DSA Motors Vs ITO (ITAT Chennai)
The Chennai ITAT allowed the assessee’s appeal for AY 2017-18 against the order of the Commissioner of Income Tax (Appeals), NFAC, which had confirmed an addition of ₹50,33,000 under Section 69A read with Section 115BBE of the Income-tax Act in respect of specified bank notes (SBNs) deposited during the demonetisation period.
The assessee, a partnership firm formed for operating a two-wheeler dealership, submitted that it could not commence business because the manufacturer failed to supply vehicles. The firm had obtained a loan from Tamilnadu Mercantile Bank for the proposed business, but due to non-supply of vehicles and financial difficulties, it defaulted in repayment. It was stated that loans were subsequently collected from relatives and friends to repay the bank dues and the cash, including SBNs, was deposited into the bank account. The assessee also filed a criminal case against the manufacturer for breach of the agreement.
The Assessing Officer completed the assessment ex parte under Section 144 by treating ₹50,33,000 as unexplained money under Section 69A read with Section 115BBE and also estimated business income at 8% of alleged turnover. Before the CIT(A), the assessee furnished confirmations from lenders, their identity details, PAN, explanations regarding the source of deposits, dishonoured cheques, and additional evidence under Rule 46A. The CIT(A) deleted the estimated business income addition but sustained the addition relating to SBN deposits.
