M/S. SRI BALAJI EDUCATIONAL AND CHARITABLE PUBLIC TRUST,CHENNAI V. ACIT, CENTRAL CIRCLE-3(4), CHENNAI

ITA 1249/CHNY/2025

AI Insights

The case involves M/s. Sri Balaji Educational and Charitable Public Trust, which faced scrutiny following a search operation under section 132 of the Income Tax Act, 1961. The search led to the disclosure of unaccounted income and subsequent legal proceedings. The primary issues in the appeals were the shortfall in income disclosure compared to the initial admissions made during the search and the treatment of cash deposits made during the demonetization period. The Tribunal's decision addressed the legal and factual complexities surrounding these issues, ultimately dismissing both parties' appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792666 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 30-04-2025
• Other Referred Cases: M/s. Micky Fireworks Industries vs ACIT, Shri Raju Dinesh Kumar vs DCIT, Amar Sparklers Factory v. ITO, Mrs. Umamaheswari Vs. ITO, Pullangode Rubber Produce Co. Ltd. v. State of Kerala, Agson Global (P) Ltd vs ACIT, Dewas Soya Ltd, Ujjain vs ITO, M/s. Purani Hospitals Suppliers Pvt Ltd vs DCIT, M/s. Vidhiyasekaran Pradeep Malliraj vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: E.PAVUNA SUNDARI
• Assessee Lawyers: Y. SRIDHAR; RETAINING
• Keywords: Set aside; Business income; Reasonable cause; Corroborative evidences; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Bogus purchase; Retraction; Principle of natural justice; TDS; Search and seizure; Charitable institution; FORM 26AS; Bogus
• Section: 68; 69

Judgement Text

" आयकर अपीलीय अिधकरण, ‘ए’ ा यपीठ, चे\u0012ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI \u0014ी एबी टी वक\u0018, ा ियक सद\u001b एवं \u0014ी एस. आर. रघुना था , लेखा सद\u001b क े सम# BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1249/Chny/2025 िनधा $रण वष$ / Assessment Year: 2017-18 M/s. Sri Balaji Educational and Charitable Public Trust, No. 60, First Avenue, Jai Durga Complex, Ashok Nagar, Chennai – 600 083. Tamil Nadu. vs. ACIT, Central Circle 3(4), Chennai. [PAN: AACTS-1386-D] (अपीला थ\u0018/Appellant) (&'थ\u0018/Respondent) आयकर अपील सं./ITA Nos.:1471/Chny/2025 िनधा $रण वष$ / Assessment Year: 2017-18 ACIT, Central Circle 3(4), Chennai. vs. M/s. Sri Balaji Educational and Charitable Public Trust, No. 60, First Avenue, Jai Durga Complex, Ashok Nagar, Chennai – 600 083. Tamil Nadu. (अपीला थ\u0018/Appellant) [PAN: AACTS-1386-D] (&'थ\u0018/Respondent) िनधा $)रती की ओर से/Assessee by : Shri. Y.Sridhar, FCA रा ज4 की ओर से /Revenue by : Ms. E. Pavuna Sundari, CIT सुनवा ई की ता रीख/Date of Hearing : 08.09.2025 घोषणा की ता रीख/Date of Pronouncement : 01.12.2025 Printed from counselvise.com :-2-: ITA. No.:1249 &1471/Chny/2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM: These appeals by the assessee and the revenue are filed against the order of the Commissioner of Income Tax (Appeals), CIT(Appeals), Chennai - 20, (in short ‘ld.CIT(A)’) for the assessment year (A.Y.) 2017-18, vide order dated 06.02.2025 passed u/s.250 of the Income Tax Act, 1961 (in short “the Act”). Since facts are identical and issues are common, for the sake of convenience, these appeals filed by the assessee and revenue are being heard together and disposed of by this consolidated order. 1.1 At the outset, we find that there is a delay of 21 days in filing the appeal filed by the revenue and the revenue explained the reasons for delay in filing the appeal. The revenue has filed affidavit stating the reasons for delay in filing the appeal is due to cases having time barring date for completion of pending assessment on 31.03.2025 were to be completed and as the case is related to old AY, the tracing out of the relevant miscellaneous records took some time and once the records were traced out, immediately the appeal paper were made ready and appeal is being filed on 21.05.2025. After considering the affidavit filed by the revenue and also hearing both the parties, we find that there is a reasonable cause for the revenue in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit the appeal filed by the revenue for adjudication. 2. The brief facts of the case are that M/s.Sri Balaji Educational and Public Charitable Trust (hereinafter referred to as ‘assessee’), is a Registered Public Charitable Trust engaged in providing education through the educational institutions run under its aegis in the streams of Medicine, Engineering, Arts, Science and Allied Disciplines. Printed from counselvise.com :-3-: ITA. No.:1249 &1471/Chny/2025 3. An action u/s.132 of the Act was undertaken in the case of an assessee on 24.06.2016 and the residential and office premises of the Chairman and Managing Trustee M.K.Rajagopalan was simultaneously covered in the said action. Based on the material gathered during the course of search and transactions portrayed in it, the Managing Trustee volunteered to disclose an additional total income of Rs.325.00 crores spread across five assessment years. 4. Both the assessee and that of the Managing Trustee, availed the benefit of settlement under Chapter XIX-A of the Act, and orders u/s.245D(4) of the Act were passed in both the cases and substantial portion of the income disclosed as search were covered in the said settlement. However, the assessment years that were covered in the said settlement pertain to assessment years 2013-14 to 2016-17. 5. The year under consideration before us relates to A.Y.2017-18 which was not covered by the proceedings under Chapter XIX-A. Based on the records and the deposition of the person searched, an order u/s.143(3) was passed for the A.Y. 2017-18 on 28.12.2018 arriving at a taxable income of Rs.87,02,28,152/- resulting in a tax demand of Rs. 30,01,78,782/- as against the income returned of Rs.25,09,88,510/-. 6. Due to dispute with regard to the addition in the said order, the assessee had preferred an appeal and the ld.CIT(A) had granted partial relief. The addition to total income in the said assessment order was twin-pronged being: a. Shortfall in disclosure of income in comparison to the declaration made u/S 132(4) of Rs.54,61,00,000/- b. Cash deposit of Rs.5,31,39,642/- made during the period of demonetisation, the source of which remained unexplained. Printed from counselvise.com :-4-: ITA. No.:1249 &1471/Chny/2025 7. Accordingly, a total addition of Rs.61,92,39,642/- was made in the assessment order. The details of additions and the reasoning given by the Assessing Officer for the above additions are given below: “SUMMARY OF ADDITIONAL INCOME OFFERED YEAR WISE Sl.No. Year Amount in Crores 1 2012-13 21.77 2 2013-14 78.24 3 2014-15 98.41 4 2015-16 46.88 5 2016-17 79.70 (54.18+25.52) Total 325 4. During the course of assessment proceedings, on verification of the return of income filed for the assessment year in question, it is noticed that the assessee has offered donation in the form of voluntary contribution at Rs 25,09,88,510/- as against undisclosed amount of Rs. 79,70,00,000/- admitted during the course of search and post search proceedings. In this regard, vide this office show cause notice dated 29-8-2018, the assessee was asked to furnish explanation for not adhering to the admission made during the course of search proceedings. In response, the assessee has furnished a comparative chart depicting the income admitted before the Investigation wing & income admitted which is enclosed as per annexure-I 5. On careful consideration of the above depicted chart, it is noticed that as against total donations receipt of Rs.55.01 crores, the assessee has admitted in the return of income for the year under consideration at Rs.25.09 crores resulting in not offering income of Rs.29.92 crores. Further, as against the admitted buffer undisclosed income of Rs.24.69 crores, no income was admitted by the assessee. In total, the assessee had failed to offer an agreed amount of Rs.54.61 crores for the assessment year under consideration. Further, on prerusal of the Bank Account of the assesse reveals that the assesse has deposited an amount of Rs. 5,31,39,642/ during the Demonetisation period, i.e. from 08-11-2016 to 30-12-2016. It may be mentioned that as a consequence of the Search action the assesse was left with only an amount of Rs.2,26,61,700/- as physical Cash as the remaining amount was seized during the course of the Search action. Therefore any deposit of Cash in the Bank Account has to have a fresh source and cannot be explained away with the availability of Cash on or before the date of Search and Seizure action. In other words, if the assesse is in receipt of Cash after the date of Search. then only there is any possibility for the assesse to deposit the Cash in the Bank Account. In view of the Operation Clean Money, the assesse was asked to submit an online response on the Cash Deposited during the Demonetisation period. The response sheet had three broad categories namely, Cash received from persons with PAN Printed from counselvise.com :-5-: ITA. No.:1249 &1471/Chny/2025 Cash received from identifiable persons without PAN, and Cash received from unidentifiable persons It is noticed from the online response that the assessee has not filled in any of the columns. Therefore it is not clear and not certain whether the assesse had any source for the deposit of Cash in the Bank Account. It has already been stated that the assesse should have a source for deposit of Cash after 24-6-2016, i.e. the Date of Search, when almost all the Cash Balance of the assesse was seized. Therefore, it is only but obvious that the source of Cash is the unaccounted income of the assesse, which has been deposited in the Bank Account. It may also be stated that the assesse had filed application before the Hon'ble ITSC only upto the A.Y. 2016-17 and any declaration of income before the Hon'ble ITSC can be covered only upto the A.Y. 2016-17 and not beyond A.Y. 2016-17. In view of the above, the Cash Book and the Books of Account of the assesse are treated as incomplete and the correctness & completeness of the same are in doubt and a such, the books of account are rejected. Further, as the assessee has failed to furnish any explanation for the nature and source of cash deposits of Rs. 5,31,39,642/- into the bank account of the assessee, the same is treated as unexplained investment u/s 69 of the Income Tax Act 1961 and treated as income of the assessee and brought to tax accordingly.” 8. The ld.CIT(A) had partly allowed the appeal of the assessee by retaining the quantum of shortfall in disclosure of income in comparison to the declaration made u/s.132(4) of the Act to the extent of Rs.29,93,11,490/-, while deleting a sum of Rs.24,26,00,000/-. The addition u/s.69 of the Act in respect of the cash deposit during the period of demonetisation of Rs.5,31,39,642/- was also directed to be deleted. 9. The ld.CIT(A) while giving relief to the assessee on these two issues considering the following reasons in his order dated 06.02.2025: “6.1.10. With respect to the addition made by the AO on account of buffer income of Rs.24.26 crores offered by the appellant in the statements recorded in the course of search and the letter dated 26.08.2016, it is noted that this amount was offered by the appellant purely as additional buffer income to cover up any commissions/omissions. In the said letter, it was clearly admitted by the appellant that the incriminating material seized contain Rs.300.74 crores for AY 2013-14 to 2017-18 and the said buffer amount of Rs.24.26 crores was offered additionally which is over and above the amount of Rs.300.74 crores of unaccounted anonymous donations arising out of incriminating materials seized vide different annexures. On perusal of the statements recorded and letter dated 26.08.2016, it is clear that the total unaccounted anonymous donations received by the appellant Printed from counselvise.com :-6-: ITA. No.:1249 &1471/Chny/2025 arising out of the incriminating materials seized vide various annexures is only to the tune of Rs.300.74 crores (which includes Rs.245.71 crores for AY 2013-14 to 2016-17 & Rs.55.03 crores for AY 2017-18). The amount of Rs.245.71 crores of unaccounted anonymous donations for AY 2013-14 to 2016-17 was already settled by the Hon'ble IBS-II, New Delhi as discussed in the earlier paragraphs. Further, the unaccounted anonymous donations of Rs.55.03 crores which relates to AY 2017-18 is also partly offered by the appellant in the return of income filed for AY 2017-18 to the tune of Rs.25,09,88,505/-and the balance amount of Rs.29,93,11,490/- has been held by me in the above paragraph as additional undisclosed income to be taxed in the hands of the appellant for AY 2017-18. Thus, the entire amount of Rs.300.74 crores arising out of the incriminating material seized during the course of search has already been brought to tax and there is no material evidence available with the AO to bring to tax the additional sum of Rs.24.26 crores over and above the incriminating material seized in the course of search. It is also noted that the appellant had originally admitted the additional sum of Rs.24.26 crores in the statements recorded and letter filed on 26.08.2016 only to keep up the initial disclosure of Rs.325 crores. It is a well-settled law that no addition can be made merely based on the statement recorded u/s 132(4) of the Act without any corroborative materials. Hence, I am of the opinion that the addition made by the AO of Rs.24.26 crores on account of additional buffer income admitted by the appellant is without any material evidence and the same cannot be sustained. 