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2024 Supreme(Online)(ITAT) 3792
INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
SHRI ABY T VARKEY, J, SHRI S. R. RAGHUNATHA, ACJ
The Deputy Commissioner of Income Tax, Mayavaram Financial Chit Corporation Limited – Appellant
Versus
Income Tax, Circle -2(1), Trichy – Respondent
ITA No.: 80/Chny/2024
For the Appellant:Shri. G. Baskar, Advocate
For the Respondent: Shri. P. Sajit Kumar, JCIT
The court ruled that valid documentation and proven business transactions negate claims of unexplained cash deposits under the Income Tax Act.
Headnote:(A) Income Tax Act, 1961 - Section 69A and Section 115BBE - Addition of Rs.13,37,000/- as unexplained money based on cash deposits during demonetization - Assessing Officer's findings were based on prohibition on acceptance of specified bank notes after 9th November 2016 - Court found the explanation for cash deposits valid, and the addition was held to be legally unsustainable. (Paras 4-10)
(B) Principles of Accounting - Cash measurement principles in accounting reaffirmed, emphasizing that transactions must comply with legal definitions of tender; monetary validity is crucial. (Paras 4-5)
Facts of the case:
Assessee was a company in chit fund services; claimed cash deposits during demonetization were from regular operations and supported by detailed records including transactions and KYC documentation. Appellant's return showed income of Rs.96,95,870/- for the year. (Paras 2-3)
Findings of Court:
Addition upheld by CIT(A) found baseless as valid explanations and bona fide transactions were shown, backed by records. Court directed deletion of the illegal addition made by AO. (Paras 8-10)
Issues: The central question was whether cash deposits made post-demonetization were valid when adequately documented. (Paras 5-6)
Ratio Decidendi: Court concluded that the Assessing Officer's reasons lacked merit and found no basis to treat reported transactions as unexplained credits, emphasizing valid documentation of cash flows and the nature of business operations. (Paras 8-10)
Result: Appeal allowed.
| Table of Content |
|---|
| 1. cash deposits during demonetization from business operations validated through extensive documentation. (Para 2 , 3) |
| 2. the assessment principles regarding the validity of cash in business accounting were reaffirmed. (Para 4 , 5 , 6) |
| 3. the court found insufficient merit in the reasoning behind unexplained cash claims. (Para 8 , 10) |
| 4. court's directive to delete the addition based on the previous findings. (Para 11) |
ORDER
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal instituted by the assessee is against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2017-18, vide order dated 19.12.2023.
2. The sole ground of the assessee is that addition of Rs.13,37,000/- u/s. 69A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and taxed u/s. 115BBE of the Act.
3. The brief facts are that, the assessee is a company engaged in the business of chit fund services to its members. It has filed its return of income for the assessment year 2017-18 on 28.07.2017, declaring a total income of Rs.96,95,870/-. The case was selected for scrutiny through CASS. During the course of assessment proceedings, the Assessing Officer has found that the appellant has made a cash deposit of Rs.32,20,000/- in the form of SBNs during demonetization period. The Assessing Officer has passed an order u/s. 143(3) of the Act on 23.12.2019 by holding Rs.13,37,000/- cash deposits made during demonetization period as unexplained money u/s. 69A of the Act. Aggrieved by the order of the Assessing Officer, the appellant preferred an appeal before the ld.CIT(A).
4. The ld.CIT(A) confirms the addition made by the Assessing Officer by dismissing the appeal of the assessee by holding as under:
“5.7. Now the question arises as to whether any person who received such SBN notes after 9th November, 2016..can bring it into his books of accounts or not. Here, the basic principles of accountancy have to be relied upon. The money measurement concept underlines the fact that in accounting and economics generally, every recorded event or transaction is measured in terms of money, i.e., the local currency monetary unit of measure. Since the SBNS were just a piece of papers and they bear no value on 9th Nov. Or after, as Central Government, the guarantor had withdrawn its guarantee. It is to be noted that from 09.14.2016 only legal tender currencies like Rs. 5, Rs. 10,Rs. 20, Rs. 50, Rs. 100, Rs 200 Rs500 and Rs:2000 only can be accepted by the assessee for any transactions. Therefore, if the assessee has received any Old SBN notes after 09.11.2016. on account of any monetary transactions and utilizes the same for making cash deposits into the bank account, then the credit of the same into the books of accounts is not valid. Therefore, it cannot be measured in money terms and hence, it can't be journalized in books of account. Therefore, the transactions made in SBN on or after 9th November 2016 as prohibited by the law, cannot be entered into cash books. Therefore, the same has to be treated as unexplained money u/s 68 and brought to tax. In view of the foregoing facts the addition made by the AO of Rs 13,37,000/- u/s 69A of the Act is hereby confirmed/Upheld. Accordingly all grounds raised by the appellant are Dismissed.”
Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.
5. The ld.AR stated that the assessee is public limited company and has maintained proper books of accounts as required under both Companies Act and Income Tax Act and the same has been audited by statutory auditors before filing it to the statutory authorities. The assessee had filed a detailed and comprehensive reply before the Assessing Officer by furnishing the details of SBNs deposited, source of deposits along with cash book, ledger A/c, cash receipts from the chit subscribers, KYC of subscribers and other supporting details establishing the recording of transactions of cash deposi
