THE KARNATAKA CO-OP CREDIT SOCIETY LIMITED ,VIJAYPUR vs. INCOME TAX OFFICER, WARD-2, BIJAPUR

The brief facts of the case are that the assessee is a co-operative society registered under the provisions of the Karnataka Co-operative Societies Act. The assessee had not filed their return of income and therefore a notice u/s. 142(1) was issued on 09/03/2018. The assessee had not filed their return of income to the said notice also and based on the information gathered during the phase of online verification under operation Clean money i.e. during the demonetization period, the AO had alleged that

As against the order, the assessee filed an appeal before the Ld.CIT(A). The assessee filed their written submissions and also filed the details about the cash deposits and the members from whom the cash was received. The assessee also furnished the copy of the details furnished before the AO on 16/09/2019 and prayed to allow the appeal of the assessee. The Ld.CIT(A) had not accepted the plea made by the assessee and dismissed the appeal on the ground that the assessee had not filed the return of income, audit report or cash book and also not produced any documentary evidence to establish the identity and credit worthiness of creditors.

As against the said order, the present appeal has been filed by the assessee.

At the time of hearing, the Ld.AR submitted that all the details were filed before the AO along with the reply to the show cause notice dated 06/09/2019 which was also extracted by the AO but unfortunately, the AO had not looked into the said details for the reason that the assessee had not

The Ld.DR submitted that the assessee had not filed their return of income and also the audit report and therefore the claim made by the assessee could not be sustained and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

The assessee is a co-operative society registered under the provisions of the Karnataka Co-operative Societies Act and falls under the control of the Registrar of Co-operative Societies and their accounts are statutorily audited by the co-operative audit wing of the department and therefore the allegation that the assessee’s books of accounts were not audited does not holds good. Further, we have noticed that the assessee had filed the details of the members from whom the old currency notes were received and deposited into their bank account but unfortunately the AO had not accepted the said details only for the reason that the assessee had not filed their return of income. This view of the AO is not correct and he is duty bound to consider the said details and grant the relief if the same are in order. Further, as stated by the Ld.AR, the societies would admit new members only after getting the KYC details from the public and therefore when the assessee had furnished the details of the members and their share number and Aadhaar numbers, it is a compliance about the members identity and also their credit worthiness. It is not the case of the revenue that the assessee had received money from the third parties in the old

Further, the receipt of old currency notes from the members during the demonetization period would not be a reason to treat the said amount as unexplained money. Even though the assessee was not authorized to receive the old currency notes, the deposits made by the members in the old currency notes into their accounts, would not treat the said amount as unexplained money u/s. 69A of the Act. The details were filed before the AO and also before the Ld.CIT(A) but unfortunately, both the authorities had not accepted the said submissions and relied on the annexure – 1A filed by the assessee and concluded that the assessee had not established the source of the cash deposits. In the annexure to the reply to the show cause notice, the assessee had furnished the statement showing the date wise amount received from the members by mentioning their share number, name, address, occupation and Aadhaar number and therefore the findings given by the authorities are against the facts and therefore we are inclined to set aside the order of the lower authorities.

In the result, the appeal filed by the assessee is allowed.