6.1.11 To summarize the above, incriminating materials were seized during the course of search as per which the unaccounted anonymous donations received by the appellant Trust for the year under consideration has been quantified at Rs.55,03,00,000/- and no telescoping benefit can be given in respect of the income finally settled in the case of the appellant and its Chairman, Shri M.K. Rajagopalan, for AY 2013-14 to 2016-17. Since, the appellant had already offered Rs.25,09,88,510/- in the return of income for AY 2017-18 and only the balance amount of Rs.29,93,11,490/-, which is emanating from seized material, has to be brought to tax. It is also held that the AO does not have any material to corroborate the additional buffer income of Rs.24,26,00,000/- and the said addition cannot be sustained. Therefore, the addition made by the AO is restricted only to Rs.29,93,11,490/-. Accordingly, this ground raised by the appellant is partly allowed. ------ 6.3.4. I have perused the details furnished by the appellant, remand report of the AO and the appellant's rejoinder to the remand report. The appellant has submitted in its submissions that it had an opening balance of cash of Rs.3,03,26,828/-as on 08/11/2016, out of the which an amount Rs 2.74,35,338/-was in demonetized currencies and the same was deposited in various bank accounts of the appellant. In support of the claim, the appellant had submitted the extracts of cash book from the books of accounts showing closing balance of its various institutes as on 07.11.2016 which constitutes Rs.3,03,26,828/- In this regard, in the remand report, the AO has stated that the appellant has furnished bank accounts summary and its closing balance for only two of its units and except for these extracts, the appellant has not furnished any other supporting evidence such as details of cash sales made etc. It is observed from the remand report and the details submitted by the appellant that appellant has maintained regular books of accounts for the FY 2016-17 which was also found at the time of search proceedings on 24.06.2016. Further, it is also noted that the appellant had filed the return of income for AY 2017-18 on 31.10.2017 based on the books of Printed from counselvise.com :-7-: ITA. No.:1249 &1471/Chny/2025 accounts maintained by it. It is also noted that the cash balance as on the date of search i.e. on 24.06.2016, was Rs.2,15,11,958/- and as on 07.11.2016 was Rs 3,03,26,828/-. It shows that the appellant has a closing balance of cash of Rs 2-3 crores on a given date for all the institutes run by the appellant Trust. By considering this fact, the closing balance as on 07.11.2016 of Rs.3 crores is not exorbitant or unusual. Further, the AO could not find any unaccounted cash being introduced into the books of accounts without any valid sales/receipts just before the demonetization with evidences. The only reason stated by the AO for not accepting the opening cash balance as on 08.11.2016 was that the appellant did not furnish the details of cash sales made prior to 08.11.2016. This alone cannot be the reason to deny or reject the closing balance as on 07.11.2016 for the reason that the appellant is in regular practice of maintaining the books of accounts and unless and otherwise there is a specific finding that cash has been brought into the books of accounts without valid source, the genuineness of the opening balance cannot be doubted. Moreover, by looking into the cash balance available as on the date of search in the books of accounts of the appellant, the closing balance as on 07.11.2016 seems reasonable. Hence, the amount of addition of Rs.2,74,35,338/-on account of opening balance as on 08.11.2016 is to be deleted. 6.3.5. The appellant has claimed that the balance cash deposits of Rs.2,57,04,124/- have been made out of cash collection made during the demonetization period, out of which an amount of Rs.1,07,17,948/- pertains to pharmacy sales and balance of Rs.1,49,86,176/- pertains to Hospital Services. Further, out of the said deposit of Rs.2,57,04,124/-, an amount of Rs.1,43,13,000/-has been deposited in Specified Bank Notes (SBN). The appellant has also furnished copy of VAT returns filed by the appellant for November 2016 & December 2016 to prove the genuineness of sale of pharmacy items. In the remand report, the AO has stated that the Ministry of Finance, Department of Economic Affairs had permitted use of SBNs in pharmacies from 09.11.2016 until 11.11.2016 and then subsequently extended till 24.11.2016 only. Further, the AO has stated that all the establishments which were allowed to accept SBNs between 09.11.2016 to 24.11.2016 were also required to maintain complete account of record of stock and sale of transactions made with the SBNs during this period but the appellant did not furnish any such details during the remand proceedings. The issue that arises to be considered is whether the SBNs received by an assessee during demonetization period in its normal course of business has to be considered as income of the assessee or not. A similar issue was considered by the Hon'ble ITAT, Chennai in the case of Mrs. Umamaheswari Vs. ITO in ITA No.527/Chny/2022 dated 14.10.2022, wherein it was held that there is no prohibition under the Specified Bank Notes (Cessation of Liabilities) Act, 2017, to deal with Specified Bank Notes up to 31.12.2016. The relevant part of the order of Hon'ble ITAT is reproduced as under: 6. I have heard both the parties, perused the materials available on record and gone through orders of the authorities below. As regards, the first objection of the AO on legal tender of Specified Bank Notes on or after 08. 11.2016, I find that as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which came into effect from 31.12.2016 appointed date for this purpose means 31.12.2016. Further, as per Sec. 5 of said Ordinance, from the appointed date. no person shall, knowingly or voluntarily, hold or transfer or receive any Specified Bank Notes. From the above what is clear is that up to the appointed date Le 31.12.2016, there is no prohibition for dealing with Specified Bank Notes. Therefore, in my considered view, the objection of the AO on this regard in light of said Act is devoid of merits. Further, a similar issue had been considered by the Tribunal, Visakhapatnam Bench, in the case of Printed from counselvise.com :-8-: ITA. No.:1249 &1471/Chny/2025 Sri Tatiparti Satyanarayana in ITA No.76/Viz/2021, where the Tribunal after considering relevant provision of Specified Bank Notes (Cessation of Liabilities) Act, 2017, held that there is no prohibition under the Act to deal with Specified Bank Notes up to 31.12.2016 Therefore, in my considered view, the observation of the AO on this regard totally incorrect and liable to be rejected. 7. Having said so, let us come back to explanation of the assessee with regard to source for cash deposits. The assessee explained before the AO that she had received a sum of Rs.13 lakhs from Smt. Vedhavathy for sale of property on 09.11.2016. In fact, the AO accepted, the assessee has received consideration for sale of property from Smt. Vedhavathy and the purchaser has also filed a confirmation letter stating that she had paid consideration in cash. Therefore, once the AO is accepted the fact that the assessee has received consideration in cash, then the source for cash deposits during demonetization period should have been accepted out of sale consideration received for property. In my considered view, the AO grossly erred in not accepting the source for balance cash deposits of Rs.7,67,500/-, even though, the assessee has filed necessary evidences to prove the availability of source for cash deposits. The Ld.CIT(A) without appreciating the fact simply confirmed the additions made by the AO. Hence, I set aside the order of the Ld.CIT(A) and direct the AO to delete the addition made towards cash deposits of Rs. 7,67,500/- u/s.69A of the Act.\" Further, relying on the above order, the Hon'ble ITAT, Chennai allowed the assessee's appeal in the case of Mis. Micky Fireworks Industries vs ACIT in ITA No 264/Chny/2023 dated 26.07.2023. Similar decision has been given by the Hon'ble ITAT, Chennai in various cases such as Shri Raju Dinesh Kumar vs DCIT in ITA No. 1321/Chny/2023 dated 19.01.2024 & Amar Sparklers Factory v. ITO in ITA No. 808/Chny/2023 dated 11.10.2023. Similar findings have been given by various benches of the Hon'ble ITAT. Thus, the SBNs received by an assessee during normal course of business cannot be treated as income of the assessee if source for the same is established. 6.3.6. In the present case, it can be seen from the VAT returns that the appellant had a sales turnover of Rs. 1,06,56,321/- & Rs.78,81,806/- during the month of November, 2016 & December, 2016, respectively from pharmacy sales alone. Hence, it can be seen that the appellant has receipts of Rs.1,85,38,127/- from pharmacy sales, out of which of Rs.1,07,17,948/- was deposited during the demonetization period to explain the source of part of the cash of Rs.2,57,04,124/- deposited in form of SBNs and the same cannot be considered as income of the appellant. Further, the appellant had claimed the balance amount of Rs.1,49,86,176/- (Rs.2,57,04,124/-Rs.1,07,17,948) pertains to Hospital services and stated that the pharmacy sales and hospital income has to go together as the patient are admitted in the hospital for medical treatment. Further, the appellant also submitted that it is operating medical college hospital in rural areas and the patients coming for treatment cannot be denied on account of cash in the form of demonetized currency not being accepted. The submissions of the appellant were considered and it is noted that the appellant was able to prove that its pharmacy sales for November & December, 2016 was Rs.1,85,38,127/- and hospital collection of Rs. 1,49,86,176/-are already considered as sale receipts in the books of accounts and out of the said receipts, an amount of Rs. 1,43,13,000/- was received in SBNs and the same was deposited in the bank accounts. It is also noted that the remaining amount of Rs.1.13,91,304/- was deposited in denominations other than SBNs. On the facts and circumstances of the case, the Printed from counselvise.com :-9-: ITA. No.:1249 &1471/Chny/2025 appellant has explained the source for depositing amount of Rs.2,57,04,124/- as sales from pharmacy and hospital collections during the demonetization period which prima facie seems acceptable. Therefore, respectfully following the above decisions of the Hon'ble ITAT, Chennai, I am of the opinion that no addition can be made in respect of Rs.2,57,04,124/- of cash deposited during the demonetization period. 