Chapter 1

Introduction to Demonetisation

1.     Meaning 

2.     The Need for Demonetisation 

2.1      Black Money and Corruption 

2.2      Tax Evasion 

2.3      Fake Currency and Illegal Activities 

2.4      Digital Transformation and Financial Inclusion 

2.5      Curbing Inflation 

2.6      Promoting Transparency and Accountability 

2.7      Role of Cash Digitisation for Tax Authorities 

3.     Digital Transactions Trail

4.     Encouraging Electronic Recordkeeping 

5.     Easier Monitoring of High-Value Transactions 

6.     Keeping Pace with Innovation 

7.     Data Analytics for Tax Compliance 

8.     Reduction of Informal Economy 

9.     Online Reporting and Filing 

10.  Reducing Tax Evasion 

11.  Historical Context: Previous Attempts and Lessons Learned 

11.1   1946 Demonetisation 

11.2   1978 Demonetisation 

11.3   2016 Demonetisation 

11.4   Lessons Learned 

11.5   Implementation Challenges 

11.6   Impact on the Economy 

11.7   Shift to Digital Transactions 

11.8   Long-Term Effects on Black Money 

11.9   Political and Social Ramifications 

11.10 Preparation and Communication 

Chapter 2

Legality of Accepting Specified Bank Notes
Post Demonetisation

1.     Legal Tender

2.     Income-tax Perspective 

2.1    Mrs. Umamaheswari v The Income-tax Officer in ITA No.527/Chny/ 2022 dated 14.10.2022 

3.     Other judgements 

3.1    [2023] 149 taxmann.com 48 (Amritsar-Trib) dated December 8, 2022 Jagjit Singh v Income-tax Officer 

Chapter 3

Jewellers & Demonetisation

1.     Introduction 

2.     Case Laws 

2.1    Assessee should have sufficient stocks in its kitty to effectuate the sales 

2.1.1    ITA No. 1011/Del/2022 DCIT v Manuvel Malabar Jewellers Pvt. Ltd. (Dated: 18.08.2023, Hon’ble C.M. Garg & Hon’ble M. Balaganesh)-Assessee Favour

2.1.2    [2022] 96 ITR (T) 24 (Visakhapatnam Trib) ACIT v Hirapanna Jewellers (Dated 12.5.2021, Hon’ble N.K. Choudhry & Hon’ble D.S. Sundar-Assessee Favour

2.2    Whether inflated & abnormal cash sales and cash deposit during demonetisation can be a criteria for addition under section 68 

2.2.1    154 taxmann.com 584 (Mumbai-Trib) dated July 26, 2023 ACIT v Ramlal Jewellers (P) Ltd.*- Assessee Favour

2.3    Whether sales can be termed not genuine, without rejecting the books of accounts 

2.3.1    151 taxmann.com 340 (Delhi-Trib) Fine Gujaranwala Jewellers v ITO (Para 19)-Assessee Favour dated March 27, 2023 

2.4    Whether cash sales during preceding month of demonetisation i.e. October 2016 can be treated as unexplained without rejecting books? 

2.4.1    ITA No. 1805/DEL/2024 Nitin Agarwal v Income-tax Officer 

2.4.2    [2024] 109 ITR (Trib) 349 (ITAT[Ahm]) Abhishek Prakashchand Chhajed v Income-tax Officer dated October 04, 2023 

2.5    Whether non-availability of CCTV footage could be reasons to suspect the sale during demonetisation? 

2.5.1    Roop Square P. Ltd. v Assistant Commissioner of Income-tax [2022] 99 ITR (Trib) 451 (ITAT[Chand]) dated June 03, 2022 

2.6    Trade advances received in cash during demonetisation period don’t trigger Section 68 if later converted into sales 

2.6.1    Income-tax Officer, Corporate Ward-2 v Sahana Jewellery-Exports (P) Ltd. [2023] 157 taxmann.com 680 (Chennai-Trib)/[2024] 119 ITR (Trib) 205 (ITAT[Chen]) dated December 20, 2023 

2.7    Whether sale of 98 lakh by jeweller to 50 customers on demonetisation day in 4 hours is improbable? 

2.7.1    Income-tax Officer v Swarnsarita Jewellers [2023] 106 ITR (Trib) (SN) 75 (ITAT[Mum]) dated August 23, 2023 

Chapter 4

Cash Deposits by House Wives during Demonetisatio

1.     Introduction 

2.     Case Laws 

2.1    ITA No.35/Agr/2021 dated 18.06.2021 Smt. Uma Agrawal v ITO (ITAT Agra)

2.1.1    ITA No. 872/Del/2021 Dated: 14.10.2021 Neeru Jain v ITO (Hon’ble Anil Chaturvedi)

2.1.2    ITA No.7882/Del/2019 dated 07.03.2023 Aroshi Jain v ACIT (Hon’ble CM Garg)

Chapter 5

Addition u/s 68 & 69 with Special Reference to
Deposits During Demonetisation Period

