PRAFULLA KUMAR PRADHAN,RAJ SUNAKAHALA V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), BHUBANESWAR , BHUBANESWAR

ITA 488/CTK/2024

AI Insights

The case revolves around an appeal by Prafulla Kumar Pradhan against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed an addition of Rs. 10,98,000 to the assessee's income for the assessment year 2017-2018. This addition was made under Section 69 of the Income Tax Act, 1961, concerning unexplained cash deposits in the bank during the demonetization period. The assessee, engaged in the retail sale of Indian Made Foreign Liquor (IMFL), accepted SBN from customers, which were later deposited in the bank. The Tribunal acknowledged the exceptional circumstances under which the assessee operated, including the necessity to accept SBN to avoid losses from non-returnable opened liquor bottles, and thus allowed the appeal, deleting the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472123 (ITAT-CUTTACK)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.C.MOHANTY
• Assessee Lawyers: P.R.MOHANTY
• Keywords: Business income; Reasonable cause; Rejection of books of accounts
• Section: 250; 145(3)

Judgement Text

" आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, कटक कटक कटक कटक \u0001यायपीठ \u0001यायपीठ \u0001यायपीठ \u0001यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अपील सं सं सं सं/ / / /ITA ITA ITA ITA No.488/CTK/2024 (िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण वष\u0005 वष\u0005 वष\u0005 वष\u0005 / Assessment Year : 2017-2018) Prafulla Kumar Pradhan, At: Kauripatana, PO: Raj Sunakhala, PS: Bolagarh, Dist: Khordha Vs DCIT, Circle-2(1), Bhubaneswar PAN No. :ARHPP 9716 E (अपीलाथ\u000f अपीलाथ\u000f अपीलाथ\u000f अपीलाथ\u000f /Appellant) .. (\u0010\u0011यथ\u000f \u0010\u0011यथ\u000f \u0010\u0011यथ\u000f \u0010\u0011यथ\u000f / Respondent) िनधा\u0005\u0013रती िनधा\u0005\u0013रती िनधा\u0005\u0013रती िनधा\u0005\u0013रती क\u0016 क\u0016 क\u0016 क\u0016 ओर ओर ओर ओर से से से से /Assessee by : Shri P.R.Mohanty, Advocate राज\u0018व राज\u0018व राज\u0018व राज\u0018व क\u0016 क\u0016 क\u0016 क\u0016 ओर ओर ओर ओर से से से से /Revenue by : Shri S.C.Mohanty, Sr.DR सुनवाई क\u0002 तारीख / Date of Hearing : 27/01/2025 घोषणा क\u0002 तारीख/Date of Pronouncement : 27/01/2025 आदेश आदेश आदेश आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 30.09.2024, passed in Appeal No.CIT(A), Bhubaneswar vide DIN & Order No.ITBA/NFAC/S/250/2024-25/1069269209(1) for the assessment year 2017-2018, on the following grounds of appeal :- 1. For that order dated 30.09.2024 as passed under Section 250 of the I.T.Act, 1961 by the Commissioner of Income Tax (Appeals) Income Tax Department hereinafter referred to as the learned CIT(Appeals) dismissing the appeal is not just and legal on the facts and in the circumstances of the case. 2. For that the learned CIT(Appeals) without properly appreciating the submissions of the appellant from its proper perspective should not have confirmed the addition of Rs.10,98,000/- u/s.69 of the I.T.Act, 1961 on the facts and in the circumstances of the case. 3. For that the learned Assessing Officer having admitted that the appellant was having only cash sales and the appellant was used to deposit the cash in the bank account the learned AO is not justified to make addition of Rs.10,98,000/- u/s.69 of the I.T.Act, 1961 on the facts and in the circumstances of the case. ITA No.488/CTK/2024 2 2. The assessee is represented by Shri P.R.Mohanty, Advocate and department is represented by Shri S.C.Mohanty, Sr. DR. 3. The only issue involved in this case with regard to addition of Rs.10,98,000/- made u/s.69 of the Act on account of cash deposited in the bank during demonetization period under SBN. 4. It was submitted by the Id. AR that the cash was deposited out of the cash sales made during the year. The assessee is dealing in IMFL and accepted cash which includes the SBN taken against cash sales during demonetization period. The Id. AR submitted that the cash was accepted in SBN under compulsion as the customers came to the shop and had taken the goods i.e. liquor