PONSANKAR AGENCIES,ERODE V. DCIT, CIRCLE-1, ERODE

ITA 2081/CHNY/2024

AI Insights

The case involves Ponsankar Agencies, a firm engaged in trading pipes, fittings, and other building materials, which appealed against the order of the Learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi. The appeal was concerning the assessment year 2017-18, where the Assessing Officer had made an addition of Rs. 79,10,093 to the assessee's income, citing unexplained cash deposits during the demonetization period. The assessee argued that the deposits were from legitimate business activities and were reflected in the audited books of account. The Tribunal referenced a similar case, Tamil Nadu State Marketing Corporation Ltd. vs. ACIT, to emphasize that a genuine explanation for cash deposits should not be dismissed merely due to procedural violations related to the use of Specified Bank Notes (SBNs) during demonetization.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472187 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: Tamil Nadu State Marketing Corporation Ltd. vs. ACIT in ITA NO.431/Chny/2023
• Laws Referred To: Income-tax Act, 1961, Specified Bank Notes (Cessation of Liabilities) Act, 2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G. SARATHA
• Assessee Lawyers: S. SRIDHAR; ERODE
• Keywords: Set aside
• Section: 143(3); 69A

Judgement Text

" आयकर अपीलीय अिधकरण, ‘ए’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0019ी एबी टी. वक\u001e, \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम( BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2081/Chny/2024 िनधा9रण वष9 /Assessment Year: 2017-18 Ponsankar Agencies, 558, Sathy Road, Karungalpalayam Post, Erode – 638 003. [PAN: AAFFP 1761N] Vs. The Dy. Commissioner of Income Tax, Circle-1, Erode. (अपीलाथ\u0007/Appellant) (\b\tयथ\u0007/Respondent) अपीलाथ\u001e की ओर से/ Appellant by : Shri S. Sridhar, Advocate (Erode) GHथ\u001e की ओर से /Respondent by : Mrs. G. Saratha, Addl. CIT सुनवाई की तारीख/Date of Hearing : 20.11.2024 घोषणा की तारीख /Date of Pronouncement : 14.02.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter “CIT(A)”] dated 30.05.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) of the Income-tax Act,1961 (hereinafter “the Act”) on 19.12.2019. ITA No.2081/Chny/2024 :- 2 -: 2. There is a delay of 07 days in filing the appeal by the assessee. The assessee has filed condonation petition stating the reasons for delay in filing the appeal. We have considered the petition of delay in filing the appeal and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is condoned accordingly. 3. The only effective ground of appeal in this appeal of assessee is against the order of Ld. CIT(A) in confirming the cash deposits during demonetization period of Rs. 79,10,093/-. 4. The assessee is a firm engaged in the business of trading in pipes, fittings and other building and water line materials. The assessee has filed its return of income declaring total income of Rs.23,91,900/- on 03.03.2015. The assessee has made cash deposit of Rs.1,00,35,000/- in Specified Bank Notes (SBN) during demonetization period. The assessee has explained the cash deposits , out of cash balance as on 09.11.2016 of Rs. 21,24,906/- and cash collection from the debtors during demonetization period. However, the A.O did not accept the assessee’s explanation and made addition of Rs. 79,10,093/- in excess of opening cash balance ITA No.2081/Chny/2024 :- 3 -: as on 09.11.2016 u/s. 69A of the Act. Aggrieved, the assessee filed an appeal before Ld. CIT(A). On appeal, the Ld. CIT(A) has confirmed the addition made by the A.O. 5. The Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee maintains proper books of accounts and the amount deposited is duly reflected in books of accounts. The Ld. AR has submitted that the A.O has made addition only because the assessee was not allowed to accept the SBNs ignoring the scope and effect of the provisions of the Specified Bank Notes (Cessation of Liabilities) Act, 2017, and relied upon the order of ITAT, Chennai in the case of Tamil Nadu State Marketing Corporation Ltd. vs. ACIT in ITA NO.431/Chny/2023 dated 07.10.2024. The Ld. AR further submitted that the A.O has not rejected the books of account and gross profit shown for the A.Y 2017-18 is much higher compared to the gross profit in the preceding years. 6. The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities. ITA No.2081/Chny/2024 :- 4 -: 7. We have heard the rival submissions, and perused the materials available on record. The A.O has made addition of Rs. 79,10,093/- u/s. 69A of the Act for the reason that the assessee has deposited SBN during demonetization period. Assessee has explained the source of cash deposit from the business and the A.O has not examined the books of account which is duly audited. The Co- ordinate Bench of this Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. vs. ACIT, supra, has clarified that merely for the reason that there is a violation of certain notifications/GO issued by the Government in transacting with SBNs, the genuine explanation offered by the assessee towards source for cash deposit cannot be rejected, unless the A.O makes out a case that the assessee has deposited unaccounted cash into bank account in SBNs. In light of the above, we set aside the orders passed by the lower authorities and remit the mater back to the file of A.O for denovo assessment after examining the books of account and profit of the assessee. We also direct the assessee to appear before the A.O on the date of hearing without fail and furnish complete details for its fresh consideration. Therefore, the appeal filed by the assessee is allowed for statistical purposes only. ITA No.2081/Chny/2024 :- 5 -: 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 14th February, 2025. Sd/- Sd/- (एबी टी. वक\u001e) (ABY. T. Varkey) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा सद! /Accountant Member चे\u0010नई/Chennai, \u0013दनांक/Dated: 14th February, 2025. EDN/- आदेश क\u0016 \bितिल\u0019प अ\u001aे\u0019षत/Copy to: 1. अपीलाथ\b/Appellant 2. \t थ\b/Respondent 3. आयकर आयु\u0010/CIT, Coimbatore 4. िवभागीय \tितिनिध/DR 5. गाड\u0019 फाईल/GF "