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TMI Blog2025 (3) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cash credit in the form of cash deposited during the demonetization period amounting to Rs. 26.00 lakh and ld. AO erred in invoking section 115BBE of the Act. 4. Tersely, the facts of the case are that the assessee is a partnership firm engaged in the business of trading and manufacturing of Artificial plants and Decorative items. Income of Rs. 19,56,800/- declared in the return furnished on 28.03.2018 for A.Y. 2017-18. The case of the assessee selected for scrutiny on account of reasons of Abnormal increase in cash deposited during the demonetization period as compared to pre-demonetization period. After validly serving of notices u/s. 143(1)/142(1) of the Act, ld. AO carried out the assessment proceedings and asked the assessee to explain the source of cash deposit of Rs. 26.00 lakh during the demonetization period, i.e. from 09.11.2016 to 30.12.2016. It was claimed by the assessee that the alleged cash deposit is from cash sales which are part of the total turnover of the assessee firm and the profit earned therefrom has been duly offered to tax and that the assessee had cash balance prior to the date of alleged cash deposits. The assessee also claimed that it is disclosing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered the income under the Presumptive Taxation Scheme u/s. 44AD of the act but still the assessee is maintaining regular books of account which is evident from the perusal of the trading profit and loss account and balance sheet. The Revenue authorities have not doubted the gross sales and more particularly the credit sales effected during the demonetization period and the total sales effected in the period other than the demonetization period. It establishes that the assessee has been carrying out the regular business activity and making sales during the year which has been accepted by the Revenue authorities. Merely for the reason that there is cash deposit during the demonetization period, the present issue has arisen. It is accepted that nobody was aware about the declaration of Demonetization Scheme and the moment it was announced it created panic. In this process, people tend to make some cash purchases and also to pay their outstanding debtors. Until and unless the source of cash is not explained one cannot doubt the genuineness of cash deposit. In the instant case, the assessee successfully demonstrated that it is carrying out regular business activity, making regular sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g payments up to 30th December, 2016. Based on this, assessee was under the bonafide belief that acceptance of cash in demonetised form from identifiable customers is permitted and therefore assessee were accepting from such customers for a few days. As soon as assessee came to know that only specified persons can accept demonetised currency they stopped receiving the same. The amount received during the initial few days were remitted to the bank account. This was the reason for acceptance of the demonetized currency to the tune of Rs. 51,05,940/- from their customers, which were remitted in to account then and there. Going by the explanation of the assessee that the cash deposited in SBNs during demonetization period is out of sale proceeds and this issue stands covered in favour of the assessee by the decision of the Co-ordinate of the Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd vs. Assistant Commissioner of Income Tax, Chennai in ITA No.431/Chny/2023 for assessment year 2017- 2018 dated 07.10.2024 and wherein it was held as under:- ''8.4 We have gone through the notifications issued by the RBI and Government of India, to deal with specified bank notes. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. Therefore, we are of the considered view that when there is no significant change in cash deposits during 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 cannot be rejected. Simpliciter violation of certain notification issued by RBI or demonetization scheme announced by Government of India on 08.11.2016 will not entitle the Revenue to make addition u/s. 69 or 69A of the Act. Because, the mandate of the provisions of Section 69 & 69A of the Act, i.e., unexplained investments and unexplained money etc., may be deemed to be the income of the assessee for the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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