bottle and after opening the same asked the assessee to accept sale consideration in SBN. In the case of liquor, once the bottle is opened, no one can accept it as sales return, therefore, the assessee has no other alternative but to accept the sale consideration in any denomination irrespective of the fact whether it is SBN or any other currency. It was the submission that the AO has not rejected the books of accounts nor stock declared by the assessee was disturbed. The sales declared by the assessee were also accepted. He, therefore, submitted that there was a reasonable cause in accepting the SBN which was deposited in the bank and the source of the same was duly explained and thus the addition made deserves to be deleted. 5. In reply, Id. Sr. DR submitted that the cash was received in SBN during the demonetization and the assessee being a trader in IMFL is not authorized to collect such SBN currency, therefore, the addition made by ITA No.488/CTK/2024 3 the AO is correct. Accordingly, the Id. Sr. DR vehemently supported the orders of the lower authorities 6. We have heard the rival submissions and perused the material available on record. It is perused that in this case the assessee has deposited total cash out of Rs.16,98,000/- in SBN during the demonetization period. The AO after giving credit of average sales of Rs.6,00,000/- held Rs. 10,98,000/- as unexplained. From the perusal of the order, it is seen that the AO nowhere held that the SBN accepted by the assessee during the demonetization is unauthorized and he himself had accepted the sales as well as stock declared by the assessee. It is not a case where provisions of Section 145(3) of the Act are invoked and income is estimated. The assessee is dealing in IMFL and had made retail sales of liquor wherein many cases customers took the goods and opened up the cap. Once the liquor bottle is opened, it cannot be returned to the seller as it cannot be accepted by any other customer and is a total loss to seller. Due to this compulsion and exceptional circumstances, the assessee had to accept the SBN in those cases. Though we are of the view that SBN cannot be accepted during demonetization except authorized by the RBI, however, as the circumstances narrated above are beyond the control of the assessee, therefore, it is a reasonable cause where to protect the interest of business and to avoid total loss, SBN were accepted from such customers. The AO has already allowed Rs.6,00,000/- as unexplained out of such sales in SBN and also accepted the trading results declared by the assessee wherein such cash sales in ITA No.488/CTK/2024 4 SBN was included in total sales by the assessee. Looking to these circumstances, we are of the considered view that the addition of Rs. 10,98,000/- made by the AO and confirmed by the Id. CIT(A) should be deleted as the assessee has demonstrated the exceptional circumstances under which such cash was accepted under SBN. In view of these facts, the addition of Rs. 10,98,000/- made by the AO is hereby deleted. 7. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 27/01/2025. Sd/- (GEORGE MATHAN) Sd/- (MANISH AGARWAL) \u0001याियक \u0001याियक \u0001याियक \u0001याियक सद\bय सद\bय सद\bय सद\bय / JUDICIAL MEMBER लेखा सद\bय/ ACCOUNTANT MEMBER कटक कटक कटक कटक Cuttack; \u0003दनांक Dated 27/01/2025 Prakash Kumar Mishra, Sr.P.S. आदेश आदेश आदेश आदेश क\u0002 क\u0002 क\u0002 क\u0002 \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप अ\tेिषत अ\tेिषत अ\tेिषत अ\tेिषत/Copy of the Order forwarded to : आदेशानुसार आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, (Assistant Registrar) आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, कटक कटक कटक कटक/ITAT, Cuttack 1. अपीलाथ\u0007 / The Appellant- Prafulla Kumar Pradhan, At: Kauripatana, PO: Raj Sunakhala, PS: Bolagarh, Dist: Khordha 2. \b\tयथ\u0007 / The Respondent- DCIT, Circle-2(1), Bhubaneswar 3. आयकर आयु\u0006(अपील) / The CIT(A), 4. आयकर आयु\r / CIT 5. िवभागीय \u0010ितिनिध, आयकर अपीलीय अिधकरण, कटक कटक कटक कटक / DR, ITAT, Cuttack 6. गाड\u0010 फाईल / Guard file. स\tयािपत \bित //True Copy// "