of Rs. 28 lacs and Rs. 48.50 lacs are not justified.” Demonetization: 200% Penalty on Cash Deposits above 2.5 lakhs, PAN is mandatory for Gold Purchase Reportedly, the Government warns to impose tax on all cash deposits above 2.5 lakhs with 200% penalty in case of income mismatch.Any mismatch with income declared by the account holder will be treated as mismatch.

Following the scrapping of rs. 500 and Rs. 1000 currency notes, the Government has allowed the citizens to exchange their old notes to deposit in their bank accounts between 10th November to 30th December. “The (tax) department would do matching of this with income returns filed by the depositors. And suitable action may follow. This would be treated as a case of tax evasion and the tax amount plus a penalty of 200 per cent of the tax payable would be levied as per the Section 270(A) of the Income Tax Act, said revenue secretary Hashmukh Adhia. Failure to conduct enquiries with respect to abnormal cash deposits during Demonetization Period: ITAT upholds Revision Order Shri Ravi Sher Singh Toor vs The Pr. CIT 2023 TAXSCAN (ITAT) 2662 The Income Tax Appellate Tribunal (ITAT), Chandigarh bench, while upholding the revision order passed under section 263 of the Income Tax Act, 1961, held that the Assessing Officer failed to conduct inquiries with respect to abnormal cash deposits during the demonetization period. Therefore, the assessee’s return of income and accompanying financial statements, other documents/submissions filed during the course of assessment proceedings, as well as certain specific documents available on record at the time of his examination of the assessment records, led to the conclusion that the assessment order so passed by the Assessing Officer is erroneous insofar as prejudicial to the interest of the Revenue.

After reviewing the facts and records, the two-member bench of Vikram Singh Yadav (Accountant member) and A.D. Jain (Vice President) upheld the revision order and held that the Assessing Officer failed to conduct inquiries with respect to abnormal cash deposits during the demonetization period. Cash generated from Sales and duly recorded in Books of Account can’t be treated as Unexplained Cash Credit u/s 68 of Income Tax Act: ITAT Abhishek Prakashchand Chhajed vs Income Tax Officer 2023 TAXSCAN (ITAT) 2449 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the cash generated from sales and duly recorded in the books of account cannot be treated as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The Two-member bench comprising of Waseem Ahmed (Accountant member) and Madhumita Roy (Judicial member) held that the assessee has duly shown the cash receipt from the sale of gold/gold ornaments duly recorded in audited books of the account supported by sales bill and stock details. The Assessing Officer has not pointed out any defect in the books of accounts. Therefore, the Assessing Officer cannot treat the cash generated from sales duly recorded in books of account from unexplained/unaccounted sources unless books of account are rejected based on valid reasons. The order of the Commissioner of Income Tax (Appeal) [CIT(A)] was set aside and the Assessing Officer was directed to delete the addition made by him. Thus, the appeal of the assessee was allowed. Assessee adopted an Evasive/lackadaisical Approach and didn’t Participate in Assessment Proceedings: ITAT upheld Addition u/s 69A of Income Tax Act M/s. Adim Jati Seva Sahkari Samiti Maryadit Korba vs The Income Tax Officer 2023 TAXSCAN (ITAT) 2405 The Raipur bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition under Section 69A of the Income Tax Act, 1961 for the unexplained cash as the assessee adopted an evasive or lackadaisical approach and didn’t participate in the assessment proceedings. The Two-member bench comprising of Ravish Sood (Judicial member) and Arun Khodpia (Accountant member) held that it was not a case where the CIT(A) had discarded any material available on the record and summarily dismissed the assessee’s appeal in limine for want of prosecution. Instead, it was a case where in the absence of any evidence whatsoever, whether documentary or otherwise, which would substantiate that the Assessing Officer was unjustified in treating the cash deposits of Rs.2,47,65,369/- in the assessee’s bank account as its unexplained money under Section 69A of the Income Tax Act, the CIT(A) had rightly sustained the addition made by the Assessing Officer under Section 144 of the Income Tax Act. Thus, the appeal of the assessee was dismissed. Assessment Order passed without Proper Examination of Evidence shall be erroneous and prejudicial to Interest of Revenue: ITAT M/s. Balaji Builders vs ACIT 2023 TAXSCAN (ITAT) 2330 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessment order passed without proper examination of evidence shall be erroneous and prejudicial to the interest of the revenue. Finally, relying on the decision of the Supreme Court in the case of Malabar Industrial Company Ltd. (243 ITR 83), it was held that the order was passed without application of mind and without making due enquiries. The assessment order was held to be erroneous and prejudicial to the interest of the revenue since the same was passed without proper examination of materials and records. The Two-member bench comprising of Manoj Kumar Aggarwal (Accountant member) and Manomohan Das (Judicial member) held that no fault could be found in the observation that the assessment was framed without making due enquiries. In such a case, the revision would be justified in terms of the decision of the Supreme Court in the case of Malabar Industrial Company Ltd. (243 ITR 83). Thus, the appeal was dismissed. Mere Assumption that Withdrawn Amount Spent for Other Purposes Without any Adverse Positive Material cannot be the Reason for Disputing Source of Cash Deposits: ITAT The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that The Assessing Officer (AO) has ignored main cash book while disputing the source of cash and making addition and the Commissioner of Income Tax (Appeals) [CIT(A)] considered entire facts and circumstances in the right prospective and thereafter granted relief to the assessee, upholding the decision of CIT(A). The Bench observed that it is not the case of the AO that the assessee did not file details and documentary evidence before him and the same was filed before the CIT(A) which was relied by him while granting relief to the assessee. Thus the Bench presume that entire evidence which was before the CIT(A) was also produced before the AO during assessment proceedings. It was further observed that the CIT(A) went in detail and further noted that the cash withdrawals during April 2016 was Rs. 1,00,20,000, in August 2016 was Rs. 2,81,00,000/- and in September 2016 was Rs. 68 lakh and in October 2016 was Rs. 53 lakh. Thus, noted that during FY(Financial Year) 2016-17 cash withdrawals were Rs. 6,30,90,000/- out of which Rs. 5,71,40,000/- were withdrawn during April to October 2016 i.e. prior to demonetization declaration. Acceptance of Demonetized Currency from 08.11.2016 Contrary to RBI Notification: ITAT Directs AO to Accept 50% Cash Deposits as Sale Proceeds received in Cash and Balance as Unexplained Money M/s. J. Kalappa Naidu Sons vs The Income tax Officer 2023 TAXSCAN (ITAT) 2190 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) to accept 50% of cash deposits as sale proceeds received in cash and balance as unexplained money as the assessee had accepted the demonetized currency from 8.11.2016 contrary to Reserve Bank of India (RBI) notification. A Single Bench of Manjunatha. G, (Accountant Member) observed that the only reason given by the Assessing Officer to reject explanation offered by the assessee was notification issued by Government of India and RBI, not to deal with specified bank notes during demonetization period and neither the assessee proved its case with necessary evidence nor the Assessing Officer had proved with conclusive evidence that cash deposits during demonetization period is unexplained money of the assessee. No Income Tax Addition can be made if Assessee Successfully Demonstrated Source of Cash Deposits in Bank Account during Demonetization Period: ITAT The DCIT vs M/s. Bhanu Infrabuild Pvt. Ltd. 2023 TAXSCAN (ITAT) 2159 The Delhi Bench of Income Tax Appellate Tribunal (ITAT), held that the assessee has successfully demonstrated source of cash deposit to its bank account during demonetization period thus no income tax addition can be made under Section 68 of Income Tax Act, 1961. The Bench comprising of Chandra Mohan Garg, Judicial Member and Dr. B.R.R. Kumar, Accountant Member noted that the sole basis for making addition in the hands of assessee under Section 68 of the Income Tax Act taken by the AO was that the cash balance is available was Rs. 7,055 and the assessee had deposited cash amount of Rs. 1,24,50,000 post demonetization period. Deletion of Income Tax Addition on successful Demonstration of Source of Cash Deposits to bank during Demonetization: ITAT dismisses Revenue Appeal The DCIT vs M/s. Atulah Contractors and Construction Pvt. Ltd 2023 TAXSCAN (ITAT) 2152 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the assessee has successfully demonstrated source of cash deposit of Rs. 2,40,00,000 to its bank account during demonetization period thus upheld the order of Commissioner of Income Tax (Appeals) [CIT(A)], in deleting the addition made by Assessing Officer (AO) on account of unexplained cash deposits under Section 68 of the Income Tax Act,1961. The ITAT Bench observed that the appellant has duly given the site cash books as well as main cash book showing cash balance of Rs. 2,45,41,259 and the cash deposited to its bank account was created due to huge opening cash balance of Rs. 1,70,45,310 as on 01.04.2016, as per audited books and return of income filed by the assessee before demonetization declaration, and amount of cash withdrawals till demonetization period amounting to Rs. 5,20,46,260 which was higher during immediately preceding FY 2015-16 amounting to Rs. 5,84,79,000. Undisputed Source of Cash Deposits in Bank Account during Demonetization: ITAT deletes Income Tax Addition Sheo Chand Yadav vs Income Tax Officer 2023 TAXSCAN (ITAT) 2101 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that there is no vacillation to hold that the source of the cash deposited in the bank account has been undisputedly proved, hence deleted the addition made by the Assessing Officer (AO). The Bench observed that Sheo Chand Yadav has a joint bank Account in Corporation Bank with his spouse Smt. Manju Yadav. Cash received from hawkers was credited in this joint account. It was further noticed that the assessee has also submitted the details of all the sub-vendors along with their addresses and contact numbers. During the assessment proceedings, the AO had asked to furnish the cash summary which was duly submitted but the AO had not considered the facts of the case that the cash was available in the books of accounts out of the sale made before demonetization period. Provision of Section 69A of IT Act cannot be applied to Cash Deposits duly recorded in Books of Account: ITAT Income Tax Officer vs M/s Zee Bangles Pvt. Ltd 2023 TAXSCAN (ITAT) 1886 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the provisions of Section 69A of the Income Tax Act cannot be applied to the cash deposits which have been duly recorded in the books of account. The Two-bench member comprising of Amarjit Singh (Accountant member) and Sandeep Singh Karhail (Judicial member) held that the Commissioner of Income Tax (Appeals) has correctly held that the provision of Section 69A of the Income Tax Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee. Therefore, the grounds of appeal of the revenue was dismissed. AO Must Verify Source of Cash Deposits Made During Demonetization Period