6.3.7. To summarize the above, the entire cash deposits of Rs.5,31,39,462/-have been explained by the appellant as Rs.2.74,35,338/- being deposited out of the opening cash as on 08.11.2016 and balance of Rs.2,57,04,124/- being deposited out of the pharmacy sales and hospital collection during the demonetization period which is already accounted in the books of accounts as sales. Since the source has been reasonably explained by the appellant, the addition of Rs.5,31,39,462/- is to be deleted. Accordingly, this ground of appeal is allowed. --------- 6.4.2. Firstly, it is noticed that the total additions made by the AO based on the discussion in the assessment order are as under: 1) Unaccounted anonymous donations - Rs 54,61,00,000/- ii) Unexplained cash deposits - Rs.5.31.39,642/- TOTAL - Rs.59,92,39,642/- Thus, it can be seen that the total addition made by the AO in the assessment order was only Rs.59,92,39,642/-. However, the total additions on the last page of the assessment order was mentioned as Rs.61,92,39,642/-. Therefore, there is an excess addition of Rs.2,00,00,000/- in the final computation. Secondly, with regard to the quantum of addition in respect of the unaccounted anonymous donations received during the year, in Para 6.1.11. of this order. I have restricted the amount of addition on this issue to Rs.29,93,11,490/- only. Further, in Para 6.3.7 of this order, I have deleted the addition of Rs.5,31,39,642/- in respect of unexplained cash deposits in the bank accounts. Accordingly, the AO is directed to re-compute the assessed income of the appellant by considering the sustained addition of Rs.29,93,11,490/-alone and delete the balance additions. The AO is also directed to consider the TDS as available in Form 26AS of the appellant in computation of the demand payable. With these directions, this ground of appeal is partly allowed.” 10. In the perspective of the assessee, there was no reason to interfere with the quantum of income disclosed in the said return, such partial relief extended by the First Appellate Authority (FAA) while retaining a major portion as addition to total income, was not good in law. The entire grounds of appeal of the assessee, pertains to this contest. 11. The balance relief extended by the Appellate Commissioner was not acceptable to the Department and seeking restoration of the order passed by Printed from counselvise.com :-10-: ITA. No.:1249 &1471/Chny/2025 the AO, the Department is in appeal before us and the grounds of appeal in Nos. 2 to 5, challenges the order of the ld.CIT(A). 12. Therefore, the principle bone of contention is pivoted to a solitary finding of fact that relates to the correctness of the total quantum of income to be taxed as a result of search spread across five assessment years, in the case of the assessee and that of the Managing Trustee of the assessee Trust and additionally, the explanation with regard to the source of cash deposited during the period of demonetisation. 13. The Ld.AR advanced arguments and supported the case of the assessee with various case laws and furnished various documents containing workings / computations etc. 14. The Ld. CIT-DR also advanced arguments and supported the findings rendered by the AO and likewise, relied on various case laws. Having heard rival submissions and upon perusal of case records, our adjudication would be as under: 15. ITA 1471/CHNY/2025 – A.Y. 2017-18 15.1 The Department challenges the relief granted to the assessee on the issues of shortfall in disclosure of income in comparison to the declaration made u/s.132(4) of the Act at the time of search, to the extent of Rs.24,26,00,000/- and the acceptance of the explanation with regard to the source deposited during the period of demonetisation by ld.CIT(A). Accordingly, it had fostered the following grounds of appeal: 1. The order of the ld. Commissioner of I.T. (Appeals) is opposed to law and facts of the case. 2. Whether the Ld.CIT(A) was justified in law and facts, in deleting the addition of Rs.24.26 crore without appreciating that this amount of Rs.24.26 crore of undisclosed income was part of ₹325 Cr admitted by the assessee (through Shri.M.K.Rajagopalan, Printed from counselvise.com :-11-: ITA. No.:1249 &1471/Chny/2025 vide statement recorded on 25.06.2016, 29,06,2016 and 19.08.2016 in the statements recorded on oath and again confirmed vide letter dated 26/8/2016? 3. Whether the Ld. CIT(A) erred in law and facts in deleting the addition of Rs.24.26 Crores, without appreciating the fact that statements confirming the undisclosed income of ₹325 crore including sum of ₹24.26 crore) was made voluntarily without any allegations of duress? 4. Whether the Ld. CIT(A) erred in law and facts, in deleting the addition of Rs.24.26 crores, without appreciating that the statements of oath were based on specific incriminating material recovered during the course of search? 5. Whether the Ld.CIT(A) erred in deleting the addition of Rs.24.26 crores, without appreciating that the statement recorded on oath are relevant, admissible and constitute good evidence? 6. Whether the Ld.CIT(A) erred in law and fact in deleting the addition of Rs.5,31,39,642/- towards cash deposit made during the demonetisation period with out appreciating the fact that the assessee had failed to produce documentary evidence in support of his claim of cash balance as on 07.09.2016 and with regard to huge amount of sales bound to be received in SBN’s. 7. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of the learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. 15.2 As stated earlier, there are two issues to be adjudicated. One relates to the argument that there is a shortfall in declaration to the extent of Rs.24.26 crores, as compared to the quantum of total undisclosed income spread across five assessment years in the case of the assessee and the second relates to the explanation with regard to the source of cash deposited in the form of SBNs during the period of demonetisation. 16. ITA 1249/CHNY/2025 - A.Y. 2017-18 16.1 The assessee not being satisfied with the relief granted by the ld.CIT(A), is challenging the Order on the pretext that the declaration made at the time of search u/s.132(4) of the Act was satisfactorily complied and according to the assessee, the total quantum of income assessed in the orders finally passed for A.Yrs. 2013-14 to 2016-17, added to that of the income disclosed in the return of income filed for A.Y.2017-18 in the hands of the assessee and the Managing Trustee of the assessee, surpasses the quantum of declaration made Printed from counselvise.com :-12-: ITA. No.:1249 &1471/Chny/2025 in the deposition u/s.132(4) of the Act and therefore there was no reason for any addition to total income in the said return. 16.2 To accentuate this claim, the following grounds of appeal were submitted by the assessee: 1. The Ld. CIT(A) erred in partly confirming the order of the Ld. AO which is contrary to law, facts and opposed to the principles of natural justice and fair procedure. 2. The Ld. CIT(A) erred in sustaining the addition of Rs.29.92 Crores for the following reasons: a) The Ld. CIT(A) failed to appreciate that the entire proceedings relating to the search ought to be seen together and that AY 2017-18 should not be seen in isolation. Thus, the Ld. CIT(A) failed to appreciate the spirit of the Settlement Commission. b) The Ld. CIT(A) failed to appreciate that the income of Rs.300.74 Crores admitted during the course of the search was for the entire period from AY 2013-14 to AY 2017- 18 was not attributable to any particular year. c) The Ld. CIT(A) failed to consider the deduction of Rs.41.18 Crores by way of outflows upto AY 2016-17 from the gross undisclosed income of Rs. 300.74 Crores admitted for the period upto AY 2017-18. Thus, the total undisclosed income for the period upto AY 2017-18 works out to Rs. 259.56 Crores (Rs. 300.74 – Rs. 41.18 Crores). d) The Ld. CIT(A) erred to note that the deduction by way of outflows were also approved by the Hon’ble ITSC by admission of its application u/s.245D(1). The fact of which was brought out in statement of facts and written submission before the Ld. CIT(A) and the Ld. CIT(A) erred in not considering the said ground. e) Thus, the Ld. CIT(A) failed to appreciate the fact that as against the additional of income of Rs.259.56 crores up the AY 2017-18 (as stated supra), an amount of Rs.234.28 Crores (including Rs.48.07 Crores of income added by the Hon’ble IBS) has been assessed up to the AY 2016-17 by Hon’ble IBS, Delhi. f) The Ld. CIT(A) erred to note that the total income assessed of Rs.234.28 Crores represents net income i.e., after allowing deduction u/s.115BBC of Rs.12.28 crores and thus gross income already assessed upto AY 2016-17 works out to Rs.246.56 Crores (Rs.234.28 Crores + Rs.12.28 Crores). Thus, leaving a balance of Rs.13 crores only, to be offered in the year under consideration. g) For that, the Ld.CIT(A) erred to note that the appellant had admitted an amount of Rs.25.09 Crores while filing the return of income for the year under consideration. h) The Ld.CIT(A) erred to note that even assuming that only net income assessed is ought to be considered, then the addition in this regard ought to be restricted to Rs.0.19 Crores (Rs.259.56 Crores – Rs.234.28 Crores – Rs.25.09 Crores) 3. The addition of Rs.29.92 Crores being the difference between income admitted by the appellant and the amount as per seized material may be deleted in view of the fact Printed from counselvise.com :-13-: ITA. No.:1249 &1471/Chny/2025 that the aggregate income admitted to tax by the appellant for AY 2013-14 to AY 2017- 18 is higher than the total income as per seized material. 4. For the above reasons and other reasons that may be adduced at the time of hearing, the addition of Rs.29.92 crores may kindly be deleted to meet justice. 5. The appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 16.3 In the case of the assessee and that of the Managing Trustee, there are ten assessment proceedings. Out of the ten assessments being covered as a result of search, a predominant portion being 8 assessments were settled through the proceedings of the Income-tax Settlement Commission and the A.Y.2017-18 is before us. 16.4 According to the Ld.AR, the total disclosure for all the years including A.Y.2017-18, was an ad-hoc value, which is a natural phenomenon in any search action when assessees’ are being coerced to boost the statistics of the Department. Obviously, these values are subject to correction based on evidence exhibited in the material seized, and after a thorough examination, the true and correct income that relates to A.Y.2017-18 of Rs. 25,09,88,510/- was declared in the return of income filed. 16.5 It was further stated that this return of income was subject to scrutiny and the assessing officer without appreciating the claims and contentions of the assessee, and the correctness of the income disclosed, in a mechanical manner brought the differential value of Rs.54.61 crores to tax. According to the assessing officer, “the disclosure made at the time of search is final and failure to keep up with the commitment is inappropriate”. Without appreciating the fact that mere deposition at the time of search, without corroborative evidence cannot result in addition. The assessing officer brought the differential sum to tax. Printed from counselvise.com :-14-: ITA. No.:1249 &1471/Chny/2025 16.6 The assessee had preferred an appeal and the ld.CIT(A) was of the opinion that the total quantum of income to be disclosed in the hands of the assessee for A.Y.2017-18 ought to be Rs.55.03 crores and therefore, this value as reduced by the income already disclosed in the return for the year of Rs.25.09 crores, being a sum of Rs.29,93,11,490/- was retained by the ld.CIT(A), while the balance sum of Rs.24,26,00,000/- was directed to be deleted. 16.7 The Department is in appeal, in respect of the relief granted to the extent of Rs.24.26 Crores + Rs.5.31 Crores = Rs.29.60 crores, while the assessee is on appeal seeking deletion of Rs.29.93 crores retained by the ld.CIT(A) in his order. Since the deletion to the extent of Rs.24.26 crores by the ld.CIT(A) and retention to the extent of Rs.29.93 crores are parts of same addition to total income and connected to the disclosure made u/s.132(4) for the year, both the contests on this issue are adjudicated together. 