1.     Section 68: Cash Credits 

2.     Section 69A: Unexplained Money, etc.

3.     Section 2(12A): Books of Accounts 

4.     Analysis of language of Section 68 & 69A  

5.     Analysis of addition made under different situations 

5.1    Where Book of accounts maintained and addition made under section 69A for unsatisfactory explanation 

5.1.1    [2024] 109 ITR (Trib) (S.N.) 47, ITAT Delhi in the case of Income-tax Officer v J.K. Wood India Pvt. Ltd. dated January 03, 2024: Favouring Assessee 

5.1.2    [2024] 111 ITR (Trib) 138 (ITAT[Chand]), ITAT Chandigarh in Fashion Zone v Joint Commissioner of Income-tax dated March 20, 2024, Favoring: Assessee 

5.1.3    2022 (4) TMI 1277, ITAT Delhi in Mr. Ramesh Kochar v ITO Ward 45(1), Delhi dated April 26, 2022, Favoring: Assessee 

5.2    Addition where assessee does not maintain Books of Accounts 

5.3    Addition where there is delay in deposit of cash from withdrawals 

5.3.1    Om Parkash Nahar v ITO reported in [2022] 100 ITR (Trib) 345 (ITAT [Del]) dated January 27, 2022 

5.4    Addition where regular cash sale not accepted and alleged as unexplained cash credits 

5.5    Once Books of Accounts have been accepted then cash sales cannot be held to be Unexplained Credit under section 68 of the Act

5.5.1    M/s A.K. Lumbers Ltd. v ACIT ITA No. 8761/Del/2019 

5.5.2    ITA No. 184/JP/2021 dated 6.5.2022 Smt Kanchan v ITO  

5.5.3    [2022] 142 taxmann.com 278 dated June 13, 2022 Smt. Tripta Rani v ACIT dated June 13, 2022 

5.5.4    [2022] 145 taxmann.com 545 dated July 26, 2022 R. S. Diamonds India (P) Ltd. v ACIT dated July 26, 2022 

5.6    Where Sales made by assessee are supported by Stock Register sale bills, payments through banking channel and sale duly disclosed in VAT returns which is verified and accepted by VAT department

5.6.1    [2023] 151 taxmann.com 338 (Amritsar-Trib) dated January 31, 2023 Balwinder Kumar v Income-tax Officer 

5.6.2    ITA No. 171/Del/2022 dated 26.4.2022 Ramesh Kochar v ITO  

5.6.3    ITA No. 194/Del/2020 dated 17.3.2020 Navkaar Traders v ITO  

5.7    Whether addition under section 69A can be made only on pretext that receipt of SBN was not legal tender? 

5.7.1    [2023] 105 ITR (Trib) (S.N.) 78 (ITAT[Chen]) Eagle Fleet Services v Assistant Commissioner of Income-tax dated July 19, 2023 

Chapter 6

Cash Sale by Medical Stores,
Milk Sellers, Petrol Pumps etc.

1.     Reliance can also be placed on following judgements in case of Milk Sellers/Distributors 

1.1    [2023] 155 taxmann.com 417 dated May 24, 2023 Arun Manohar Pathak v ACIT 

1.2    [2023] 156 taxmann.com 465 dated August 2, 2023 DCIT v Kannan Rajendra Babu 

2.     Reliance can be placed on following judgements in case of Medical Store 

2.1    Vijay Prakash Mantri v Income-tax Officer [2024] 159 taxmann.com 1393 (Hyderabad-Trib) dated January 12, 2024 

2.2    [2024] 113 ITR (Trib) (S.N.) 3 (ITAT[Kolk]) Subhojit Paul v Assistant Commissioner of Income-tax June 18, 2024 

3.     Whether there is requirement to kept doctor prescription and identity of customer for cash sale of medicines during demonetisation? 

3.1    Income-tax Officer v Manasa Medicals [2022] 100 ITR (Trib) (S.N.) 5 (ITAT[Bang]) dated October 31, 2022 

4.     Reliance can be placed on following judgement in case of Petrol Pumps 

4.1    ITA No.52/RJT/2022, ITAT Rajkot in M/s. Avadh Petroleum v PCIT dated August 08, 2022, Favouring: Assessee 

Chapter 7

Real Estate and Demonetisation

1.     Elimination of unsecured cash transactions 

2.     Low home loan interests due to demonetisation 

3.     Improved stock market performance and FDI 

4.     Slow purchases due to contraction in cash 

5.     Slowdown in construction work 

6.     Low rental yield 

7.     Benami Transactions (Prohibition) Amendment Act, 2016 & Demonetisation 

8.     Benami Transactions (Prohibition) Amendment Act, 2016 

9.     Demonetisation in 2016 

10.  Connection between Benami Act and Demonetisation 

11.  Whether Cash Transactions During Demonetisation Period Per-Se Fall Under the Scope of Benami Act? 

11.1   Whether cash deposited during demonetisation out of advance received for sale of property can be added under section 69A? 

