Case Law Details
Bibekananda Pradhan Vs DCIT (ITAT Cuttack)
In the case of Bibekananda Pradhan Vs DCIT, the appellant appealed against the order of the CIT(A), which upheld an addition of ₹16,80,000 under Section 69 of the Income Tax Act for cash deposited during the demonetization period. The appellant, represented by Advocate P.R. Mohanty, argued that the cash deposits were legitimate as they resulted from sales of Indian Made Foreign Liquor (IMFL) made under exceptional circumstances—specifically, customers paid in specified bank notes (SBN) after purchasing liquor, which could not be returned once opened. The Assessing Officer (AO) acknowledged the appellant’s cash sales but deemed ₹16,80,000 as unexplained, despite having accepted other cash deposits amounting to ₹6,30,000. The Senior DR supported the AO’s stance, asserting that the appellant should not have accepted SBN as a trader. However, the ITAT found merit in the appellant’s argument, stating that the acceptance of SBN was a reasonable response to extraordinary circumstances to avoid loss of business. Ultimately, the ITAT decided to delete the addition of ₹16,80,000, allowing the appeal based on the justifiable acceptance of cash during the demonetization period.
FULL TEXT OF THE ORDER OF ITAT CUTTACK
This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 12.03.2024, passed in DIN & Order No.ITBA/NFAC/S/250/2023- 24/1062424984(1) for the assessment year 2017-2018, on the following grounds of appeal :-
1. For that order dated 12.03.2024 as passed under Section 250 of the I. T.Act, 1961 by the Commissioner of Income Tax (Appeals) Income Tax Department hereinafter referred to as the learned CIT(Appeals) dismissing the appeal is not just and legal on the facts and in the circumstances of the case.
2. For that the learned CIT(Appeals) without properly appreciating the submissions of the appellant from its proper perspective should not have confirmed the addition of 18,16,000/- u/s.69 of the I. T.Act, 1961 on the facts and in the circumstances of the case.
3. For that the learned Assessing Officer having admitted that the appellant was having only cash sales and the appellant was used to deposit the cash in the bank account the learned AO is not justified to make addition of Rs. 18,16,000/- u/s.69 of the I. T.Act, 1961 on the facts and in the circumstances of the case.
2. The assessee is represented by Shri P.R.Mohanty, Advocate and department is represented by Shri S.C.Mohanty, Sr. DR.
3. The only issue involved in this case with regard to addition of Rs.16,800/- was made u/s.69 of the Act on account of cash deposited in the bank during demonetization period under SBN.
4. It was submitted by the ld. AR that the cash was deposited out of the sales made during the year. The assessee is dealing in IMFL and accepted the SBN during demonetization period for which the ld. AR submitted that the cash was accepted in SBN under compulsion as the customers came to the shop and had taken the goods i.e. liquor bottle and after opening the same asked the assessee to accept sale consideration in SBN. In the case of liquor, once the bottle is opened, no one can accept it as sales return, therefore, the assessee has no other alternative but to accept the sale consideration in any denomination irrespective of the fact whether it is SBN or any other currency. It was the submission that the AO has not rejected the books of accounts nor stock declared by the assessee was disturbed. The sales declared by the assessee were also accepted. He, therefore, submitted that there was a reasonable cause in accepting the SBN which was deposited in the bank and the source of the same was duly explained and not doubted by the AO.
5. In reply, ld. Sr. DR submitted that the cash was received in SBN during the demonetization and the assessee being a trader in IMFL is not authorized to collect such SBN currency, therefore, the addition made by the AO is correct. Accordingly, the ld. Sr. DR vehemently supported the orders of the lower authorities.
6. I have heard the rival submissions. It is perused that in this case the assessee has deposited total cash out of Rs.26,46,000/- in SBN during the demonetization period. The AO after giving credit of average sales of 6,30,000/- held Rs.16,80,000/- as unexplained. From the perusal of the order, it is seen that the AO nowhere held that the SBN accepted by the assessee during the demonetization is unauthorized and he himself had accepted the sales as well as stock declared by the assessee. The assessee is dealing in IMFL and had made retail sales of liquor wherein many cases customers took the goods and opened up the cap. Once the liquor bottle is opened, it cannot be returned to the seller as it cannot be accepted by any other customer and is a total loss to seller. Due to this compulsion and exceptional circumstances, the assessee had to accept the SBN in those cases. Though I am of the view that SBN cannot be accepted during demonetization except authorized by the RBI, however, as the circumstances narrated above are beyond the control of the assessee, therefore, it is a reasonable cause where to protect the interest of business and to avoid total loss, SBN were accepted from such customers. The AO has already allowed Rs.6,30,000/- as unexplained out of such sales in SBN and also accepted the trading results declared by the assessee wherein such cash sales in SBN was included in total sales by the assessee. Looking to these circumstances, I am of the considered view that the addition of Rs.16,80,000/- made by the AO and confirmed by the ld. CIT(A) should be deleted as the assessee has demonstrated the exceptional circumstances under which such cash was accepted under SBN. In view of these facts, the addition of Rs.16,80,000/- made by the AO is hereby deleted.
7. In the result, appeal of the assessee is allowed.
Order dictated and pronounced in the open court on 10/09/2024.
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