16.8 On examination of the contents of the assessment order and that of the appellate order, it is seen that the addition made in the assessment order and the adjudication made granting partial relief is solitarily confined to the total disclosure made of Rs.325.00 crores. While the AO felt there was a shortfall to the extent of Rs.54.91 crores, and hence this sum was added to the total income. The ld.CIT(A) of the view that the shortfall is only Rs.29.93 crores and thus addition was scaled down to the extent of Rs.24.26 crores. On the sum retained, deduction @ 5% u/s.115BBC(1)(i)(a) was provided, thereby effectively restricting the addition to total income to Rs.28.45 crores. 16.9 The Ld. AR pleaded that in either of these proceedings, the determination of income was based on the declaration made at the time of search and the claims fostered subsequently during the course of assessment proceedings and appellate proceedings were grossly ignored. Printed from counselvise.com :-15-: ITA. No.:1249 &1471/Chny/2025 17. In order to accentuate that the quantum of income offered in the return of income filed by the assessee for A.Y.2017-18 was true and correct, the ld.AR had expressed the following contentions: Even in respect of the settlement commission proceedings, the quantum as determined by the Department in the Rule 9 Report was not in tandem with the quantum determined by the ITSC in the order u/s.245D(4) of the Act for A.Yrs.2013- 14 to 2016-17 and had sought settlement at a value which was Rs.427.82 crores which was noticeably in excess of the quantum determined by the ITSC for those four assessment years. Before the ITSC, the assessee had made a total disclosure of Rs.186.22 crores, and the ITSC had enhanced the value by Rs.65.00 crores. Therefore, the assessee had also challenged the order through a writ before the Hon’ble High Court of Madras, seeking deletion of the addition of Rs.65.00 crores. The Department was also not satisfied with the order passed under Section 245D(4) and hence contested the same through a writ of certiorari before the Hon’ble High Court at Madras. On hearing the case of the assessee and that of the Department, the Hon’ble Court had set aside the order for fresh examination in the light of the grounds fostered by both the litigants and pass necessary orders. As a consequence, the Interim Board of Settlement-2 in the order dtd.14.06.2023 passed a final order in which the gross total income for the four assessment years was fixed at Rs.246.50 crores. At the stage of the proceedings before IBS, the ld.PCIT requested for enhancement of total income by Rs.186 crores. However, the IBS-2, Delhi after a thorough examination recomputed the total income at Rs.246.50 crores only. This repeated challenge by the ld.PCIT-1, Central, demonstrates that the Department is not open for verification and reasonable assessment and wants to enforce the total income as jacked up by it, although unsubstantiated. Therefore, the additions made by the assessing officer for A.Y.2017-18 is also baseless and as expressed earlier, the quantification of addition was solely based on the differential value between the amount disclosed before the ITSC to that of the declaration made at the time of search u/s.132(4) of the Act. It is a settled legal proposition that a confession needs corroboration with evidence. Therefore, in the absence of any enquiry and affirmation, the confession cannot be taken as the sole basis for making the addition and reliance is placed on the decision of the Hon’ble Supreme Court in the case of M/s. Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18. On careful examination of the contents of the assessment order, it can be verified that the addition to total income solely relies on the confession at the time of search and no further enquiry has been conducted to confirm the determination of income by the AO for the A.Y.2017-18. The ld.CIT(A) has not deviated from this principle of determination of income and they have also relied on the same confession, the only difference being that the buffer value of Rs.25.00 crores has been excluded. Printed from counselvise.com :-16-: ITA. No.:1249 &1471/Chny/2025 18. It is the primary plea of the Ld.AR that all the ten assessments have to be examined holistically and in this regard, the following aspects and values were submitted in support of the claim: 18.1 As per the computation of disclosure of income as a result of search action, the tabulation provided below shows that the quantum of total income offered by the assessee and the Managing Trustee consequent to the search action. Sri Balaji Educational and Charitable Public Trust S.No A.Y. Particulars Amount 1. 2013-14 Additional Income offered as per Final Order dt. 14.06.2023 u/s.245D(4) of the Act by IBS-2, New Delhi 22,54,41,000 2. 2014-15 78,60,93,507 3. 2015-16 98,44,35,413 4. 2016-17 47,00,04,866 5. 2017-18 Amount Disclosed in ITR Filed 25,09,88,510 Total 271,69,63,296 M.K. Rajagopal 1. 2013-14 Additional Income offered as per Final Order dt. 13.03.2017 u/s.245D(4) of the Act by ITSC, Chennai 13,87,12,778 2. 2014-15 6,42,45,569 3. 2015-16 12,98,65,498 4. 2016-17 55,13,19,650 Total 88,41,43,495 Total Disclosure by the Assessee and the Managing Trustee Searched 360,11,06,791 18.2 According to the Ld.AR, the total disclosure made consequent to the search stands at Rs.360.11 crores which is much higher than the original declaration made at the time of search of Rs.325.00 crores and therefore there was no need for any further addition. 18.3 It was further brought on record that the order of settlement is dated 30.03.2017 and the order of assessment for A.Y. 2017-18 is dated 28.12.2018. Since the order of ITSC on being contested by both the parties had not attained finality, the AO had to conclude that there is a gross shortfall, since the adhoc addition of Rs.65.00 crores was not acceptable to the assessee. The arithmetic at the time of passing the assessment order on 28.12.2018 was lesser and Printed from counselvise.com :-17-: ITA. No.:1249 &1471/Chny/2025 therefore the AO had to evolve to retain the total income assessed to the extent of the disclosure of Rs.325.00 Crores made at the time of search. 18.4 The subsequent development in the case of the assessee, which involved the interference of the Hon’ble High Court of Madras and further increase to total income in the order passed by IBS-2, Delhi, the quantification of which is provided in Para 6.1 above was not in the knowledge of the AO at the time of passing the order and therefore, the adhoc value was adopted, resulting in addition to total income. 18.5 However, when the scenario had drastically changed consequent to the order passed by the IBS-2, Delhi, which is subsequent to the order of assessment for A.Y.2017-18, the total quantum of undisclosed income brought to tax, as stated earlier, stands at Rs.360.11 crores which is substantially higher in comparison to the disclosure of Rs.325.00 Crores made at the time of search. 18.6 Accordingly, this Tribunal was appraised that the fact situation in the present case has undergone a metamorphic change in quantification of income consequent to the order passed by the IBS-2, Delhi and when the total quantum of disclosure done being Rs.360.11 crores is also considered, the appeal of the Department and denial of relief by the ld.CIT(A), which is contested by the assessee, is incorrect. 18.7 In support of its claim, the paper book containing the orders passed by the ITSC in the case of the assessee Trust & the Managing Trustee and that of IBS u/s.245D(4) of the Act were submitted. 19. The Ld.DR of the Department, supported the order of assessment passed by the AO and held that when the total disclosure that was made in the sworn statement was in the order of Rs.325.00 crores, the same may have to be sustained and when the shortfall in the income disclosed in the ITR for Printed from counselvise.com :-18-: ITA. No.:1249 &1471/Chny/2025 A.Y.2017-18 is Rs.54.91 crores, the same becomes the additional total income to be brought to tax for the year. 20. Undoubtedly, the grounds of appeal of the Department and that of the assessee on this issue of shortfall in disclosure of income in the Return of income as compared to the disclosure made u/s.132(4) of the Act is common, and therefore adjudicated together. 20.1 The ld.CIT(A) in respect of the addition sustained had totally relied on the disclosure made in the sworn deposition dated 26.08.2016 and to such extent which according to him were supported by incriminating evidence in the seized records. 20.2 As per the finding of the ld.CIT(A), the holistic approach as advocated by the assessee is incorrect, and drawing inference from the conclusion drawn in the order of IBS-2, Delhi dated 14.06.2023 held that the income disclosed in the hands of the Managing Trustee cannot be clubbed with that of the Trust, while both of them are distinctly identifiable persons as per Section 2(31) of the Act. 20.3 It was further held by him that though there was a total disclosure of Rs.325.00 crores originally, by the letter dated 26.08.2016, the values were scaled down to Rs.300.74 crores out of which 55.03 crores pertains to A.Y.2017-18. Annexure-5 appended to this letter had clearly identified the disclosure to be made in each one of the five years in the hands of the assessee corresponding to a seized record and thus the value that was to be adopted as the undisclosed income for A.Y.2017-18 ought to be Rs.55.03 crores. 20.4 The Ld.AR has relied on the ruling of the Hon’ble Supreme Court in the case of M/s. Pullangode Rubber Produce Co. Ltd. v. State of Kerala (supra.), to drive the point that disclosure made at the time of search cannot be absolute, unless supported by corroborative evidence. The contention of the Ld.AR is Printed from counselvise.com :-19-: ITA. No.:1249 &1471/Chny/2025 accepted to such extent of relief extended by the ld.CIT(A) which is in the order of Rs.24,26,00,000/-. This amount of Rs.24.26 crores is undoubtedly an ad-hoc disclosure classified as a buffer by the assessee, which is not supported by any corroborative evidence. 20.5 The ld.CIT(A) had truly appreciated this fact, and therefore granted relief to such extent. Even on the grounds of appeal fostered by the Department, emphasis is laid on the quantum of disclosure made originally at the time of search on 19.08.2019 of Rs.325.00 crores and does not link this buffer value to any incriminating evidence found at the time of search. The grounds of appeal of the Department are found to be superficial and in the absence of any incriminating evidence to support the additional buffer income of Rs.24,26,00,000/-, the relief extended by the ld.CIT(A) is found favour and accordingly the corresponding grounds of appeal of the Department are dismissed. 20.6 Coming to the grounds of appeal fostered by the assessee against the retention of addition made by the ld.CIT(A) to the extent of Rs.29,93,11,490/- after allowing 5% deduction u/s.115BBC(1)(i)(a) of the Act, the decision relied upon by it in the case of Pullangode Rubber Produce Co. Ltd (supra) does not come to the rescue of the assessee, since the ld.CIT(A) had categorically identified the relevant seized record which pins the total disclosure for the year at Rs.55.03 crores. 20.7 Undoubtedly, the disclosure made by the assessee for all the ten assessment years stands at Rs.360.11 crores is higher in comparison to the income disclosed in the returns of income. As per the sequence of events, it is comprehendible that there is certainly an excess quantum of disclosure made. 20.8 As stated earlier, the assessee and the managing trustee had approached the ITSC for settlement and initially the entire disclosure was made Printed from counselvise.com :-20-: ITA. No.:1249 &1471/Chny/2025 in the hands of the managing trustee instead of the trust. While making the application before ITSC, the quantum of income for A.Yrs.2013-14 to 2015-16 were modified consequent to the notice u/s.153A of the Act. However, for A.Y.2016-17 since the search action was undertaken on 16.03.2017, the addition income of Rs.46.98 crores was offered in the return of income filed u/s.139 of the Act for that year. However, since the conditions laid down u/s.245C were not satisfactory, the disclosure made in the hands of the managing trustee was not acceptable and therefore the corresponding application was rejected. 