ITAT confirms Addition of Unexplained Income for SBN Deposits during Demonetization Period in Absence of Legitimate Source [Read Order]

The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT) recently confirmed the addition of unexplained income for SBN deposits during the demonetization period in the absence of legitimate source documentation.

The assessee Pankaj Gupta was an individual carrying on business of FMCG goods on wholesale and retail trading in the name and style of M/s Santoshi Agencies at Sohella, District Bargarh.

The assessee maintained a computerized cash book, journal, Ledger, purchase register and sales register in the regular course of his business. In the course of his business catered to shopkeepers Located in nearby small villages, small hawkers etc. on credit as well as in cash and collects outstanding debts in cash.

Unfortunately, most of these small shopkeepers, vendors and weekly market hawkers were not maintaining any bank accounts as they were residing in remote village areas and the banking facilities were not available to them.

They were very poor and needy people who made their livelihood by selling items of daily use and they were aloof to the modern world. The cash book revealed the balance as on 08.11.2016 was Rs. 253.40 only.

The Assessing Officer passed an order under Section 143(3) of the Income Tax Act, without issuing a specific show cause notice (SCN) for addition. The lower authorities dismissed the appeal of assessee simply holding that the appellant was not authorized to receive SBNs during the impugned period without quoting any source of Law.

Counsel for the Assessee had not been able to controvert the fact that balance as per cash book was mere Rs. 252.40 only whereas Rs. 28,00,000 had been deposited in his bank account. He failed to produce the documentary evidence.

Counsel for the revenue argued that the assessee was not within the category of the persons permitted to accept the demonetized currency. It was the further submission that there was no entry of the receipts of the said funds in the cash book either.

The Single Bench tribunal of Judicial Member George Mathan observed that if the assessee desired to take the stand that the SBNs were the currency received between 08.11.2016 to 12.11.2016, it would be incumbent upon the assessee to prove to the revenue as to from whom he had received the SBNs.

In the absence of such proof, the deposit of SBN to the extent of Rs.28 lakhs will have to be treated as the unexplained investment of the assessee, the bench noted.

In result, the appeal of the assessee was dismissed

To Read the full text of the Order CLICK HERE

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