Case Law Details
DCIT Vs Kannan Rajendra Babu (ITAT Chennai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Chennai recently ruled on an appeal involving the Revenue and Kannan Rajendra Babu, a proprietor of a milk business. The case pertained to the assessment year 2017-18 and revolved around the question of accounting for Specified Bank Notes (SBNs) deposited during the 2016 demonetization period. This article provides an in-depth analysis of the case and its implications.
Grounds of Appeal Raised by Revenue: The Revenue initially challenged the Commissioner of Income Tax (Appeals) [CIT(A)] for deleting an addition of Rs. 75,54,450 made towards SBN notes. The Revenue argued that these transactions occurred during the demonetization period, and the assessee failed to identify parties from whom the SBNs were received.
The Decision by CIT(A): The CIT(A) previously considered the business nature of the assessee, dealing with perishable milk products, and deleted the addition made by the Assessing Officer (AO). He argued that the AO didn’t bring any evidence that these sales were extraordinary compared to sales in the preceding year.
Key Arguments by Both Parties: The Department Representative contended that the acceptance of SBNs was illegal from 09.11.2016, according to government and RBI notifications. The counsel for the assessee, however, argued that accepting SBNs was necessary to protect his perishable business and that the Specified Bank Notes (Cessation of Liabilities) Act, 2017 allowed for such transactions during a window period.
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