PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 25.11.2021, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short 'the Act') dated 30.11.2019 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal:
"1. In the facts and circumstances of the case and in law, the ld. Commissioner of Income-tax (Appeals) has erred in confirming the order of ld. Assessing Officer making addition of Rs.6,86,000/- u/s.69A of the Income-tax Act, 1961 without considering facts of the case in their entirety.
2. In the facts and circumstances the Id. Commissioner of Income-tax (Appeals) has erred in confirming the order of ld. Assessing Officer invoking provisions of sec.69A of the Income- tax Act, 1961 without fulfilling the requisite conditions.
3. In the facts and circumstances of the case and in law the ld. Commissioner of Income-tax (Appeals) has erred in confirming the disallowance of Rs.15,593/- made by ld. Assessing Officer out of Telephone Expenses without considering the facts of the case.
4. The impugned order is bad in law and in facts.
5. The appellant craves leave to add, alter or omit all or any grounds of appeal in the interest of justice."
2. Succinctly stated, the assessee who is a dealer of Essar Oil Ltd. and is engaged in trading of petroleum products under the name of
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Swastik Fuels, Bhatapara had filed her return of income for the A.Y.2017-18 on 18.10.2017, declaring an income of Rs.10,94,470/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.
3. During the course of the assessment proceedings, it was observed by the A.O that the assessee during the year under consideration had made cash deposits of Rs.6,80,42,748/- in hrer bank account as under:
| Name of Bank |
Bank a/c. No. |
Total cash deposited during the year |
Total cash deposited during demonetization period |
Total demonetized currency during demonetization period |
| Dena Bank, Bhatapara |
060913031165 |
6,80,42,748/- |
2,16,63,090/- |
1,85,42,500/- |
On being queried, it was the claim of the assessee that the cash
deposits in his bank account were sourced out of the cash-in-hand
that was available with her on the respective dates. It was observed by
the A.O that though the Central Government vide its notification
published in the Official Gazette had allowed petrol pump outlets to
receive Rs.1000/- demonetized currency notes upto 24.11.2016 and
Rs.500/- demonetized currency notes upto 02.12.2016, but the
assessee had continued to deposit the aforesaid demonetized currency
even after the aforesaid specified period i.e. upto 30.12.2016, as under:
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Date Denomination Number Total 25/11/16 1000 544 5,44,000/- 28/11/16 1000 30 30,000/- 01/12/16 1000 1 1,000/- 03/12/16 1000 32 32,000/- 500 256 1,28,000/-
05/12/16 500 53 26,500/- 06/12/16 500 10 5,000/- 08/12/16 1000 550 5,50,000/- 500 60 30,000/-
14/12/16 1000 2 2,000/- 500 17 8,500/-
22/12/16 500 2 1,000/- Total 13,58,000/-
On being confronted with the aforesaid issue, it was claimed by the assessee that the demonetized currency was deposited in the bank account out of the cash-in-hand as was available with her on 24.11.2016 and 02.12.2016. However, the A.O did not find favor with the said explanation of the assessee. The A.O was of the view that Observing that the assessee was eligible to receive Rs.1000/- demonetized currency notes upto 24.11.2016 and Rs.500/- demonetized currency notes upto 02.12.2016, the A.O was of the view that though the deposit of Rs.5.44 lacs in the denomination of
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Rs.1000/- on 25.11.2016 and deposit of Rs.1.28 lacs in the denomination of Rs.500/- on 03.12.2016 in the bank could safely be held to have been made out of the available demonetized sale proceeds that were available with her in the form of demonetized currency notes, however, the same would not be so as regards the balance amount of cash deposits of Rs. 6.86 lacs made in demonetized currency, viz. (i) cash deposits of Rs. 6,15,000/- in demonetized currency of Rs.1000/- (after 25.11.2016); and (ii) cash deposits of RS. 71,000/- in demonetized currency of Rs.500/- (after 03.12.2016). Accordingly, the A.O was of the view that the aforesaid cash deposit of Rs.6.86 lac [Rs.13.58 lacs (-) Rs.6.72 lacs] was either the assessee's unaccounted money deposited in the bank account either in the guise of sales; or was the cash that was accepted by her in lieu of sales in old denomination notes during the demonetization period. In the backdrop of his aforesaid observations the A.O made an addition of the aforesaid amount of Rs.6.86 lacs (supra) u/s.69A of the Act. Also, the A.O disallowed 1/4thof the assessee's telephone and mobile expenses of Rs.62,375/- and made a consequential addition of Rs.15,593/- for the reason that neither the assessee had maintained any logbook nor shown on the basis of supporting documentary evidence that the entire expenditure was incurred wholly and exclusively for the purpose of her business.
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4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me.
6. I have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
7. On a perusal of the assessment order I find that the A.O had held the amount of Rs.6.86 lacs (supra) as the assessee's unexplained money u/s.69A of the Act for the following reasons:
(i) If old currency was available with the assessee, she would immediately have deposited it in her bank account. It is noticed that Rs.1000/- has been deposited after 25/11/16 in five installments whereas Rs.500/- has been deposited in bank after 03/12/16 in five installments.
(ii) The assessee cannot take the plea that there was rush in bank as it can clearly be seen from the bank statement that the assessee continued to deposit cash in her bank account in the gap of 2-3 days throughout the demonetization period.
(iii) As stated above, denomination of closing cash in hand was not maintained by the assessee to substantiate that the entire amount of demonetized currency deposited in bank after specified period is out of available cash in hand.