: ITAT Jumbo Electronics Corporation Pvt. Ltd. vs Pr. Commissioner of Income Tax 2023 TAXSCAN (ITAT) 1797 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the assessing officer (AO) must verify the source of cash deposits made during the demonetization period. The ITAT’s decision in the case of Jumbo Electronics Corporation Pvt Ltd. v. Pr. CIT-2 is a reminder to businesses of the importance of accurate record-keeping and transparency with the tax authorities. The Two Bench Members comprising Justice S Rifaur Rahman (Accountant Member) and Justice Kavitha Rajagopal (Judicial Member) decision was to partly allow the appeal filed by the assessee. It upheld the order of the PCIT on the issue of cash deposits made during the demonetization period, but it set aside the order of the PCIT on the issue of discrepancy in the gross receipts reported in the service tax return, the 26AS, and the P&L account. Revisionary Powers u/s 263 of Income Tax Act not prevails if AO Conducts Inquiry and Verification during Assessment: ITAT quashes Revision Order Ashok Khimraj Jain vs Pr. Commissioner of Income Tax-1 2023 TAXSCAN (ITAT) 1668 The Pune Bench of Income Tax Appellate Tribunal has quashed the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The ITAT held that the PCIT’s order was unsustainable in law as the Assessing Officer (AO) conducted due inquiry before framing of the assessment. The PCIT’s ruling was deemed to be legally unsustainable by the ITAT, who concurred with the assesses position. The ITAT found that the AO had made a sufficient investigation and that the PCIT had not taken into account all of the relevant facts. The Tribunal thus maintained the AO’s assessment order while reversing the PCIT’s ruling. The bench consisting of S S Viswanethtra Ravi (Judicial Member) and G. D. Padmahshali (Accounting Member) allowed the appellant’s appeal and quashed the PCIT’s revisionary order. Deposit Made as a Reserve Amount for Business During Demonetization Period not amount to Unexplained Income: ITAT Deletes Addition Neeladri Sekhar Dey vs ITO 2023 TAXSCAN (ITAT) 1647

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that deposits made as a reserve amount for the business during the demonetization period do not amount to unexplained income. The two-bench member comprising of Sonjoy Sarma (Judicial member) and Girish Agrawal (Accountant member) that the approach taken by the Assessing Officer while making the addition of Rs. 24,07,000/- in the hands of the assessee by assuming that deposits made during the demonetization period are unexplained money was not correct. The order passed by the Assessing Officer by sustaining the addition of Rs. 24,07,000/- was not in accordance with the law as the Assessing Officer never discussed any other surrendering facts and not taking into consideration while framing the assessment order. The Assessing Officer was directed to delete the addition of Rs. 24,07,000/-. Not Every Deposit during Demonetization Period will under category of Unaccounted Cash: ITAT directs Re-Adjudication Shri Neralakere Marulasiddappa Dayananda vs The Income-tax Officer 2023 TAXSCAN (ITAT) 1635 The Income Tax Appellate Tribunal (ITAT) of Bangalore Bench held that the payment of bonus made to employees before the due date of filing a return of income under Section 139(1) of Income Tax Act are sufficient for compliance of Section 43B of Income Tax Act, 1961. Therefore, the tribunal after considering the submissions of both parties concluded that as per the CBDT instruction dated  09/08/2019 and 21/02/2017 point out that not every deposit during the demonetization period would fall under the category of unaccounted cash. Thus, two member benches of the tribunal comprising Chandra Poojari (Accountant Member) and Beena Pillai (Judicial Member) assessee are directed to establish all relevant details to substantiate its claim in line with the above applicable instructions as applicable to the present facts of the assessee.