20.9 Subsequently, the income before ITSC was disclosed in the hands of the assessee, shifting the same from the managing trustee. However, since the return of income was filed for A.Y. 2016-17 u/s.139 of the Act, the undisclosed income for that year could not be shifted to that of the assessee. This issue was raised before the IBS-2, New Delhi, but since the Interim Board was of the firm view that the Trust and Managing Trustee are two independent persons u/s.2(31), it did not favour the holistic approach. 20.10 Therefore, the contention of the Ld.AR that if the disclosure made together by the Trust and the Managing Trustee are considered together, the addition to be made for A.Y.2017-18 is unwarranted. On careful examination of this issue, it needs to be appreciated that each assessment year is distinct, and each person is also distinct. Therefore, even though there is an excessive disclosure in the hands of the Managing Trustee, since the assessee(trust) is independent of the managing trustee and while each year is independent, the method of clubbing or telescoping the income considering all ten assessment years together is improbable. 20.11 For the year under consideration, as per the finding of the ld.CIT(A), there is clear evidence in the form of seized records that the total quantum of disclosure to be made supported by incriminating evidence is in the order of Printed from counselvise.com :-21-: ITA. No.:1249 &1471/Chny/2025 Rs.55,03,00,000/-. Therefore, while the assessee had only disclosed a total income of Rs.25,09,88,510/-, the balance sum of Rs.25,93,11,490/- after providing deduction @ 5% requires to be added. Accordingly, the order of the ld.CIT(A) cannot be interfered with and therefore all the grounds of appeal of the assessee are dismissed. 21. Ground of Appeal of the Department against the deletion of addition made of Rs.5.31 crores being the cash deposited during the period of demonetization: 21.1 Now coming to the explanation with regard to the source of cash deposited, the ld.CIT(A), after examining the bills and vouchers had granted relief. Not being satisfied by the justified relief, the Department has preferred an appeal. 21.2 In the challenge posed by the Ld.AR of the assessee, it was expressed that while the ld.CIT(A) had examined the aspect and evidences in a threadbare fashion, the Department in Ground No.6 of Grounds of Appeal had attempted to retain the addition in a disconnected manner, stating that the cash balance as on 07.09.2016 stating that the assessee had failed to produce documentary evidence in support of its claim of cash balance as on 07.09.2016 and the sales made subsequently and received in SBNs. 21.3 The Ld.AR expressed that the records provided by the assessee had demonstrated that the cash was sourced out of opening cash balance and further cash receipts during the period of demonetization received during the course of regular activities of the assessee. 21.4 It was also stated by the Ld.AR that the AO failed to understand and appreciate that sale of medicine through pharmacy and medical services are essential services, and therefore, it falls under the exceptions and hence the Printed from counselvise.com :-22-: ITA. No.:1249 &1471/Chny/2025 assessee is not precluded from receipt of SBNs during the period of demonetisation. 21.5 The Ld.AR relied on the decision of the Coordinate Bench of Chennai ITAT in the case of ITO v. Surabii Gold reported in ITA No. 372/Chny/2023 vide Order dt. 05.04.2024 which had held that there is no bar in receiving SBNs during the period of demonetization and as long as the source is explained, the addition u/s.69 of the Act is unsustainable. 21.6 It was further stated by the Ld.AR that the assessee had during the year made cash deposits of Rs. 5.31 crores during the period of demonetisation and according to the Ld.AR, despite production of cash book to explain the source of cash deposited, rejecting the claim of the assessee in an incongruous and unscientific manner, this addition of Rs.5.31 crores was made treating the deposit as unexplained investment to be brought to tax u/s.69 r.w.s. 115BBE of the Act. 21.7 The Ld.DR had contested the argument of the Ld.AR and insisted that the addition made by the AO of Rs.5,31,39,642/- u/s.69 of the Act needs to be sustained. 21.8 The facts of the case, grounds of appeal of the Department and the contents of the appellate order were carefully considered. Since the evidence with regard to the source of cash deposited in the form of cash deposit challans and statement of bank account of the pharmacy and hospital collections were produced for the first time before appellate proceedings, the same were remanded to the AO in terms of Rule 46A of IT rules. 21.9 As a consequence, the AO submitted a remand report on 11.11.2024 and the contents of the said report are also incorporated in the appellate order. The copy of the said report was provided to the assessee and in the rejoinder Printed from counselvise.com :-23-: ITA. No.:1249 &1471/Chny/2025 provided, the assessee was able to demonstrate that the total cash balance available as on 08.11.2016 was Rs.3,03,26,828/- as on 08.11.2016 out of which an amount of Rs.2,74,35,338/- was in demonetized currency and deposited in the bank accounts. 21.10 The ld.CIT(A) emphasized that in the absence of specific finding by the AO that the claims of the assessee are not supported in respect of the correctness of balances exhibited in the books of multiple units of the assessee Trust, the summary dismissal of the claim of the assessee is unacceptable and therefore the addition to the extent of Rs.2,74,35,338/- made out of opening cash balance as on 08.11.2016 is inappropriate. Therefore we are of the considered view that the finding of the ld.CIT(A) cannot be faulted with and hence the deletion of addition made by the ld.CIT(A) is upheld. 21.11 The assessee had claimed that the balance cash deposits of Rs.2,57,04,124/- was made out of cash collection made during the period of demonetisation out of which an amount of Rs.1,07,17,948/- pertains to the pharmacy sales and balance of Rs.1,49,86,176/- pertains to hospital services. This sum of Rs.2.57 crores comprised Rs.1,43,13,000/- in the form of SBNs and the balance of Rs.1,13,91,304/- in the form of denominations other than SBNs. 21.12 The ld.CIT(A) had examined the books of accounts and also found that the VAT returns for the months of November and December 2016 in respect of pharmacy sales support this quantum. That the balance pertains to hospital services is also not under dispute. The ld.CIT(A) also found that in the various decisions rendered by the Coordinate Benches of this Tribunal, there is no bar in receiving SBNs during the period of demonetization, as long as the source for the same is established. We also note the reliance placed by the ld. AR on the decision of the Coordinate Bench of Chennai ITAT in ITO v. Surabii Gold (ITA No.372/Chny/2023, order dated 05.04.2024). In that decision, the Tribunal Printed from counselvise.com :-24-: ITA. No.:1249 &1471/Chny/2025 categorically held that there is no statutory bar on receiving SBNs during the period of demonetisation, and where the source of cash is duly explained through verifiable records, an addition u/s 69 cannot be sustained. The ratio of the above decision squarely applies to the present case. The relevant paragraphs of the decision is extracted below: 11. Having said so, let us come back whether is there any prohibition in accepting demonetized currency notes of Rs. 500 and Rs. 1000 after 08.11.2016 and up to 31.12.2016. The Assessing Officer is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argued that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 has been withdrawn from circulation from 09th November, 2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31st December, 2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31st December, 2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31st December, 2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the Assessing Officer makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. 12. Coming back to case laws relied upon by the assessee. The Ld. Counsel for the assessee has relied upon the decision of ITAT, Chennai Benches in ITO vs Sahana Jewellery Exports Pvt Ltd in ITA No. 999/Chny/2022. The ITAT Chennai Benches, under identical set of facts and also in respect of cash deposits during demonetization period held that, when source for cash deposits has been explained out of cash sales made during the period, then cash sales made by the assessee cannot be treated as unexplained credit taxable u/s. 68 of the Act. The relevant findings of the Tribunal are as under: “11. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We have also carefully considered relevant reasons given by the AO to make additions towards cash receipts amounting to Rs.51,39,39,100/- u/s.68 of the Act. The AO has made additions towards cash receipts pertains to sale of jewellery for the period from 01.04.2016 to 08.11.2016 u/s 68 of the Act, on the ground that the assessee could not prove the identity of the creditors, genuineness of transactions, and creditworthiness of the parties. The genesis of the dispute started from the point of verification of source for cash deposits into bank account during Printed from counselvise.com :-25-: ITA. No.:1249 &1471/Chny/2025 demonetization period amounting to Rs.48,73,80,000/-. In fact, the assessee has made cash deposits of Rs.48,73,80,000/- to Oriental Bank of Commerce, Coimbatore, State Bank of India, SME Branch, Coimbatore, and State Bank of India, Main Branch, Coimbatore, in aggregating Rs.48,73,80,000/-. The assessee has explained source for cash deposits out of trade advances received from various persons and same has been subsequently converted into sale of jewellery. The assessee has accounted sales made before 08.11.2016 in its books of accounts and cash balance available as on 08.11.2016 as per cash book maintained by the assessee was at Rs.48,82,75,750/-. 12. During the course of assessment proceedings, the AO called upon the assessee to file details of name and address of the persons from whom it has received trade advances for sale of jewellery. The assessee has filed a list of persons from whom it has received trade advances for sale of jewellery. Out of list submitted by the assessee, the AO has issued summons u/s.131(1) of the Act, to 50 persons to verify the genuineness of the assessee claim of receipt of cash from them. Out the above 50, summons issued to 40 persons returned by the Postal Authorities citing ‘addressee cannot be located’ or ‘no such person’ or ‘no such address’ or ‘insufficient address’ or ‘no such address at the above place’. In response to summons, three persons were responded and out of three, two persons namely, Shri N.Armugam and Smt.B.Deepa denied having any kind of transactions with the assessee. Further, one person namely Shri A.M.Vargies confirmed having paid advance to the assessee company and also purchased jewellery from them. The Assessing Officer, on the basis of enquiry conducted u/s.131(1) of the Act, came to the conclusion that the assessee could not substantiate cash receipts received from various persons towards sale of jewellery before the date of demonetization. Therefore, vide letter dated 24.12.2019 called upon the assessee to file confirmation from all the parties and also called upon the assessee to show cause ‘as to why’ the credits should not be considered as unexplained cash credit u/s.68 of the Act. In response, the assessee submitted that as per law, it is not required to collect complete address and PAN from the persons to whom it has sold jewellery. Further, as per Rules 114B of the Income Tax Rules 1962, if sale value of jewellery is in excess of Rs.2 lakhs to a single person, then, it is required to collect PAN. Since, there is no requirement of collecting PAN, the assessee does not having details of PAN and correct postal address of the persons from whom it has received trade advances