The Cuttack Bench of Income Tax Appellate Tribunal(ITAT) deleted the addition of Rs. 16,80,000 made for cash deposits in Specified Bank Notes (SBN) from liquor sales, citing exceptional circumstances.
Bibekananda Pradhan,the appellant-assessee,appealed the order issued by the Commissioner of Income Tax(Appeals)[CIT(A)] at the National Faceless Appeal Centre (NFAC), Delhi, on 12.03.2024,for the Assessment Year(AY) 2017-2018.
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The only issue in this case concerned the addition of Rs. 16,800 made under Section 69 of the Act for cash deposited in the bank during the demonetization period under SBN.
SBN stands for Specified Bank Notes, referring to the Rs.500 and Rs.1,000 currency notes that were demonetized in India on November 8, 2016. During this demonetization period, individuals were required to deposit these notes into banks. The government introduced new ₹500 and Rs.2,000 notes as replacements. Many businesses faced challenges in cash transactions, leading to situations where they had to accept SBNs despite restrictions.
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The tribunal reviewed the submissions and noted that the assessee deposited Rs. 26,46,000 in SBN during the demonetization period. The AO allowed Rs. 6,30,000 for average sales but deemed Rs. 16,80,000 as unexplained. However, the AO did not classify the SBN as unauthorized and accepted the reported sales.
Due to customers opening liquor bottles, which could not be returned, the assessee had to accept SBN to avoid losses. The bench recognized the exceptional circumstances and determined that the addition of Rs. 16,80,000 made by the AO and upheld by the CIT(A) should be deleted.
A single member bench of George Mathan(Judicial Member) allowed the appeal filed by the assessee.
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