ITAT restores matter to consider Source of Cash Deposited with Sale Proceeds of LPG Cylinder during Demonetization Anaveer vs The Income Tax Officer 2023 TAXSCAN (ITAT) 1631 The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) held that in the interest of justice and equity an opportunity should be granted to the assessee to prove the source of cash deposits and the matter was restored to the Assessing Officer (AO) for denovo consideration. The Single Bench comprising of George George K, Vice President, observed that the assessee neither before the AO nor the CIT(A), has explained the source of cash deposited with the sale proceeds of LPG cylinders. Hence, in the interest of justice and equity, the Tribunal granted one more opportunity to the assessee to prove the source of cash deposits. Hence, the matter was restored to the AO for denovo consideration. Cash Deposited in Bank Accounts during Demonetization Period reflected in Books of Account of Company: ITAT deletes Addition DCIT vs Bawa Jewellers Pvt. Ltd. 2023 TAXSCAN (ITAT) 1586 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), while deleting the addition made by the Assessing officer (AO), determined that the cash deposited in bank accounts during the demonetization period was reflected in the books of account of the company. The tribunal after reviewing the facts observed that AO did not point out any defects in the books of account, no discrepancies were found in the stocks, sales and purchases. The assessee has amply demonstrated with evidence that the cash sales and the cash deposits during financial years 2015-16 and 2016-17 were almost same and there is only a minimal increase in cash deposits during the financial year 2016- 17 relevant to the assessment year 2017-18. Cash Deposits from earlier withdrawals cannot be Totally Disbelieved: ITAT allows Deduction on Cash Deposit Smt. Hemavathi Ramesh vs

The Income Tax Officer 2023 TAXSCAN (ITAT) 1509 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that the cash deposits from earlier withdrawals cannot be totally disbelieved, thus, the bench allowed deduction on the cash deposits. The Single-bench member consisting of George George K (Judicial member) stated that since the receipt of Rs.5,50,00/- has not been doubted by the Assessing Officer, the amount would be available with the assessee for making the impugned cash deposits. Further, the assessee has placed the record on the return of income and statement of income wherein the assessee had offered to tax a sum of Rs.2,50,000/- being sundry receipts and gifts. ITAT confirms Addition of Unexplained Income for SBN Deposits during Demonetization Period in Absence of Legitimate Source Pankaj Gupta vs ITO 2023 TAXSCAN (ITAT) 1131 The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) recently confirmed the addition of unexplained income for SBN deposits during the demonetization period in the absence of legitimate source documentation. The Single Bench tribunal of Judicial Member George Mathan observed that if the assessee desired to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he had received the SBNs. In the absence of such proof, the deposit of SBN to the extent of Rs.28 lakhs will have to be treated as the unexplained investment of the assessee, the bench noted. In result, the appeal of the assessee was dismissed.

Cash from Sister-In-Law received in Bank Accounts during Demonetization Period is not gift: ITAT upholds Addition M. Natarajan vs The Income Tax Officer 2023 TAXSCAN (ITAT) 937 The Chennai bench of Income Tax Appellate Tribunal (ITAT) has recently held that cash received from sister-in-law deposited in bank accounts during the demonetization period is not a gift. Hence, the bench upheld the addition made by the assessing officer. It was observed by the tribunal that there is inconsistency in arguments in respect of source for cash deposits also assessee could not file any corroborative evidence to substantiate his arguments, that why the money received towards sale of property was kept in his sister-in-law bank account. Therefore, the bench of Mahavir Singh, Vice President and Manjunatha. G, Accountant Member sustained additions made towards cash deposits made during the demonetization period. Cash Deposit during Demonetization out of Alimony from Husband: ITAT deletes Addition u/s 115BBE of Income Tax Act Deepa Satish Borse vs The Income Tax Officer 2023 TAXSCAN (ITAT) 818 The Income Tax Appellate Tribunal (ITAT), Pune bench has deleted an addition under section 115BBE of the Income Tax Act, 1961 considering the fact that the cash deposit during demonetization was out of the huge amount of alimony received from the husband. A two-Member bench of ITAT comprising Shri Satbeer Singh Godara, Judicial Member and Shri G.D. Padmahshali, Accountant

Member has held that “We find no merit in the Revenue’s foregoing arguments supporting the CIT(A)’s findings once it has come on record that the assessee’s matrimonial ties with her husband are witnessing a rough weather wherein the latter has already supported her case of having received the impugned sum by way of cash prior to demonetization for maintenance of herself and their sole girl child followed by similar arrangement post facto demonization by way of banking channel. We are of the opinion that the assessee’s husband’s supportive evidence by way of documentary evidence as well as confirmation satisfactorily discharges her onus of proving source of these cash deposits of Rs.10,14,500/- in issue. The impugned addition u/s.115BBE is directed to be deleted therefore.” Re-Deposit of Cash during Demonetization for House Renovation and Marriage of Son is “Normal Conduct of an Ordinary Man”: ITAT deletes Addition  Laxmi Narain vs ITO 2023 TAXSCAN (ITAT) 799 While deleting an addition under section 69A of the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the re-deposit of cash after the declaration of the demonetization for the purpose of the renovation of house and marriage of son is normal conduct of a man ordinary prudent which cannot be doubted unless revenue authorities bring on record positive or adverse material to establish that the amount withdrawn by the assessee from his bank account was utilized or deposited somewhere else.