for sale of jewellery. Therefore, assessee submitted that the question of filing confirmation letter from the parties, from whom, it has collected advance for sale of jewellery does not arise, and consequently, cash receipts cannot be assessed u/s.68 of the Act. The assessee had also explained the AO that it has sufficient cash balance as on 08.11.2016 as per books of accounts maintained for that assessment year and argued that the total cash deposits into bank account is explained out of cash in hand. The assessee has also made an alternative submission that it has sufficient cash withdrawal from very same bank account on various dates, which has been recorded in books of accounts of the assessee and source for cash deposits is also out of cash withdrawal from very same bank account. The assessee had also filed necessary books of accounts, including cashbook, sales register, sale bills, purchase details along with bills and stock details to prove that there is no discrepancy in books of accounts and also the assessee has reported sales made before the date of demonetization to GST authorities. Printed from counselvise.com :-26-: ITA. No.:1249 &1471/Chny/2025 13. In light of above factual matrix, if one examines the issue, the AO has rejected the contention of the assessee on two grounds. The first and foremost reasons given by the AO to reject the explanation of the assessee is that persons from whom assessee claims to have been received advance are not responded to summons issued u/s.131(1) of the Act, and in few cases, they have denied any kind of transactions with the assessee. According to the AO, the assessee could not discharge its onus cast upon as per the provisions of Sec.68 of the Act, in respect of cash receipts, and thus, opined that cash receipts claimed to have been received by the assessee from various persons is unexplained cash credits taxable u/s.68 of the Act. The second reason given by the AO was that there is a contradiction in the claim of the assessee in so far as source for cash deposits are concerned in as much as initially, the assessee claims to have explained cash deposits out of cash receipts from various persons towards sale of jewellery and subsequently changed its stand and argued that source for cash deposits is out of cash withdrawals from very same bank account. In so far as the first and foremost reason given by the AO to assess cash receipts u/s.68 of the Act, we find that there is a distinction between cash credits and cash receipts towards sales. If assessee claims certain cash credits in his books of accounts and not able to explain credits to the satisfaction of the AO, then, such cash credits need to be examined in light of provisions of Sec.68 of the Act. In case, the assessee claims that it has received trade advances in cash and the same has been subsequently converted into sales by issuing sale bills, then, said trade advance cannot be examined in light of provisions of Sec.68 of the Act, because, trade advances have been subsequently converted into sales and sales has been accounted in the books of accounts of the assessee. Therefore, in our considered view, the AO has committed a fundamental mistake in examining the cash receipts claimed to have been received by the assessee towards sale of jewellery in light of provisions of Sec.68 of the Act. 14. Be that as it may. The fact remains that, the assessee has furnished name and address of the customers from whom it has received cash for sale of jewellery. The assessee need not obtain confirmation and submit to the AO, because, the law does not mandate colleting PAN details of the persons, if sale value of jewellery does not exceed Rs.2 lakhs as per Rule 114B of Income Tax Rules, 1962. In so far as compliance of KYC norms, it is mandatory under Prevention of Money Laundering Act, 2002, w.e.f.04.05.2023 onwards and not applicable for the impugned assessment year. Therefore, in our considered view, when the assessee has furnished name and address of the persons from whom it has received trade advances for sale of jewellery, the assessee has satisfactorily discharged onus cast upon to furnish name and address of the persons. Therefore, the observation of the AO in light of provisions of Sec.68 of the Act, that the assessee has not satisfactorily explained cash receipts is unwarranted and devoid of merits. 15. Having said so, let us come back whether the assessee could able to explain source for cash deposits made during demonetization period or not. It is an admitted fact that the assessee was having sufficient cash balance as per cash book maintained for the relevant period. In fact, cash in hand as on the date of demonetization i.e. 08.11.2016 was at Rs.48,84,03,169/- and said cash balance is backed by cash receipts recorded in the books of accounts before the date of demonetization. Further, cash receipts from various persons have been further substantiated with sales made to them before the Printed from counselvise.com :-27-: ITA. No.:1249 &1471/Chny/2025 date of demonetization. In fact, the assessee has filed various evidences, including sales bills to support its arguments. The AO never disputed sales declared by the assessee nor pointed out any discrepancy in purchase or stock in trade held in the business of the assessee before the date of demonetization. In fact, the assessee has filed comparative sales for the month of April, 2016 to November, 2016 and corresponding April-15 to November, 2015 and we find that there is no abnormal deviation in sales declared for the month of November, 2016 when compared to earlier periods. It is not a case of the AO that the assessee has declared sales without purchases. In fact, a sale declared by the assessee is backed by corresponding purchases, and is supported by necessary purchase bills. The AO could not point out any discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any stock in hand. Therefore, in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by any corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. In our considered view, there cannot be any reason for uniform sales in all days or month or year. There may be various reasons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view, the explanation of the assessee that it has received cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable. 16. Coming back to second observation of the AO in rejecting explanation of the assessee with regard to source for cash deposits. Initially, assessee claims that source for cash deposits is out of trade advances received in cash from various persons. However, during the course of assessment proceedings itself, the assessee claimed that it was an error in making a submission that it has received trade advances from various persons before the date of demonetization, but fact remains that authorized representative who appeared and made submissions before the AO made an inadvertent error of copying submission made in another group case which is also pending for assessment. Further, immediately after noticing the above inadvertent error, the assessee has submitted details of cash book along with bank statements and explained that it has sufficient cash withdrawal aggregating to Rs.150 Crs. from very same bank account on various dates before the date of demonetization and after utilization of the cash for the purpose, for which, it has been drawn the net withdrawal was at Rs.136.85 Crs. The assessee was carrying cash balance in books and once demonetization was announced, the available cash balance in Specified Bank Notes, has been deposited into bank account. We have perused relevant cash book and bank statements which are available in paper book and after considering relevant materials, we find force in the arguments of the assessee for simple reason that as per the details furnished by the assessee like bank statements, cash book, it is undoubtedly clear that assessee was having sufficient withdrawals from very same bank accounts before the date of demonetization which was recorded in the books of accounts of the assessee. Further, the cash balance maintained by the assessee as per books of accounts as on 08.11.2016 was much higher than the amount of cash deposited to bank account during demonetization period. Therefore, in our considered view, when the assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been Printed from counselvise.com :-28-: ITA. No.:1249 &1471/Chny/2025 clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposits are out of cash withdrawals from very same bank account. 17. At this stage, it is necessary to consider certain judicial precedents on this issue. The assessee has relied upon the decision of the Hon’ble Delhi High Court in the case of PCIT v. Agson Global (P) Ltd., reported in [2022] 441 ITR 550 (Delhi) (19-01-2022). The Hon’ble Delhi High Court under identical set of facts, has deleted the additions made by the AO towards cash deposits during demonetization u/s.68 of the Act. The relevant findings of the Hon’ble Delhi High Court are as under: • A careful perusal of the extract of the statement made by managing director of the assessee (as recorded in \" the assessment orders in-issue) would show that all that he had stated was that it was the assessee's own money, given in the form of loan and/or bogus sales or purchases, that had been routed back to the assessee in the form of share capital/share premium, albeit, through banking channels. [Para 10.3] • The Tribunal, in this context, records a finding of fact that \"no unaccounted income of the assessee\" had been introduced in its books of account in the form of share capital. Based on this, the Tribunal concluded that there was 'no confession' made by the managing director that unaccounted income had been introduced by the assessee in the form of share capital. Therefore, according to the Tribunal, the statement made under section 132(4) did not constitute incriminating material. [Para 10.4] • The Tribunal, has correctly analyzed the statement of the managing director. The statement does not allude to the fact that the assessee had introduced 'unaccounted money' in the form of share capital/share premium through investor entities. The retraction letter, as noted by the Tribunal, also did not advert to the introduction of investment of money in the assessee in the form of share capital/share premium. [Para 11.1] • The trail of the money received from various entities in the form of share capital/share application money, concluded that the assessee had been able to place before the Assessing Officer sufficient documentary evidence which established that the money which the assessee had paid to the investor entities was routed back to it in the form of share capital/share premium. [Para 11.4] • That being the position, the Tribunal concluded that the assessee had been able to prove the identity of the investors, their creditworthiness and genuineness, which are the ingredients of section 68. [Para 11.5] • In instant case, insofar as the assessee is concerned, it placed the evidence on record, which established the trail of the money, the mode through which the money had travelled from the assessee to the investor entities and back to the assessee, and the fact that each of the investor entities was in existence. Therefore, once the assessee claimed (and it was found as a fact) that it was its own money which was routed back to it in the form of share capital/share premium, the traditional test which is sought to be applied by the revenue, for triggering the provisions of section 68, which is, that the assessee had to establish the creditworthiness, Printed from counselvise.com :-29-: ITA. No.:1249 &1471/Chny/2025 genuineness and identity of the transactions would have to adapt to the circumstances obtaining in the instant case. [Para 12.1] • Therefore the addition made under section 68 needed to be sustained as untenable, in view of the finding recorded by the Tribunal. [Para 14.4] • The entire purchase and sales had been duly recorded in the regular books of account of all parties; the transactions were routed through regular banking channels; the purchase and sales were duly supported by quantitative details; copies of bank statements