Payel Verma Vs ITO (ITAT Raipur)
The Raipur Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal filed by Payel Verma against the order of the Commissioner of Income Tax (Appeals)/NFAC for Assessment Year 2017-18. The dispute concerned an addition of ₹17,61,000 made 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, an agent of M/s. Godfrey Philips India Ltd., was engaged in the wholesale trading of Marlboro cigarettes, candy, tea, pan masala and similar products. During assessment proceedings, the Assessing Officer noted that the assessee had deposited cash of ₹1,37,51,000 during the year, of which ₹17,61,000 comprised demonetised currency. The assessee explained that these specified bank notes were received from small retailers, including pan shop owners and cart-based vendors, who regularly purchased goods from the assessee for resale. It was submitted that many such retailers did not maintain income tax or GST records and were not permanently located at a single place. The Assessing Officer rejected the explanation and treated the demonetised cash deposits as unexplained money under Section 69A. The CIT(A)/NFAC affirmed the addition.
The Tribunal observed that the Department had not disputed the assessee’s business model as a wholesaler supplying goods to retailers, including petty pan shop owners and cart-based vendors. It further noted that the Department had accepted the assessee’s turnover, business model, and books of account. The Tribunal also observed that the realities regarding the nature of the assessee’s customers had not been disputed. Since the books of account had been accepted and the Department had not questioned the business transactions, the Tribunal held that the cash deposited in the bank account could not be treated as unexplained money under Section 69A.