Shri Chandra Mohan Garg (Judicial Member) found that when the purpose of renovation of house and marriage of son is deferred and the assessee was having cash amount withdrawn from his bank then after declaration of demonetization he had no option but to re-deposit the same to his bank account. AO failed to Conduct Investigation regarding Cash Deposits during Demonetization Period: ITAT Upholds Revision Order K. Rajeswari, Vs The ACIT, 2023 TAXSCAN (ITAT) 568 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has upheld the revision order observing that the Assessing Officer (AO) had failed to conduct investigation regarding cash deposits during the demonetisation period. The Division Bench of Mahavir Singh, (Vice President) and Manoj Kumar Aggarwal, (Accountant Member) noted that the cash deposited by assessee in specified bank notes were received during demonetization period and nothing was examined by the AO while framing assessment. The appeal filed by the assessee was dismissed accordingly.

ITAT deletes Addition on Cash Deposits during Demonetization Period on Proper Explanation as to Utilization Mrs. Usha Narayan Chaware vs ITO 2023 TAXSCAN (ITAT) 484 The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition of cash deposits during demonetization on proper explanation as to utilization of the cash deposit. The Tribunal of RS Syal, Vice President noted that “Once the availability of cash in hands was established and it was not shown by the AO that such cash was spent elsewhere, I am of the considered opinion that the explanation of the assessee as to its utilization has to be accepted.” SOP Issued by CBDT shall be followed while Making Addition in respect of Cash Deposits During Demonetization: ITAT Chandrakant Tatoba Patil vs Pr. Commissioner of Income Tax-1 2023 TAXSCAN (ITAT) 473 The Pune Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the standard operating procedure ( SOP ) issued by the Central Board of Direct Tax ( CBDT ) should be followed while making additions in respect of cash deposits found during the demonetization period. The Pune Bench of Inturi Rama Rao, (Accountant Member) and S.S. Viswanethra Ravi (Judicial Member) dismissed the appeal by the assessee and observed that there was no reference or whatsoever in respect of cash deposits and the CBDT instructions and no verification by AO.

“We note that the PCIT only remanded the matter to the file of AO for proper examination on facts and applicability of provisions of law along with SOP issued by the CBDT and no prejudice would cause to the assessee in representing his case before the AO with evidence if any rebutting the finding of PCIT in respect of huge cash deposits during demonetization period.” The Bench observed. Inflated Sales during Demonetization Period to be Computed After Considering Average Sales of Prior One Year: ITAT Shri Arif vs ACIT 2023 TAXSCAN (ITAT) 374 The Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) recently held that inflated sales during demonetization period to be computed after considering average sales of prior one year. After considering the contentions of the both parties the single bench of ITAT of Chandra Poojari (Accountant Member) allowed the appeal filed by the assessee and observed that “This inflated sales, if any, already had gone into the computation of income and making further under section 69A of the Income Tax Act 1961 amounts to double addition which shall be avoided.” 69A of the Income Tax Act 1961 provides that if any money or jewellery or bullion found from the assessee and which was not recorded in the book of accounts of the assessee and the assessee has not such explanation about the nature of the asset such asset shall be considered as the income of the assessee. Cash Deposits can be Accepted during Demonetization Period If Source is Explained: ITAT R. Raju vs Income Tax Officer 2023 TAXSCAN (ITAT) 369 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has held that the cash deposits could be accepted during the demonetisation period if the source has been explained. The Division Bench of Mahavir Singh (Vice President) and G. Manjunatha, (Accountant Member) deleted the addition, allowing the appeal observing that

“We find that, the AO as well as CIT(A) never disputed fact that the assessee has furnished necessary evidence with regard to maturity proceeds of fixed deposits and insurance policy. However, disregarded evidence filed by the assessee only for the reason that cash has been deposited during demonetization period.” Deposit during Demonetization Period: Burden of Proof on Assessee to Establish Genuineness, rules ITAT Yagnavalkya Souhardha Credit Co. Ltd. vs ITO 2023 TAXSCAN (ITAT) 346 The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) held that the burden of proof is on the assessee to establish genuineness of deposit during the demonetization period. Judicial member Perbeena Pillai observed that, “We are aware of the fact that not every deposit during the demonetisation period would fall under the category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash.” Accordingly the grounds raised by the assessee were allowed for statistical purposes. In result, the appeal filed by the assessee was allowed for statistical purposes. Deposit of Cash kept for Medical Emergency Post- Demonetization: ITAT deletes Addition Krishna Goyal, Vs ACIT, Circle-14, New Delhi. 2023 TAXSCAN (ITAT) 308 Addition made under section 69A of the Income Tax Act, 1961 was deleted by the Delhi Bench of Income Tax Appellate Tribunal (ITAT) as the cash deposit was kept for the medical emergency.

The single bench of Saktijit Dey (Judicial Member) observed that the department does not have any contradictions on the illness of the assessee and also it’s a serious matter that should be considered. Furthermore, considering the fact that the assessee face a serious medical condition, her explanation that cash withdrawals made earlier were kept at hand for meeting any medical emergency, to some extent, is believable and thus directed to delete the addition. Production of Proof for Cash deposit during Demonetization: ITAT deletes Addition Umamaheswari vs Income Tax Officer 2022 TAXSCAN (ITAT) 1747 In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ), Chennai bench has deleted the addition on the basis of production of proof for cash deposit in the bank account during demonetization period. G. Manjunatha (accountant member) set aside the impugned order and directed to delete the addition observing that there was no prohibition for dealing with Specified Bank Notes during those period during demonetization and assessee had already filed necessary evidences to prove the availability of source for cash deposits and the tribunal also held that the observation of assessing officer regarding addition was invalid. Cash Sales by Medical Shops Permitted by RBI during Demonetization,

Doctors Prescription and ID of Purchasers Not Required: ITAT deletes Addition The Income Tax Officer, Ward-1 & TPS, Vs Manasa Medicals, 2022 TAXSCAN (ITAT) 1782 The Income Tax Appellate Tribunal (ITAT), Bangalore bench, while deleting an addition under section 68 of the Income Tax Act, 1961 has held that the cash sales by the medical shops and pharmacies were permitted during the demonetization period under the circular issued by the RBI. Shri George George K., Judicial Member and Ms. Padmavathy S, Accountant Member allowed the plea of the assessee and observed that “the AO is not questioning the source of the cash deposit since he has recorded a finding that cash sales during the demonetisation period is brought to tax u/s. 68 which makes it clear that it is admitted fact that sales is the source for cash deposits.” No Income Tax Addition for Cash Deposit during Demonetization duly explained with Cash Flow Statement: ITAT Smt. Perminder Kaur Matharoo vs I.T.O 2022 TAXSCAN (ITAT) 1696 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that Income Tax Addition for cash deposits duly explained with cash flow statements is not permissible. The ITAT bench of Shri N K Billaiya, Accountant Member and Shri Kul Bharat, Judicial member observed that once the cash flow statement is not controverted by the Assessing Officer as well as the CIT[A] when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of a cash deposit in the bank account cannot be discarded by the authorities below. While allowing the appeal, the ITAT directed the Assessing Officer to delete the impugned addition under the Income Tax Act,1961. Shri Kapil Goel appeared for the assessee and Shri Sanjai Kumar Yadav appeared for the department. Enquiry and Investigation as per CBDT Instructions on Cash Deposited in Post Demonetisation period is necessary, Addition u/s 68 not allowable:

ITAT restores the issue M/s. Bhavana Cooperative Credit Society Niyamita vs The Income-tax Officer 2022 TAXSCAN (ITAT) 1565 Addition under section 68 of the Income Tax Act, 1961 is not allowable when the enquiry and investigation as per CBDT Instructions on cash deposited in post demonetisation period which is necessary to be not done, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has restored the issue for fresh adjudication. A Coram of Shri Chandra Poojari, AM and Smt. Beena Pillai, JM viewed that the various standard operating procedures laid down by the central board of direct taxes issued from time to time give a hint regarding what kind of investigation, enquiry, and evidence the assessing officer was required to take into consideration to assess such cases.  Further observed that it is important to examine whether the case of the assessee falls into any of the above parameters are not and the assessee was directed to establish all relevant details to substantiate its claim in line with the above application instructions.  Cash Deposited during Demonetization period did not exceed Threshold Limit: ITAT deletes Income Tax Addition Shri Amar Singh vs ACIT 2022 TAXSCAN (ITAT) 1570 The Income Tax Appellate Tribunal (ITAT), New Delhi Bench deleted addition as cash deposited during demonetization period does not exceed threshold limit. A Division Bench consisting of G S Pannu, President and Saktijit Dey, Judicial Member observed that “In the facts of the present appeal, undisputedly, assessee is a salaried person having no business income. Further, the cash deposited during the demonetization period, does not exceed the threshold limit of Rs.2.50 lacs in terms with the CBDT Instruction noted above. The CBDT instruction being beneficial to assessee, has to be applied. In view of the aforesaid, we delete the addition of Rs.2,23,000 made under Section 69A of the Act.” Ignoring Assessee’s Submissions and Additional Evidence is ‘Patently and Legally Wrong’:

ITAT condemns NFAC’s Approach Naveen Kumar vs ITO 2022 TAXSCAN (ITAT) 1392 The Income Tax Appellate Tribunal (ITAT), Chandigarh bench has slammed the National Faceless Appeal Centre (NFAC) for not acknowledging the submissions and additional evidence produced by the assessee stating that the same is patently and legally wrong. Sudhanshu Srivastava , Judicial Member observed that the assessee, during the course of First Appellate proceedings, did furnish various evidences and submissions before the NFAC like copy of bank statement and the credit card statement as well as copy of employments letter with the telecom company etc. Deposit of Banned Notes received out of Cash Sales during Demonetization Period is Legally Valid: ITAT deletes Addition Polepalli Srinivasulu Gupta vs DCIT 2022 TAXSCAN (ITAT) 920 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam bench has deleted an addition under section 69A of the Income Tax Act, 1961 by holding the deposit of banned notes received by the assessee from cash sales during demonetization period is legally valid. A bench of Shri Duvvuru Rl Reddy, Judicial Member & Shri S Balakrishnan, Accountant Member has relied on the judicial pronouncement in the case of Principal Commissioner of Income Tax vs. Agson Global (P) Ltd, and held that the cash sales made by the assessee deposited in the bank account are in accordance with law and hence the addition made by the AO is deleted. Scope of Limited Scrutiny is Confined: ITAT quashes Revision since Original Assessment was initiated to Cash Deposits during Demonetization Shri Baljeet Yadav vs The PCIT 2022 TAXSCAN (ITAT) 761 Quashing a revision order passed under section 263 of the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT),

Jaipur bench has held that the scope of limited scrutiny is confined to its purpose and such an assessment cannot be treated as “erroneous” in order to invoke revisional jurisdiction. A bench of Dr. M.L. Meena, AM & Dr. S. Seethalakshmi, JM held that the assessee’s case was selected for scrutiny under CASS for examination of cash deposits made in the bank during the demonetarization period. It is prima facie not clear whether it was a limited scrutiny case or a detailed scrutiny case with the approval of the competent authority. Retired Army Officer kept Cash to Meet Medical Emergencies: ITAT deletes Addition for Cash Deposit during Demonetization Col. Ranjan Sharma vs Income Tax Officer 2022 TAXSCAN (ITAT) 687 In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Bangalore bench has deleted an addition of around 7 lakhs on account of cash deposit during demonetization against the assessee, a retired officer by holding that the amount was kept to meet medical emergencies and therefore, the same cannot be suspected under section 69A of the Income Tax Act, 1961. Shri B.R. Baskaran, Accountant Member observed that a perusal of the documents would show that the assessee has withdrawn a sum of Rs.8,00,000/- from his bank account maintained with ICICI Bank on 05.06.2015. Ruling in favour of the assessee, the Tribunal held that “I notice that the assessee has withdrawn cash in small amounts in subsequent period also. Since the assessee is an aged person and retired from army, it is quite possible that the assessee had kept the money in cash with him in order to meet medical emergencies.

The assessee is a pensioner and there is no other material to show that the cash of Rs.8,00,000/- withdrawn earlier had been spent away. Accordingly, in the facts and circumstances of the case, I am of the view that the explanation of the assessee that he has made the deposit of Rs.7,01,000/- out of the cash withdrawal made earlier is quite plausible. Accordingly in my view the sources for making deposits stand explained in this case.” No Addition for Deposits up to Rs. 250,000 during Demonetization by Salaried Person: ITAT deletes Addition against Cost Accountant Shri Aniket Agarwal vs Income Tax Officer 2022 TAXSCAN (ITAT) 470 While deleting an addition against a Cost Accountant, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the same cannot be made against an Individual who is earning income from salary filing return of income has deposited amount of Rs.2,30,000/- during demonetization period, as per the relevant CBDT circular. Shri Chandra Mohan Garg, Judicial Member observed that “Instruction No. 1.1 to a logical conclusion that when the CBDT Circulars clearly provide, no further clarification and verification is required to be made in the case of an Individual who is earning income from salary filing return of income has deposited amount of Rs.2,30,000/- during demonetization period. Therefore, addition made by the Assessing Officer and confirmed by the ld. CIT (Appeals) cannot be held as sustainable as the same is clearly against the Instruction issued by the CBDT. Therefore, sale ground of appeal of the assessee is allowed.”

