Deposit of Huge Amount of SBN Notes in Bank Account: ITAT Confirms Income Tax Addition, Directs Authorities to Investigate Role of Bank Employees

While upholding an addition under section 68 of the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT), Hyderabad bench has directed the concerned authorities to investigate the role of bank employees assisted the assessee to deposit huge amount of specified bank notes (SBN) in the bank account violating KYC norms.

The assessee, Vaishnavi Bullion Private Limited, is a Private Limited Company engaged in the business of trading in gold, diamond jewellery and bullion. In this case, a search and survey action u/s 133A of the Act was carried out in the business premises of the assessee on 01.12.2016 by the Investigating Wing, Hyderabad. During the survey, it was noticed that assessee had deposited Rs.39,64,98,000/- in its Axis Bank account and Rs.50,00,000/- in Bank of Baroda, Hyderabad and thus, the total deposit after demonetization made by the assessee company was Rs.40,14,98,000/-. Later, the assessee had agreed to cover under the Pradhana Mantri Garib Kalyan Yojana, 2016 as the assessee was given the assurance, no criminal prosecution / PMLA inquiry / investigation would not be done.

However, ED has started investigation on the above, and the income tax department made an addition against the assessee based on the confession made by the Director of the assessee before the ED.

A two-Member ITAT comprising Shri Rama Kanta Panda, Accountant Member and Shri Laliet Kumar, Judicial Member observed that the conduct of the assessee was abnormal and it had caused immense harm to well intention notification and the Act.

“The withdrawal of legal tender character was one of the significant steps in weeding out the fake currency and to curb the black money in the country. The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others’ ill-gotten money into bullions. In the present case the bank account. The above said act of the assessee is not only against the law but also against the interests of the nation. In the present case, the bank account with the AXIS Bank was only opened on 10.11.2016. As per the notification, the assessee cannot deposit more than the amount of Rs.50,000/- in its account till KYC is completed. It is not the case of the assessee that the KYC had been completed on the date of opening of its account.”

Concluding the order, the ITAT held that “It is not understandable how the bank permitted the deposit of huge amounts in the newly opened account, on the date of its opening itself. The concerned agency must look into the role of the bank employees in this regard. When the assessee itself cannot deposit more than Rs.50,000/- as per notification, then how a third party can be authorized to deposit more than the specified limits in the bank account of the assessee. The disability of the assessee would entail the disability of its delegate / agent.”

To Read the full text of the Order CLICK HERE

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