Bhartiya Samruddhi Finance Ltd Vs DCIT (ITAT Delhi)
Demonetisation Cash ≠ Black Money: NBFC’s EMI Recoveries Explained, S.68 Deleted & 43B Deduction Allowed—ITAT Delhi
Assessee, a RBI-registered NBFC & Micro-Finance Institution, faced addition of ₹2.71 crore u/s 68 on account of cash deposits during demonetisation period, AO alleging unexplained money & even invoking s.269T. Assessee explained that cash represented EMI recoveries from about 17,280 existing borrowers, mostly rural & semi-urban, where cash recovery was normal industry practice, digital payments were non-existent & refusal to accept old notes would have resulted in mass defaults. It was also pointed out that bank reporting itself was erroneous, with duplicate reporting by RBL Bank & non-reporting of certain deposits, besides absence of bifurcation between SBN & non-SBN deposits.
ITAT Delhi upheld deletion of addition, holding that AO failed to conduct even basic enquiry, ignored detailed borrower-wise data, made no verification from customers & wrongly applied s.269T which applies to borrowers, not lenders. Tribunal held that recovery of pre-existing loans in cash & deposit thereof in banks, even during demonetisation, cannot be treated as unexplained when business model, past scrutiny history & factual matrix are undisputed. Mere acceptance of SBNs does not ipso facto lead to addition u/s 68 without proving unexplained source.
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