Tribute to All House Wives: ITAT deletes Addition for Cash Deposits below Rs. 2.5 Lakhs made during Demonetization Smt. Uma Agrawal vs I.T.O 2021 TAXSCAN (ITAT) 352 In a significant ruling granting major relief to all the house-wives in the country, the Income Tax Appellate Tribunal (ITAT), Agra bench consisting of Judicial Member Lalit Kumar and the Accountant Member Dr. Mitha Lal Meena has ruled that cash deposit made by the housewives during the demonetization scheme 2016, cannot be subject to addition if such deposits are below Rs. 2.5 lakhs and such amount shall not be treated as income of the assessee. Allowing the appeal considering the facts in deep, the Tribunal observed that the assessee had duly explained the source of deposit i.e previous years saving and we have no hesitation to accept the same, as it would be presumed that this small amount of Rs 2,21, 000/ would have been accumulated or saved by her from various activities undertaken by her for and on behalf of the family in last many years. “Further as mentioned hereinabove, in the decision of Kirti ( supra), women per se cannot be said to be not having income from any activities, as they are presumed to always been doing economic activities in the family for many years, hence in our view, the assessee had duly explained the source of her investment.

Therefore no additions can be made by a lower authority. Further even if we ignore the explanation, for the sake of argument, then also it is for the assessing officer to bring on record some cogent evidence to prove that the amount deposited in the bank was undisclosed income arising from the business or from any other activities. No evidence has been brought on record by the lower authorities,” the Tribunal said. Dept can’t make Addition solely for receiving Scrapped Currencies Post-Demonetization: ITAT grants Relief to Jewellery after proving Huge Sales with Evidence M/s Hirapanna Jewellers vs Asst.Commissioner of Income Tax 2021 TAXSCAN (ITAT) 426 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench ruled that no cash inflow involved due to demonetization as the assessee explains the reason for huge sales with evidence.

The coram of N.K.Choudhry and D.S.Surendra Singh in the light of the trading account and find that there was sufficient stock to affect 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. The tribunal observed that no cash inflow is involved due to demonetization. In the assessee’s case, there were no such deductions or exempt income and the profits were also not abnormal. The assessee explained the reason for huge sales with evidence. ITAT upholds Addition since assessee failed to explain the source of Cash Deposit in her Bank Account during Demonetization period The Income Tax Appellate Tribunal (ITAT), Delhi Bench upheld the addition on the ground that the assessee failed to explain the source of cash deposit in her bank account during the demonetization period. The coram consisting of Bhavnesh Saini noted that when the matrimonial dispute was not settled till August, 2019, there was no reason for the assessee to keep the cash at home. The ITAT further said that when assessee made cash deposits of Rs. 15 lakhs in three installments in her bank account in November, 2016, would lead to irresistible conclusion that assessee was keeping unaccounted cash money of Rs. 15 lakhs with her at the time of demonetization period and the assessee realizing that such currency cannot be used anywhere, she deposited same in her bank account and purposely the return of income was filed belatedly after expiry of the period provided under section 139(1) for filing of the return of income within the period of limitation.

Income Tax Department conducts Search on a group of individuals, Hawala dealers and Businessmen in Raipur On 27.02.2020, Income Tax Department conducted a search on a group of individuals, hawala dealers, and businessmen in Raipur. The search action was mounted on the basis of credible inputs, intelligence and evidence of the generation of huge unaccounted cash from liquor and mining business and transfer of the same to public servants, huge cash deposits during the demonetization period, accommodation entries from shell companies, undisclosed investment in properties, etc. Subsequently, based on evidence found during the search, a few other premises were also covered inconsequential actions. CBDT fixes deadline to dispose Demonetization Cases The Central Board of Direct Taxes ( CBDT ), in its action plan for the current quarter from April- June 2019, has set 30th June 2019 as the deadline to dispose of all the cases related to demonetisation “where assessment is required to be framed,”.

On 8th November 2018, the Central Government banned higher value currency notes. Post-demonetization, the revenue department had selected 87,000 cases where the assessees had not filed responses to income tax notices. Over 3 lakh notices and emails were sent to those who had made high cash deposits following the demonetisation announcement but not filed income tax returns. The deadline of 30 June is also set for issuing notices to those who fail to file statement of financial transactions (SFT) of high-value transactions under Section 285BA of Income-tax Act by 15 May 2019 and for filing of references before the national company law tribunal (NCLT) for firms that have been struck off under the Companies Act. Three Lakh Firms de-registered by MCA under Income Tax Scanner for Evasion during Demonetization About three lakh firms are under the scanner of the income tax department for indulged in tax evasion and money laundering during demonetization. The Central Board of Direct Taxes (CBDT) has issued directions to income tax offices to probe against those firms who have been de-registered by the government for dubious financial credentials.

The CBDT has also asked the tax offices to undertake this special task and bring under their ambit the time period (over last two years) when these companies were struck off from the records of the Ministry of Corporate Affairs (MCA). “To check possible misuse of such companies for money laundering activities, the board desires that the field authorities may verify deposits/withdrawals from the bank accounts of such companies during the process of striking down and just before that especially during the period of demonetization,” the CBDT, the apex policy-making body for the I-T department, said in a communication. GST, Demonetisation and IBC made Economy more Efficient and Transparent: Finance Ministry Report The Indian Government has made significant strides in the last 4 years in taking India to new heights in terms of the welfare of the citizenry, the overall structure& growth of the economy, and creating a strong presence as an emerging global power.

To fuel such achievements, the Government has worked tirelessly for shouldering a number of bold and important socio-economic reforms. The Government has undertaken its reform drive with the spirit of inclusiveness of the marginalized and hitherto socio-economically neglected classes in the overall development process. To this end, right at the beginning of its term, the Government came-up with the Pradhan Mantri Jan DhanY ojana(PMJDY) in August 2014, for giving space to the deprived classes into the formal banking system and making Financial Inclusion as its prime goal. Pradhan Mantri Jan Dhan Yojana’s success has led to the creation of the much needed financial infrastructure, which serves as a runway for taking-off other Social Security Schemes like Atal Pension Yojana (APY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). Post Demonetisation: Income Tax Dept set to issue 1 Lakh notices for Huge Deposits The Income Tax Department (IT) is set to issue notices to one lakh entities and individuals, who deposited huge cash in banks Post Demonetisation and whose tax returns have been picked for detailed probe into suspected discrepancies, official sources reportedly said today. The Government on November 8 last year had announced the scrapping of Rs 500 and Rs 1,000 notes, totaling Rs 15.44 lakh crore. It constituted 86 per cent of the total cash in circulation. The income tax department will issue notice this week itself.

