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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE
Appellant by : Shri.Bhupendra Shah.AR Respondent by : Shri.Umesh Sinha. JCIT-DR Date of Hearing 27.09.2023 Date of Pronouncement 12.10.2023 आदेश / O R D E R
PER PAVAN KUMAR GADALE JM:
1. The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi /CIT (A) passed u/sec 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal:
1. In the facts of the case and in Law, the learned AO erred in making addition of Rs. 12,10,000/-by arbitrarily adding cash deposit made during demonetization period amounting to Rs. 12,10,000/- as undisclosed income u/s 69A r.w.s 115BBE by The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 2 - a. Disregarding the fact that entire cash deposit is fully accounted for and disclosed in the audited books of the Appellant. b. Without rejecting books of accounts u/s 145(3) c. Arbitrarily rejecting details of cash deposits even though each and every detail was submitted about the source and nature of receipt.
2. In the facts of the case and in Law, the learned CIT(A) erred in confirming the addition by rejecting all the grounds of appeal.
[B] Relief Prayed:
The appellant therefore prays as follows,
To quash the order passed in violation of natural justice.
2. To delete the addition of Rs. 12,10,000/- made u/s 69A r.w.s 115BBE.
[C] General: - The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion This appeal is filed on time and the same may please be allowed in full. A Detailed paper book along with case laws will be submitted at the time of hearing.
The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 3 -
The brief facts of the case are that, the assessee is a cooperative credit society and is engaged in banking business for its members. The assessee society collects the deposits from members by way of fixed deposits, saving deposits and recurring daily deposits and provide loans to its members. The assessee has filed the return of income for the A.Y 2017-18 disclosing a total income of Rs. Nil after claiming deduction Chapter under VIA of Rs.2,690/- and the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny under CASS and notice u/s 143(2) and 142(1) of the Act. In compliance to the notice, the assessee has filed the submission online through e-proceedings on various dates. The Assessing Officer (A.O) has gathered the information that the assessee has made aggregate cash deposits of Rs.12,10,000/- in the Mumbai District Central Co-op Bank Lalbaug branch in the F.Y 2016-17 and the explanations were called. The assessee has submitted the list of members who have deposited the cash in the specified bank notes in demonetization of Rs.1000 and Rs.500 during demonetization period. Since the assessee has not The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 4 - filed the complete details, the AO has provided one more opportunity to assessee to submit the details. Further in the course of assessment proceedings, notice u/s 133(6) of the Act was issued to the banks of the assessee and bank statements were obtained. The AO has dealt on the data analysis of the bank account and the details submitted by the assessee. The AO has accepted the fact that the assessee has deposited the cash in SBN with bankers on 11.11.2016. Whereas the AO has observed that the assessee has failed to establish the sources of cash deposits and made addition under sec 69A of the Act of Rs.12,10,000/- and passed the order u/s 143(3) of the Act dated 11.12.2019.
3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the AO but has confirmed the action of the A.O and dismissed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon’ble Tribunal.
The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 5 -
At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the AO overlooking the submissions and material information filed in the assessment proceedings. Further the assessee is a credit cooperative society and provide loans to the members and the amount received by the assessee represents the repayment of loans and the interest on loans. The Ld. AR submitted that the assessee is working on a concept of banking business and collects the deposits from members by way of fixed deposits, saving deposits and recurring daily deposits and provide loans. The Ld.AR substantiated the submissions with the judicial decisions and factual paper book and prayed for allowing the appeal. Per contra, the Ld.DR supported the order of the CIT(A).
Heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld. AR that the CIT(A) has erred in confirming the action of the AO making addition u/sec 69A of the Act in respect of cash deposits made by the assessee in the bank accounts. The Ld. AR contentions are that the assessee being a credit cooperative society has The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 6 - provided loans to its members for various purposes and the amount received from the members towards repayment of loans and interest on loans are deposited and collected over a period. Further the circular was received from the RBI for not to accept the cash deposits from the members from 14.11.2016. Whereas the Ld. AR has referred to the list of members placed in the paper book at page 57 to 62, where the details of membership number, name of the member, address and PAN number and amount of each member who has deposited the cash towards the repayment for various purposes. Further the Ld.AR has submitted that the assessee being credit cooperative society has provided the receipts for payment/deposits made by the members placed at page 63 to 67 of the paper book. Whereas the AO has made addition u/sec 69A of the Act, even though the money was already recorded in the books of account of the society and addition is not warranted.
Whereas, the assessee has substantiated the details before the lower authorities and the Ld. AR emphasized that the assessee has provided all the details and the AO has not conducted enquiry. The The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 7 - Ld. AR relied on the decision of the Honble Tribunal Bangalore Bench, in - Sri Bhageeratha Pattina Sahakara Sangha Niyamitha Vs ITO Davanagrere. Dated 18-02-2022 observed at Page 7 Para 14 of the order read as under: “ 14. I heard Ld. D.R on this issue and perused the record. I notice that the A.O. has not doubted the submissions of the assessee that the above said amount of Rs.24,47,500/- represents collection of money in the normal course of carrying on of business of the assessee, i.e., it represents money remitted by the members of the assessee society towards repayment of the loan taken by them and also towards pigmy deposits, etc. The Ld A.R submitted that the assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into bank account. Thus, I notice that the assessee has explained the nature and source of the above said amount of Rs.24,47,500/-, which was in-turn deposited by the assessee society in its bank account and further, all these transactions have been duly recorded in the books of account. Hence, the above said deposits cannot be considered as "unexplained money" in the hands of the assessee.