showing sales and purchases were placed before the Assessing Officer, and no incriminating documents concerning sales and purchases were found in the course of search and seizure actions. [Para 15.1] • Tribunal also found that in respect of assessment years 2012-13, 2013- 14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under section 143(3). The books of account were duly audited, both, under the Companies Act, 2013 and the Income-tax Act; no defects concerning books were found either by the Assessing Officer or the Commissioner (Appeals). Thus, according to it, no incriminating evidence was found. [Para 15.1] • Insofar as the abated assessment years were concerned i.e., assessment years 2015-16, 2016-17 and 2017-18, it was, apparent that the assessee had purchased goods, which were in value less than the sum for which they were sold. Therefore, as held by the Assessing Officer, in the deviation report, if the purported bogus purchases were to be disallowed then necessarily the sales shown in the assessee's regular books of account would also have to be excluded which would result in the assessee's income falling below the returned/declared income. [Para 15.1] • Furthermore, the Assessing Officer had not placed on record any material to justify the disallowance of 25 per cent of the purchases on the ground that they were bogus without carrying out any inquiry or investigation. In particular, the Tribunal also flagged the issue that the purported shortage of stock was based on a reference made qua that aspect in the appraisal report of Investigation Wing which, as noted above, did not find mention in the remand report, as during the search it was found that the stock worth the aforementioned value was lying at the assessee's warehouse, something which was completely ignored. This position, was fortified by the fact that no addition in respect of any excess or shortage of stock had been made in the assessment orders of any of the years. In effect, according to the Tribunal, the stock found in the books reconciled with the stock which was found physically. [Para 15.3] • It appears, that the Commissioner (Appeals) did not call for the books of account i.e., to examine the same. Furthermore, the Tribunal records that the Assessing Officer, in the remand report, did not advert to the fact that the books of account were either incorrect or incomplete. According to the Tribunal, the books of account could not have been rejected till such time the revenue found \"patent, latent and glaring defects in the books of account\". The revenue, according to the Tribunal, made no such attempt and simply relied upon the statement of the managing director, which was retracted and in any event, did not relate to the booking of bogus expenditure'. Therefore, insofar as the Tribunal was concerned, the Printed from counselvise.com :-30-: ITA. No.:1249 &1471/Chny/2025 rejection of books of account by the Commissioner (Appeals) did not meet the legal standards. [Para 15.6] • Thus, in effect, the Tribunal held that the books of account were rejected without crystalizing the defect in the books of account, which could have been done only after examining the same. Furthermore, according to the Tribunal, even if it is assumed that the books of account could be rejected, the profit had to be estimated based on proper material. As noted above, the Tribunal recorded the inconsistent approach adopted by the Commissioner (Appeals) in applying the gross profit ratio concerning non- related parties to purported bogus transactions i.e., those involving related parties, resulting in unsustainable conclusions. [Para 15.7] • Accordingly, the observations made by the Tribunal are pure findings of fact, which cannot be interdicted by the Court in appeal. The inconsistency in the approach adopted by the Assessing Officer, while preparing the deviation report and framing the assessment order with regard to purported bogus purchases is an aspect, which cannot be ignored and has been correctly highlighted by the Tribunal. [Para 15.8] • If the revenue chooses to disallow bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very same parties. As pointed out by the Tribunal, the Commissioner (Appeals) could have rejected the books of account only, after it had examined and come to the conclusion that he was not satisfied as regards their correctness or completeness. The finding of fact returned by the Tribunal is that books of account were not examined by the Commissioner (Appeals). If that be so. then, section 145(3) could not have been triggered by the Commissioner (Appeals), based on the mere statement of the managing director of the assessee. Besides this, as noted by the Tribunal, the Commissioner (Appeals) had attempted to quantify the profit by resorting to a methodology, which was incomprehensible. [Para 15.9] • The average cash deposited by the assessee with its bankers before demonetization was, approximately, Rs.42.35 crores, whereas the actual sum deposited during the demonetization period was Rs.180.53 crores. The assessee's explanation was, broadly, that deposits were made out of cash sales and, during Diwali, cash sales increase; especially in the business in which the assessee is i.e.. dry fruits. [Para 16.2] • The assessee. in support of its plea that cash deposits were made by the assessee in respect of sales which were duly accounted for, reliance was placed on the following material:- audited books of account; bankwise summary of cash deposits; copies of bank statements; and details of monthly cash sales and cash deposits made in earlier financial years. [Para 16.2] • In this context, the Tribunal analyzed the data pertaining to cash sales and cash deposits made in the financial year in issue. The analysis made by the Tribunal showed that, in the three financial years, the total cash deposits more or less corresponded with the cash sales. [Para 16.6] • Based on the data, the Tribunal concluded that, in the year in which demonetization kicked in i.e., financial year 2016-17, the increase in sales in percentage terms was less than the earlier year. The Tribunal, thus, held Printed from counselvise.com :-31-: ITA. No.:1249 &1471/Chny/2025 that it could not be said that the assessee had booked non-existing sales in its books post-demonetization. [Para 16.6] • In sum, it was the Tribunal's assessment of the material placed on record that cash deposits made by the assessee with its bankers, more or less compared with the cash sale transactions entered into by it with its - customers. The Tribunal's view was that given the fact that there was no allegation made by the revenue that the assessee had backdated its entries to enhance its cash sale figures, one could only conclude that there was a growth in the assessee's business. [Para 16.9] • Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, it is opined that there was nothing placed on record—which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in the Tribunal correctly found in favour of the assessee and deleted the addition made under section 68. [Para 17.6] 18. The assessee had also relied upon the decision of the ITAT Visakhapatnam Bench in the case of M/s.Hirapanna Jewellers, Visakhapatnam, in ITA No.253A/Viz/2020 and CO No.02/Viz/2021, AY2017- 18, wherein, the ITAT Visakhapatnam Bench, under identical set of facts has held as under: \" We have heard both the parties and perused the material placed on record. In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look into section 68 which reads as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year; From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to Printed from counselvise.com :-32-: ITA. No.:1249 &1471/Chny/2025 disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s.44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No.7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared he exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. Provisions or section 68 are applicable in case or unexplained cash credit. Looking at the discussion at the foregoing paragraphs and the Judicial Precedents presented, I find that with sufficient stock in record for which excise duty was paid and vat taxes were paid, the sales could not be treated as unexplained cash credit u/s.68 of the Income Tax Act. It must be appreciated that an unexplained credit would imply credit which has unexplained source which is not so. The addition made on account of bogus sale thus failed that test of being unexplained as envisaged u/s 68 of the Income Tax Act. In view these of the addition of Rs.51,39,39,100/- stands deleted. 19. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the AO is erred in making additions towards cash receipts received for sale of jewellery, which has been subsequently converted into sales, for the impugned assessment year as unexplained cash credits taxable u/s.68 of the Act. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO, and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.” 13. The appellant has also relied upon the decision of ITAT, Chennai Benches in the case of M/s. Purani Hospitals Suppliers Pvt Ltd vs DCIT, in ITA NO. 489/Chny/2022, dated 31.05.2023. The Tribunal under identical set of facts and in light of cash deposits during demonetization period has held as under: “8. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from records indicates that the assessee is in the business of distribution of pharmaceutical goods, surgical and diagnostics goods, which is considered to be essential goods. The assessee has deposited a sum of Rs. 1,82,37,000/- during demonetization period in specified bank notes to various bank accounts. The assessee claims that source for cash deposit is out of realization of cash sales made before demonetization period. The assessee has filed necessary details including copies of sales bills made in cash before demonetization period and also list of parties from whom cash collected after demonetization period and deposited into bank account. The assessee had also filed necessary details of information furnished to department immediately after demonetization period towards cash collected from third party in response data. The Assessing Officer is Printed from counselvise.com :-33-: ITA. No.:1249 &1471/Chny/2025 not disputing all these claims of the assessee including evidence filed in support of justification for source for cash deposit. But, the Assessing Officer has made additions towards cash deposit in specified bank notes after demonetization period only for the reason that the assessee is not eligible to transact or receive any specified bank notes after demonetization as per notification/GO issued by RBI and Government of India. The Assessing Officer, had discussed the issue with reference to GO issued by RBI and Government of India and concluded that since the assessee has accepted demonetized currency in violation of circular/notification issued by the Government of India, the source explained by the assessee cannot be accepted. In other words, the Assessing Officer never disputed fact that the assessee has made sales in cash before demonetization period and also realized cash from debtors against cash sales made before demonetization period. Therefore, to decide the issue whether the assessee can accept specified bank notes even after it was banned for legal tender after 09th November, 2016 and further, the same can be added u/s. 69 of the Act as unexplained investment and also can be taxed u/s. 115BBE of the Act, it is necessary to examine the case in light of business model of the assessee, and evidence filed during the course of assessment proceedings. 