ITAT Kolkata Deletes ₹43.98 Lakh Addition Against Disha Eye Hospitals For Genuine SBN Receipts

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) on 6 April deleted a Rs. 43.98 lakh addition made against Disha Eye Hospitals Pvt. Ltd., holding that receipts from a genuine source, even if in demonetised notes (SBNs), cannot be treated as unexplained money under Section 69A of the Income Tax Act.

A Bench comprising Judicial Member George Mathan and Accountant Member Rakesh Mishra observed:

“Only on account of the fact that the receipts were in SBNs, the same could not be added u/s 69A of the Act when the source of receipts has not been disputed.”

Disha Eye Hospitals, a private hospital chain providing specialised eye care through branches in West Bengal, had deposited Rs. 43,98,500 in demonetised Rs. 500 and Rs. 1,000 notes between 9 and 15 November 2016.

The Assessing Officer accepted the overall cash deposits but treated the SBN component as unexplained money, reasoning that such notes had ceased to be legal tender after midnight on 8 November 2016. The Commissioner of Income Tax (Appeals) upheld the addition, holding that private hospitals were not authorised under the Government's demonetisation notification to accept SBNs after that date.

Reversing this view, the Tribunal held that the tax authorities' reasoning was internally inconsistent, treating the receipts as invalid legal tender while simultaneously taxing them as “money” under Section 69A of the Income Tax Act, which applies to unexplained money, bullion, jewellery, or other valuable articles.

The Bench also noted that the receipts were from patients, a source not disputed by the Revenue, and that the hospital had already included them in its computation of taxable income, making any separate addition unsustainable.

Accordingly, the Tribunal deleted the addition of Rs. 43.98 lakh.