11.1.1     [2023] 102 ITR (Trib) (S.N.) 9 (ITAT[Kolk]) Joginder Singh Johal v Income-Tax Officer dated January 24, 2023 

Chapter 8

Other Important Judgements on
Demonetisation for ready reference

1.     Cash Deposit multiple times prior to demonetisation 

1.1      ITA No. 1453/D/2021 Tilak Raj Anand v ITO dated 17.3.2022: Assessee Favour

2.     Where ITAT held that case deposited to be treated as income from business and profession and not to be taxed as unexplained money 

2.1      [2024] 113 ITR (Trib) 418 (ITAT[Mum])- ITAT Mumbai SMC Bench JAYESH Jagat Parekh v Income-tax Officer dated 28.06.2024: Assessee Favour

3.     Assessing Officer accepted cash sales on estimated basis but no basis or method was adopted for that estimation 

3.1      [2022] 98 ITR (Trib) 419 (ITAT[Chand]) Deputy Commissioner of Income-tax v Roop Fashion (and vice versa) dated 14.06.2022: Assessee Favour

4.     Where living expenses as declared by assessee out of cash withdrawal does not appear to be reasonable 

4.1      [2024] 113 ITR (Trib) (S.N.) 17 (ITAT[Surat]) Nilaben Aravindbhai Lad v Income-tax Officer June 25, 2024 

5.     Validity of Cash Deposits and Books of Account in Fireworks Trading Business Amidst Demonetisation 

5.1      [2024] 113 ITR (Trib) (S.N.) 53 (ITAT[Del]) Durga Fire Work v Income-tax Officer July 3, 2024 

6.     Cash Deposit by assessee out of sale proceed of Flat

6.1      [2022] 98 ITR (Trib) (S.N.) 65 (ITAT[Bang]) Ms. Karishma Sharma v Income-tax Officer (International Taxation) dated: 12.08.2022: Assessee Favour

7.     Opportunity of hearing to the assessee in accordance with law  

7.1      [2023] 103 ITR (Trib) 391 (ITAT[Ahm]) Kishoresinh Hemantsinh Chudasama v Deputy Commissioner of Income-tax dated 29.03.2023: Favouring Assessee, person /Matter remanded/remitted 

8.     Where there is no material on record to show sales were bogus 

8.1      [2023] 104 ITR (Trib) 503 (ITAT[Jai]) Assistant Commissioner of Income-tax v Chandra Surana dated 15.12.2022: Assessee Favour

9.     Whether the CBDT circulars and instructions not being followed during the assessment process can be held against the department - CBDT guidelines should be followed while assessing cash deposit during demonetisation.

9.1      ITA No.415/Bang/2022 dated 27.09.2022 Sasanur Hospital v The Pr. Commissioner of Income-tax 

10.  Declaration by assessee in PMGKY amnesty scheme and also payment of due taxes as per PMGKY amnesty scheme 

10.1   [2024] 164 taxmann.com 709 (Gujarat) Principal Commissioner of Income-tax v Sunil Mittal HUF July 2, 2024 

11.  ITAT remanded matter as assessee missed email notices sent by AO due to newly launched procedures 

11.1   Ediga Veeranjaneyulu v Income-tax Officer [2024] 159 taxmann.com 1214 (Hyderabad-Trib) January 11, 2024 

12.  When the assessee had declared the trade advances as sales and had also offered them to tax 

12.1   [2024] 113 ITR (Trib) 651 (ITAT[Chen]) Deputy Commissioner of Income-tax v Dar Paradise P. Ltd. March 21, 2024 

Chapter 9

CBDT Circulars of Demonetisation

1.     Circulars and Notifications 

2.     Overview of Online Verification 

3.     Reference Documents 

4.     Ensuring Online Response 

5.     Conducting Verification 

6.     Adherence to the Time-limit during Verification 

7.     Approval from Higher Authorities 

8.     Dealing with Non-Compliance 

9.     Initiation of Penalty Proceedings under Sections 2695S/269T of the Act

10.  Facilitation 

Annexure      Source Specific General Verification Guidelines                                                  

Chapter 10

RBI Circulars of Demonetisation

1.     Provision of Exchange Facility of SBN  

1.1    Reporting Mechanism   

2.     Deposit of SBN in A/c 

2.1    V. Acceptance of deposits through cash deposit machines CDM and cash recyclers 

2.2    Compliance with provisions of 114B of the Income-tax Rules, 1962 

3.     Cash Withdrawals 

3.1    Cash withdrawal for purpose of celebration of wedding 

4.     Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances 

5.     Interest Subvention Scheme for Short Term Crop Loans during the year 2016-17 - Grant of grace period of 60 days beyond due date 

6.     Detection of counterfeit notes in Specified Bank Notes (SBNs)-Reporting 

7.     Preservation of CCTV recordings 

Annexure 1   Master Circular No. RBI/2016-17/112, dated 8-11-2016" Withdrawal of Legal Tender Character of existing `500/- and `1000/- Bank Notes

Chapter 11

Withdrawal of Rs. 2000 Note by RBI

1.     Comparing Demonetisation in 2016 with the present move 

2.     Reasons advanced by RBI for Withdrawal of `2000 notes 

3.             FAQ’s issued by RBI dated 30/09/2023 for Withdrawal of `2000 Denomination Banknotes from Circulation