In the first portion notices will be issued to 70,000 entities that deposited over Rs50 lakh in cash in banks but chose not to file tax returns or respond to the relevant income tax department advisories. Santosh Kumar Gangwar Speaks about the Measures Taken By the Govt for Recovery of Black Money Post Demonetization With a view to curbing financing of terrorism through the proceeds of Fake Indian Currency Notes (FICN) and use of such funds for subversive activities such as espionage, smuggling of arms, drugs and other contrabands into India, and for eliminating black money which casts a long shadow of parallel economy on the real economy, the Government decided to cancel the legal tender character of the high denomination bank notes of Rs. 500 and Rs. 1000 issued by the Reserve Bank of India on 8th November 2016. Income Tax Dept pushes Additional Cases of High Cash Deposits in Second Phase of Operation Clean Money The Income Tax Department (ITD) has used information received under the Statement of Financial Transactions (SFT) to identify 5.56 lakh new persons in the second phase of “Operation Clean Money” (OCM). These are persons whose tax profiles were found to be inconsistent with the cash deposits made by them during the demonetization period. Another 1.04 lakh persons who did not disclose all bank accounts during e-verification in the first phase of OCM have also been identified. In the first phase, 17.92 Lakh persons had been identified for e-verification of large cash deposits, of which 9.72 Lakh people had submitted online response. Demonetisation: Income Tax dept. initiates queries on Suspicious Bank Account deposits during window period The Income Tax Department started raising queries on suspicious bank account deposits, including the deposits made in co-operative banks,post demonetization.

Reportedly, the department could start summoning bank account holders in the coming month or two. The move is part of the government’s crackdown on money laundering in the wake of demonetisation. The department, initially, was focusing on those bank accounts that do not have proper KYC (know your customer) credentials or cash deposits do not correspond with the individual’s income people close to the development said. Sources say that many bank account holders suddenly deposited a huge chunk of money even as their income tax records do not correspond with such an amount. About 1.5 lakh account holders have deposited more than Rs 10 lakh each and there have been suspicious cash deposits in one crore accounts belonging to 75 lakh people. CBDT to issue legal notice to persons not responding to verification of Cash deposits under ‘Operation Clean Money’ The Central Board of Direct Taxes (CBDT), on Friday directed its officials to issue legal notice to tax payers who have not properly responded to the cash deposit verification under the new policy “Operation Clean Money”.

Last month,  the Board has issued a SOP to the assessing officers directing them to issue online verification of cash deposits made during demonetization period. It is stated that the notice should be sent in cases where the taxpayer fails to respond to the online verification of cash deposits. In case of individuals, the notice will be generated through the ITD system and hence, there is no need for hand written/printed notices. “Persons under verification” are required to respond to the notice through online mode within the time stipulated. The Board once again clarified that the verification under the “Operation Clean Money” must be done in the manner prescribed in the SOP dated 21st February 2017.The present Instruction also encloses a format of notice to be used for issue notice under section 133(6) of the Income Tax Act. Demonetization – 7 years Punishment for persons using Other’s Bank Account to legalize Black Money; says IT Department The Income Tax Department to levy penalty of 7 years imprisonment for persons depositing money in other’s account during the 50 day window period. Sources reveals that the Department has decided to impose charges under the newly enforced Benami Transactions Act against bank violators that carries a penalty, prosecution and rigorous jail term of a maximum seven years. Reportedly, the Department has conducted about 80 surveys and 30 searches, as result of which almost 200 crores have been seized as undisclosed income. further, the Department has initiated a country-wide operation to identify suspect bank accounts where huge cash deposits have been made post ban of Rs. 1000 and 500 currency notes.

In cases where the suspicion is found to be true, both the depositor and the actual owner of the money will be prosecuted under the Benami Property Transactions Act, 1988. The act is applicable on both movable and immovable property, that has been enforced from November 1 that year. No ‘abnormal jump’ in cash sales during Demonetization Period: ITAT Deletes Income Tax Addition u/s 68 of Income Tax Act J.R. Rice India Pvt. Ltd vs ACIT 2023 TAXSCAN (ITAT) 2312 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that there is no abnormal jump in cash sales during demonetization period and all these facts clearly proved the genuineness claim made by the assessee that cash deposits has been made out of cash balance available with the assessee, thus deleted the addition made under Section 68 of Income Tax Act,1961. The Bench comprising of Saktijit Dey, Vice-president and M. Balaganesh, Accountant Member observed that the nature and source of credit being sale proceeds received from the customers stands duly proved and explained.

Hence, prima facie, no addition could be made under Section 68 of the Income Tax Act. After the examination of the cash book of the assessee, it was found that the assessee had cash balance of Rs.55,93,580/- on the date of announcement of demonetization, which sufficiently explains the source of deposit of Rs.52,60,000/- in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. Receipts that constitute business receipts cannot be held as unaccounted money of the assessee: ITAT directs re-computation  Smt. Saraniyaa Karthick vs ITO 2023 TAXSCAN (ITAT) 2144 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee. During assessment proceedings, it transpired that the assessee made cash deposits in her bank account during the period between 10- 11-2016 to 30-12-2016. The assessee did not file return of income in earlier years.

The  AO proceeded to frame the assessment on best judgment basis u/s 144 since no books were maintained by the assessee. The assessee failed to respond to hearing notices. The two member bench consisting of V. Durga Rao (Judicial member) and Manoj Kumar Aggarwal (Accountant member) held that In most cases, the clients opted for travelling at later dates. Thus, such receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee. Under such circumstances, making full addition thereof could not be held to be justified. ITAT directs to Estimate 25% Profit Towards Income from Sale of Milk Products Deposited in Bank During Demonetisation Period The Dy. Commissioner- of Income Tax vs Mr.Kannan Rajendra Babu 2023 TAXSCAN (ITAT) 2052 Read More: https://www.taxscan.in/itat-directs-to-estimate-25-profit-towards-income-from-sale-of-milk-products-deposited-in-bank-during-demonetisation-period/316198/ The Income Tax Appellate Tribunal (ITAT) Chennai Bench directed to estimate 25% profit towards income from sale of milk products deposited in banks during the demonetisation period. It was observed by the tribunal that there is no dispute with regard to the fact that RBI has withdrawn legal tender of SBNs from 09.11.2016 onwards leaving behind certain exemption categories. Although, the assessee does not come under the exempted category. However to protect his business, the assessee has accepted SBNs from customers and deposited into bank account. After considering the facts and circumstances of the case and also explanation of the assessee two member bench of  Mahavir Singh, (Vice president ) and Manjunatha. G, ( Accountant Member) directed to estimate 25% profit towards cash deposits made during demonetization period and delete balance 75% addition made under Section 68 of the Income Tax Act.