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Admittedly, as per the notification issued by the Central Government, the petrol pump outlets were allowed to receive demonetized currency notes of Rs.1000/- upto 24.11.2016 and that of Rs.500/- upto 02.12.2016. As is discernible from the records, the assessee had continued to deposit currency notes of Rs.1000/- and Rs.500/- even after the aforesaid specified period i.e. upto 30.12.2016. On being queried, it was the claim of the assessee before the lower authorities that the demonetized currency notes were deposited out of the cash- in-hand which was generated from the business during the specified period and was available with her as per the books of accounts. In sum and substance, it was the claim of the assessee that the demonetized currency deposited in the bank account was received in the course of her business of running petrol pump within the specified dates as were allowed by the Central Government and had been deposited over the period i.e. 25.11.2016 to 22.12.2016. Although, the aforesaid claim of the assessee at the first blush appears to be convincing, but a careful perusal of the facts reveals a different story. On a perusal of the respective dates on which the assessee had deposited the demonetized currency notes in her aforesaid bank account i.e. Dena Bank, Bhatapara, I find that while for the demonetized currency notes of Rs.1000/- were deposited on six occasions on different dates falling within the period i.e. 25.11.2016 to 14.12.2016, while for the
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demonetized currency notes of Rs.500/- were deposited on six occasions over the period i.e 03.12.2016 to 22.12.2016. As observed by the A.O, and rightly so, though the aforesaid claim of the assessee of having deposited demonetized currency of Rs.5.44 lac in denomination of Rs.1000/- on 25.11.2016 and Rs.1.28 lac in denomination of Rs.500/- on 03.12.2016 could safely be held to have been made out of the sale proceeds which were received by her in the form of demonetized currency notes during the specified period allowed by the Central Government, but it is very difficult to comprehend that similar would have been the position qua the deposits made on the subsequent dates i.e. upto 22.11.2016.
8. Be that as it may, a perusal of the assessment order reveals that the A.O had held the aforesaid amount of Rs.6.86 lacs (supra) as the assessee's unexplained money u/s.69A of the Act for either of the reasons, viz. (i) that the assessee had in the guise of sales deposited her unexplained money in bank account; or (ii) that the assessee had received sale proceeds in old denomination currency even after the lapse of the specified time period allowed by the Central Government.
9. After having given a thoughtful consideration to the very basis for making of the addition by the A.O u/s.69A of the Act, I am unable to persuade myself to subscribe to the same. In case, as observed by
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the A.O, the assessee had in guise of sales deposited her unaccounted money in his bank account, then, the A.O was obligated to have rejected the books of account of the assessee before recharacterizing the corresponding sales as the latters unaccounted money u/s.69A of the Act, which, I find, had not been so done. I, say so, for the reason that while for the A.O had observed that the assessee in the guise of sales had deposited her unaccounted money in the bank account, but despite so observing he had while framing the assessment vide his order passed u/s.143(3), dated 30.11.2019 accepted the sales as were disclosed by the assessee in his books of account. Accordingly, the very first basis for treating the amount of Rs.6.86 lacs (supra) as the unexplained money of the assessee u/s.69A of the Act fails. Adverting to the observation of the A.O that the assessee might have received the sales proceeds in the demonetized currency even after the specified time period allowed by the Central Government, the same in my considered view would by no means justify the treating of the amount in question as the assessee's unexplained money u/s.69A of the Act. Assuming that the assessee had continued with receiving of the sale proceeds in the form of demonetized currency even after lapse of the specified time period as provided by the Central Government, i.e., 24.11.2016 (for Rs.1000/- denomination notes) and 02.12.2016 (for Rs.500/- denomination notes), even then the same would by no means
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justify treating of the said amount as the unexplained money of the assessee u/s.69A of the Act.
10. Although, as observed by me hereinabove, the deposit in tranches of the demonetized currency notes by the assessee in her bank account, i.e, after lapse of the specified time period allowed by the Central Government though raises serious doubts, but the same in my considered view would by no means suffice for stamping the same as the assessee's unexplained money u/s.69A of the Act. I, thus, not being able to concur with the view taken by the lower authorities who had failed to come forth with any cogent reason for treating the amount in question as the assessee's unexplained money u/s.69A of the Act, thus, set-aside the order of the CIT(Appeals) and vacate the addition of Rs.6.86 lacs made by the A.O. Thus, the Ground of appeal No. (s) 1 & 2 raised by the assessee is allowed in terms of the aforesaid observations.
11. Adverting to the disallowance of 1/4thof the telephone expenses of Rs.15,593/- made by the A.O, I am of the considered view that as the assessee had not maintained any log book which would substantiate her claim of having incurred the entire amount of expenses booked under the aforesaid head, wholly and exclusively or the purpose of his business, therefore, no infirmity does emerge from
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the orders of the lower authorities who had rightly made/sustained the said addition. Accordingly, I herein uphold the disallowance of Rs.15,593/- made by the A.O. Thus, the Ground of appeal No.3 raised by the assessee is dismissed in terms of the aforesaid observations.
12. Grounds of appeal No. (s) 4 & 5 being general in nature are dismissed as not pressed.
13. In the result, appeal of the assessee is partly allowed in terms of the aforesaid observations.
Order pronounced in open court on 21stday of November, 2022. Sd/-
(रवीश सूद /RAVISH SOOD)
या यक सद य/JUDICIAL MEMBER
रायपुर / Raipur; दनाकं / Dated : 21stNovember, 2022 **SB
आदेश क त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT (Appeals), Raipur (C.G.)
4. The Pr. CIT, Raipur (C.G.)
5. वभागीय त न ध, आयकर अपील य अ धकरण, "एक-सद य" बच, रायपुर / DR, ITAT, "SMC" Bench, Raipur.
6. गाड फ़ाइल / Guard File.
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आदेशानुसार / BY ORDER, // True Copy //
नजी स चव /Private Secretary आयकर अपील य अ धकरण, रायपरु
/ ITAT, Raipur