The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 8 - complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am Page 8 of 9 unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.Oto delete this disallowance.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes”
Similarly the Honble Tribunal in ITA.No.1613/Mum/2021 dated 5-09-2022 in the case of Saidatar Co-op Credit Society Ltd Vs ITO, has dealt on the provisions and facts and deleted the addition
The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 9 - and observed at Page 5 Para 7 of the order read as under:
“2.We have considered the rival submissions and perused the material available on record. In the present case, it has not been disputed by the Revenue that assessee is Co-operative Credit Society, during the year under consideration and is in the business of Credit Co- operative Society and provides financial assistance to its members by granting loans. It is also not in dispute that return of income was filed by the assessee only pursuant to the notice issued under section 142(1) of the Act. In the said return, the assessee has claimed to have declared total income of Rs. Nil, after claiming deduction under section 80P of the Act of Rs. 2,34,364. It is the plea of the assessee that as part of its activity of Co-operative Credit Society, assessee received total cash deposit of Rs. 1,12,72,341, during the year under consideration, from the following source:
Sr. No Details of receipt of cash Amount (Rs.) . 1. Daily deposit 1,02,53,490 2. Dam Duppat Deposit 2,90,000 3. Savings deposit 2,71,101 4. Recovery of loans 4,57,750 Total 1,12,72,341
As per the assessee, the cash deposited in its bank during the year is as under:
Amount (Rs.) Period
The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 10 -
56,38,800 01/04/2016 to 08/11/2016 09/11/2016 to 31/12/2016 2,00,000 (1000 and 500 old notes) 09/11/2016 to 31/12/2016 15,90,500 (other than 1000 and 500 old notes) 31,71,770 01/01/2017 to 31/03/2017 1,06,01,070 Total
2. To substantiate its claim, the assessee has also filed statement of accounts no. 00281806000030 and 00281106000069 maintained with Mumbai District Central Co-operative Bank, Borivili (West), Mumbai branch, forming part of the paper book from page No.197– 219. Thus, as per the assessee cash amounting to Rs.17,90,500, was only deposited in its bank account during the demonetisation period. We find that the above submission is duly corroborated from the entries in the aforesaid statement of accounts forming part of the paper book. Thus, we are of the considered view that Assessing Officer has erred in considering the amount of Rs. 18,07,000 instead of Rs.17,90,500, deposited during the demonetisation period. Further, the Assessing Officer has added the amount deposited during the demonetisation period under section 69A of the Act. In this regard, it is pertinent to analyse the provisions of section 69A of the Act, which reads as under:
“69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 11 - assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”
Thus, provisions of section 69A of the Act are applicable only in the case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article. In the present case, it is an accepted fact that assessee is a Co-operative Credit Society and in its business it accepts deposits from its members and also gives credit to its members which is repaid by them. The cash/money deposited by its members is further deposited by the Society in its bank account. Thus, in the facts of the present case, the assessee who is a registered Co-operative Credit Society cannot be considered to be the owner of the money, which only belongs to its members and same is retained by the assessee as its custodian. Further, from the perusal of the record we find that the assessee provided the details of cash deposited during the demonetisation period before the Assessing Officer in reply to the notices issued. From such reply filed by the assessee, forming part of the paper book, we find that assessee also provided name and address of the members who have deposited cash with the assessee during the year under consideration. The assessee has also provided the PAN number of some of its members. However, the Assessing Officer without commenting upon any of these details added the cash deposit made during the period of demonetisation as undisclosed income of the assessee. We find that though Assessing Officer has issued notice under section 133(6)
The Sagreshwar Co-Op Hsc Society Ltd, Mumbai. - 12 - of the Act to the bank seeking information regarding the details of bank statement and KYC details of the assessee, however, neither such notice under section 133(6) was issued nor examination/enquiry was done from the members. During the hearing before us, the assessee also submitted the list of members along with their PAN/TIN No. who had deposited cash during the demonetisation period in old currency notes. Be that as it may, since this money is of the members of the assessee society and the same is not owned by the assessee society, therefore, we are of the considered view that Assessing Officer has wrongly made the addition under section 69A of the Act, in respect of the cash deposit made during the demonetisation period”.
Whereas the facts of the present case are, similar and identical and fallow the judicial precedence and apply the ratio of judicial decision. Accordingly, set-aside the order of the CIT(A) and direct the assessing officer to delete the addition U/sec 69A of the Act and allow the grounds of appeal in favour of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 12.10.2023.