Records maintained for sales carried out by assessee prevents credit to be held as unexplained cash U/S 68: ITAT deletes Addition The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the credit could not be held to be unexplained cash credit and the impugned additions are not sustainable in law. The two member bench consisting of Mahavir Singh (Vice president) and Manoj Kumar Aggarwal (Accountant member) held that the assessee has duly identified the debtors from whom the cash was received and the same could not be disputed by lower authorities. The PAN of respective debtors as well as quantum of cash realized from each of them has duly been detailed by the assessee before  AO during assessment proceedings. No defect has been pointed out in the books of accounts. In such a case, the credit could not be held to be unexplained cash credit and the impugned additions are not sustainable in law. Thus the appeal was allowed. Non issuance of Notice prevented Assessee from Reasonable Opportunity of being Heard Resulting in Violation of Natural Justice: ITAT directs Readjudication Arunachalam Vijayakumar vs The Income Tax Officer 2023 TAXSCAN (ITAT) 1991

The Chennai bench of the Income Tax Appellate (ITAT) Tribunal held that no notice to the registered e-mail ID of the assessee as per the PAN data base/ Income Tax Web Portal was issued is in gross violation of principles of natural justice and provisions of the Income Tax Act and the assessee shall be afforded reasonable opportunity of being heard to substantiate his claim. The two member bench consisting of Manoj Kumar Aggarwal (Accountant member) and V.Durga Rao (Judicial member) set aside the appellate order and remit the matter back to the file of the  CIT(A) to decide the issue afresh in accordance with law by issuing notice to the registered e-mail ID of the assessee enabling the assessee to substantiate his claim with supporting evidences. Not Enquiring Huge Cash Deposit in Demonetized Currency is Violation of Provisions Dealing in Demonetized Currency: ITAT upholds Revision Order SAP Medicals (P) Ltd vs Income Tax Officer 2023 TAXSCAN (ITAT) 1794 The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the revision order holding that not enquiring huge cash deposits in demonetized currency was a violation of provisions dealing with demonetized currency. The two-member Bench of R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member It is an admitted fact that the assessee has made cash deposit of Rs.39,74,500/- during the demonetization period which was accepted by him from various hospitals in demonetized currency in violation of the extant provisions regarding dealing in demonetized currency.

However, the AO in the instant case has failed to investigate this aspect and passed the order under Section 143(3) of Income Tax Act accepting the income returned. Addition made u/s 69 of Income Tax Act on ground of Unexplained Investment on Bank Account: ITAT Deletes Addition Anjali Roy Vs Income Tax Officer  2023 TAXSCAN (ITAT) 1326 The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition made by the assessing office under section 69 of the Income Tax Act,1961 on the ground of unexplained investment in a bank account. The two-member bench comprising Rajpal Yadav (Vice-President) and Rajesh Kumar (Accountant Member) held that the assessee had not made any unexplained investment in the bank account and whatever deposits were made are either out of the past savings or from the loans taken from relatives and the addition made by the assessing officer was against the law and are liable to be deleted while allowing the appeal filed by the assessee.  Ex-parte Addition of Cash Deposit made in Bank during Demonetisation Period u/s 69A of I-T Act: ITAT directs Readjudication Srimathi Pichara Karimnagar vs Income Tax Officer 2023 TAXSCAN (ITAT) 1075

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) decided to give opportunity to the assessee to produce all the relevant documents before the Assessing Officer (AO) for fact verification would meet the ends of justice. The bench noted that the assessee failed to appear before the AO after the assessment order was issued according to Section 144 of the Income Tax Act. Further, the assessee’s justification is that, as a woman and because of personal issues, she was unable to present before the AO and successfully prosecute the procedures. Additionally, Covid Pandemic intervened for a significant amount of time with the proceedings before the first appellate authority. Thus allowed the appeal and directs for readjudication. No Additions u/s 69A allowable for Deposit of Demonetized Currency if Advance Tax paid under PMGKY Scheme: ITAT Shri Sourabh Aggarwal E – 49 vs The D.C.I.T Central Circle Karnal 2022 TAXSCAN (ITAT) 1834 In a recent ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) chaired by N.K. Balliya, Accountant Member and Kul Bharat, Judicial Member directed the Assessing Officer (AO) to delete the additions made under Section 69A of Income Tax Act, 1961 for the cash deposit of demonetized currency as the advance tax was paid under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) Scheme, 2016.

The Appellate Tribunal observed that the Assessee had presented a legitimate declaration in accordance with the PMGKY Scheme, 2016, and had duly paid penalties and taxes together with the required amount. Added, no stretch of imagination provisions of section 69A of the Income Tax Act can be applied on the mentioned facts. Further the bench directed the AO to delete the impugned addition made under Section 69A of the Income Tax Act in respect of cash deposited in the bank account during the time of demonetization. Cash Gifts during Marriage is Customary in India: ITAT deletes Addition Including Demonetized Notes received as Marriage Gift Smt. Porkodi vs Income Tax Officer 2022 TAXSCAN (ITAT) 1746 The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted an addition under section 69A of the Income Tax Act, 1961 where the assessee received cash including the demonetized currencies as gift during marriage. Noting that the claim of marriage gift from her brothers cannot be rejected, the Tribunal held that “it is also a customary in India that during marriages brothers will give some money to their sisters depending upon their social status and economic condition. Therefore, the claim of the assessee that she has received marriage gift from her brothers cannot be totally ruled out.

Therefore, considering the facts and also custom prevailing in India, we are of the considered view that a reasonable amount of marriage gift claimed by the assessee, can be allowed. Therefore, we direct the AO to allow source for cash deposits out of marriage gift received from her brothers to the extent of Rs.2 lakhs and delete the addition made u/s.69A of the Income Tax Act, towards cash deposits to the extent of Rs.2 lakhs out of marriage gift received from her brother.” Addition on Cash Deposit during Demonetisation is not permissible when opportunity to adduce evidence to prove the Source was given: ITAT Devarajulu Natarajan vs ITO 2022 TAXSCAN (ITAT) 1517 The Chennai Bench of the Income Tax Appellate Tribunal (ITAT)has held that addition on cash deposit During Demonetisation is not permissible when the opportunity to adduce evidence to prove the source was given to the assessee. A Coram consisting of single member Shri Manoj Kumar Aggarwal, AM observed that the onus is on the assessee to substantiate the source of the cash deposit of Rs.8.50 Lacs and granted another opportunity to the assessee to substantiate its case before AO. The issue was restored to the file of AO with a direction to the assessee to substantiate the source of the deposit.

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