Bank Notes were collected on sale of Liquor, which is a non essential commodity
IT Department has classified this under Unexplained Investment
Income Tax Department officers scrutinising Income Tax returns of state owned Tamil Nadu State Marketing Corporation (TASMAC) are in a state of complete disarray as they have identified cash transactions of over Rs 50 Crore in demonstised bank notes or Specified Bank Notes during the period November 6, 2016 till December 30, 2016.
IT Department, while scrutinising the IT returns for FY 2016-17 found that TASMAC had accepted demonetized currency notes (Rs 500 and Rs 1000) of value Rs 57.29 Crore. This money was accepted across all stores under TASMAC for sales of Liquor, which is also a Non Essential commodity.
“The assessee is a government-owned State undertaking and it is beyond imagination as to how the State undertaking managed by an IAS officer would collect demonetised currency in contravention of the order of the Government of India... It is beyond probability to think that the assessee company and its outlet shops will exchange the valuable goods purchased by company legally, by transferring valid consideration, in exchange for invalid bank notes (illegal tender) - IT Department Assessment Order (as accessed by The Hindu)
As per the Computer Aided Scrutiny Selection System,TASMAC had an opening balance of Rs 84.23 Crore as on November 9, 2016, which was declared a bank holiday. Demonetized Currency Notes (Rs 500/Rs 1000) or SBN made up Rs 81.57 Crore. Rs 2.66 Crore was in other currencies. The Balance of SBN in the accounts of TASMAC was Rs 140 Crore. This means that TASMAC stores had collected Rs 57.29 Crore in demonetized bank notes over the demonetisation period. This was in complete contravention of government orders after the demonetisation announcement on November 8, 2016 and TASMAC is operated by a serving IAS officer, being a state owned enterprise.
“Though assessee claimed that it accepted SBN from customers due to law and order problems, the assessee has failed to produce any evidence from Government of Tamil Nadu or Honourable Governor of Tamil Nadu or the police evidencing any law and order issue that constrained the assessee to sell non essential commodity like liquor against invalid bank notes,” - IT Department Assessment Order (as accessed by The Hindu)
Income Tax department has concluded that the cash transactions of demonetized notes done by TASMAC amounts to "unexplained investment" under Section 69 of the Income Tax Act 1961 for AY 2017-18. This conclusion was reached after the IT department concurred and disagreed with the argument of TASMAC that is accepted SBN from customers due to law and order problems. IT department further said that they refuse to believe that a State owned entity managed by an IAS officer could carry out such illegal transactions after applying the Principle of Preponderance of Probability. TASMAC has also not provided branch wise details regarding the deposits of demonetized notes.
The IT Department has demanded payment of Tax for the unexplained investment of Rs 57.29 Crore as well as ordered the initiation of Penalty proceedings against TASMAC and its management.