9. The provisions of section 69 of the Act, deals with unexplained investment, where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of accounts, if any, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory, then the value of the investments may be deemed to be the income of the assessee of such financial year. In order to invoke provisions of section 69 of the Act, two conditions must be satisfied. First and foremost condition is there should be an investment and second condition is the assessee could not explain source for said investment. In this case, if you go through evidence filed by the assessee including comparative details of amount collected out of sales for financial year 2015- 16 & 2016-17 and details of cash deposit into bank for above financial years, we find that there is no abnormal deviations from its normal course of business. Further, on verification of analysis of cash sales and cash deposits to bank account there is no deviation of cash sales and cash deposits when compared to earlier financial year and demonetization period. Further, the assessee is dealing in essential commodities like medicines, surgical and diagnostics equipment through medical shops, hospital, doctors etc. The agents of the assessee come and collect cash from parties and directly deposit to bank account of the assessee. It is also not in dispute, in this line of business the majority of sales is in cash, because doctors, hospitals and medical shops mainly deals with cash. Therefore, from the business model of the assessee and trade practice there is no doubt of what so ever with regard to the explanation offered by the assessee that it has collected cash from debtors towards sales made in cash before demonetization period. Further, the appellant has also regularly availing GST/VAT returns and there is also being no change or deviation in the VAT returns field for the earlier months i.e., before the announcement of demonetization. The assessee had also declared sales made in cash in their books of accounts and filed necessary return of income and paid taxes on said income. The appellant has also made cash deposits regularly before and during that period including the notes which Printed from counselvise.com :-34-: ITA. No.:1249 &1471/Chny/2025 are not banned and therefore, it is not a case of amount of deposit in specified bank notes has came out of undisclosed source or under any circumstances only to change the colour of the money. From the details filed by the assessee, it is evident that during the month of November and December, the assessee has made almost more than 5 crores cash deposit which includes various demonetized currency and regular notes. Further, the Assessing Officer has accepted fact that out of total cash deposits, only a sum of Rs. 1,82,37,000/- is in specified bank notes. From the above, it is very clear that there is no significant change in the pattern of cash sales, cash collection and cash deposit during demonetization period, when compared to earlier period in the same financial year and also during immediate preceding financial year. Therefore, we are of the considered view that the assessee has satisfactorily explained source for cash deposit made during demonetization period in specified bank notes and thus, the Assessing Officer is completely erred in making additions u/s. 69 of the Act. 10. Coming back to the observations of the Assessing Officer with regard to GO/notification issued by the RBI and Government of India, to deal with specified bank notes. The Assessing Officer is mainly on the issue of notification issued by the RBI to deal with the specified bank notes and argued that the assessee is not one of the eligible person to accept or to deal with specified bank notes and thus, even if assessee furnish necessary evidence, the assessee cannot accept specified bank notes after demonetization and the explanation offered by the assessee cannot be accepted. No doubt specified bank notes of Rs. 500 & Rs. 1000 has been withdrawn from circulation from 09th November, 2016 onwards. The Government of India and RBI has issued various notifications and SOP to deal with specified bank notes. Further, the RBI allowed certain category of persons to accept and to deal with specified bank notes up to 31st December, 2016. Further, the specified bank notes (cessation of liability) Act, 2017, also stated that from the appointed date no person can receive or accept and transact specified bank notes, and appointed date has been stated as 31st December, 2016. Therefore, there is no clarity on how to deal with demonetized currency from the date of demonetization and up to 31st December, 2016. Therefore, under those circumstances, some persons continued to accept and transact the specified bank notes and deposited into bank accounts. Therefore, merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with specified bank notes, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the Assessing Officer makes out a case that the assessee has deposited unaccounted cash into bank account in specified bank notes. 11. We further, noted that the Central Board of Direct Taxes had issued a circular for the guidance of the Assessing Officer to verify cash deposits during demonetization period in various categories of explanation offered by the assessee and as per the circular of the CBDT, examination of business cases, very important points needs to be considered is analysis of bank accounts, analysis of cash receipts and analysis of stock registers. From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the Assessing Officer needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits Printed from counselvise.com :-35-: ITA. No.:1249 &1471/Chny/2025 in demonetized currency, the Assessing Officer needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if you go through analysis furnished by the assessee in respect of total sales, cash sales realisation from debtors and cash deposits during financial year 2015-16 & 2016-17, there is no significant change in cash deposits during demonetization period. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. In our considered view, to bring any amount u/s. 69 of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also been duly included in the return of income filed in relevant assessment year. Therefore, we are of the considered view that, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account. 12. At this stage, it is relevant to consider certain judicial precedents relied upon by the ld. Counsel for the assessee. The Ld. Counsel for the assessee relied upon the decision of Delhi High Court in the case of Agson Global Pvt Ltd vs ACIT [2022] 325 CTR 001. The Hon’ble Delhi High Court held that additions made on the sole ground of deviation in the ratio of cash sales and cash deposits during the demonetization period with that of earlier period, is improper and unlawful. 13. The assessee had also relied upon the decision of ITAT Indore Bench in the case of Dewas Soya Ltd, Ujjain vs ITO in ITA No. 336/Ind/2012, where it has been held as under: The Hon'ble Indore ITAT Bench in the case of DEWAS SOYA LTD, UJJAIN vs. Income Tax (Appeal No. 336/lnd /2012 has held that,\" the claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit 8: loss account) and on the other hand amounts received from above parties has also been added u/s 68 of the Act. This view has been held by the Hon'ble Supreme Court in the case of CIT vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194(SC) that \"It is for the assessee to prove that even if the cash credit represents income, it is income from as source, which has already been taxed.\" The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again.\" 14. The ld. DR, has relied upon the decision of ITAT, Hyderabad Benches, in the case of Vaishnavi Bullion Pvt Ltd vs ACIT Taxsutra 914/ITAT/2022 (Hyd). We, find that in the said case, the Tribunal noted that CFSL report, books and statement are contrary to assessee’s claim which are of post demonetization period. Under these facts, the Tribunal came to the Printed from counselvise.com :-36-: ITA. No.:1249 &1471/Chny/2025 conclusion that additions made towards cash deposits during demonetization period, assessee could not explain proper source. In this case, on perusal of details and records, we find that the assessee has filed all details to explain source for cash deposits and on the basis of details filed by the assessee, the Assessing Officer never disputed fact that source for cash deposit is not out of ordinary business receipts, which has been accounted in the books of accounts of the assessee and further, there is no deviation in cash deposits during demonetization period when compared to earlier period in same financial year and in earlier financial year. Therefore, we reject the case laws relied upon by the ld. DR. 15. In this view of the matter and by considering facts and circumstances of this case, we are of the considered view that the Assessing Officer erred in making additions towards cash deposits during demonetization period u/s. 69 of the Act. The ld. CIT(A), without appreciating relevant facts simply sustained additions made by the Assessing Officer. Thus, we set aside the order passed by the CIT(A) and direct the Assessing Officer to delete additions made towards cash deposits u/s. 69 r.w.s. 115BBE of the Act.” 14. Coming back to decision relied upon by the ld. DR, in the case of M/s. Vidhiyasekaran Pradeep Malliraj vs ITO (Supra). We have gone through case law relied upon by the ld. DR, and we find that, in the said case, the Tribunal after considering the decision of Hon’ble Apex Court in the case of Apex Laboratories (P) Ltd vs DCIT (135 Taxmann.com 236), held that, one arm of the law cannot be utilized to defeat the other arm of law and doing so would be opposed to public policy and bring the law into ridicule. In our considered view, the case law relied upon by the ld. DR is not applicable to the facts of the present case for the simple reason that, the Tribunal has not considered the facts of cash deposits in light of explanation offered by the assessee with regard to source for cash deposits. However, it went on the legal issue of validity of legal tender of specified bank notes after 08.11.2016. The said issue has been considered by the coordinate bench in the case of M/s. Purani Hospitals Suppliers Pvt Ltd vs DCIT (Supra) and held that, there is no prohibition in accepting specified bank notes from 08.11.2016 up to 31.12.2016, in light of specified bank notes (Cessation of Liability) Act, 2017. Therefore, we prefer to follow the decision of Coordinate bench, which is more appropriate in light of facts of the present case and thus, we reject case law relied upon by the ld. DR present for the revenue. 15. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that, the assessee has explained source for cash deposits to the tune of Rs. 7,75,65,100/- into bank account during demonetization period, out of cash sales recorded in the books of accounts maintained by the assessee. The ld. CIT(A), after considering relevant facts has rightly held that the Assessing Officer is erred in making additions towards cash deposits u/s. 68 of the Act, when the appellant has explained source for cash deposits. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.” 21.13 In the instant case, the Department has not produced any material to controvert the assessee’s cash book, the opening cash balance, or the sales effected during the demonetization period. In absence of any adverse material, Printed from counselvise.com :-37-: ITA. No.:1249 &1471/Chny/2025 and considering that the assessee operated in an essential sector permitted to receive cash in SBNs, the explanation offered is fully satisfactory. 21.14 When the source of cash deposit as out of receipts generated in the regular activity in the form of pharmacy sales and hospital collections has not been destabilized by the AO in the remand report, this bench is of the opinion that the order of the ld.CIT(A) in respect of the relief extended deleting the addition of Rs.5,31,39,462/- need not be interfered with and therefore when the source for the deposit made during the period of demonetization of Rs.2,57,04,124/- is also explained, the grounds of appeal of the Department are dismissed. 22. In the result, the appeal of the Assessee and that of the Department are dismissed. Order pronounced in the open court on 01st December, 2025 at Chennai. Sd/- Sd/- (एबी टी वक\u0018 ) (ABY T VARKEY) ाियक सद\u001b/JUDICIAL MEMBER (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखासद\u001b/ACCOUNTANT MEMBER चे\u0012ई/Chennai, िदनांक/Dated, the 01st December, 2025 SP आदेश की &ितिलिप अ;ेिषत/Copy to: 1. अपीलाथ\u0018/Appellant 2. &'थ\u0018/Respondent 3.आयकर आयु