ARABILACHI VYAVASAYA SEVA SHANKAR SANGHA LIMITED ,SHIMOGA vs. INCOME TAX OFFICER, WARD-1 & TPS, SHIMOGA

Brief facts of the case are that assessee is a Credit Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act. The assessee had not filed its return of income and the AO based on the high value transaction, had issued notice under section 148 of the Act. Even for the said notice issued under section 148 of the Act, assessee had not responded. It is the case of the AO that the assessee had deposited into their bank account a sum of Rs.74,11,000/- and Rs.1,54,97,000/- and

As against the said order, the assessee filed an appeal before the learned CIT(A) with a delay of 251 days. The assessee also filed an application to condone the said delay and in the said application, the assessee had mainly alleged the mistake committed by the consultant and therefore prayed that an opportunity may be granted to the assessee to explain the source of the said cash deposits and the purpose for withdrawing the cash from the bank account, which is nothing but the money paid by the farmers. The learned CIT(A) had considered the said application and not satisfied with the reasons stated therein, did not condone the delay and dismissed the appeal of the assessee on the ground

At the time of hearing, the learned AR submitted that the reasons stated in the application to condone the said delay in filing the appeal is the genuine reason and therefore because of the mistake committed by the authorized representative, the assessee should not be penalized and prayed that an opportunity may be granted for explaining its case before the AO.

The learned DR submitted that the assessee had not cooperated with the Department on both the occasions and therefore no leniency should be shown on them and prayed to dismiss the appeal.

We heard the arguments. It is an admitted fact that the assessee society is a very old society registered in the year 1976 and it is providing credit facilities to its members and also supplying the rice given by the KFCSC to the public free of cost to the ration card holders. Similarly, other food grains are also supplied at the concessional rates. The assessee also purchases fertilizers and supplies to its members at a nominal rate. In respect of earlier years as well as subsequent years, we found that the assessee was regular in filing its return of income and only in respect of current Assessment Year, the assessee was not able to file its return of income because of some misunderstanding with the AR. From the facts, it is clear that the non-filing of the return was neither willful nor wanton but due to bonafide reasons as stated by the assessee. In fact, because of the misunderstanding between the AR and the assessee, the AR had not intimated about the various notices received in his email and therefore the assessee had not participated in the assessment proceedings and therefore a

Considering the fact that the assessee is a Co-operative Society and also deposited the members’ money into the bank account, an opportunity may be granted to establish its case that the cash deposits are nothing but the cash paid by the members and therefore it cannot be termed as unexplained money under section 69A of the Act. No doubt, the assessee had not explained the facts before the AO but it does not mean that the assessee had not disclosed the correct income which is nothing but the deposits made by the members. If the assessee was able to satisfy the authorities that the cash deposits are from the genuine sources, the entire addition made under section 69A of the Act would go and, in that circumstances, no liability would be imposed on the assessee. If an opportunity is not granted, the assessee society could be facing huge liability which would otherwise destroy the very institution.

In such circumstances, we are of the view that a lenient view may be taken and therefore we are inclined to condone the said delay of 251 days in filing the appeal before the learned CIT(A) and set aside the orders of the lower authorities and remit this issue to file of the AO for fresh consideration. It is open to the assessee to furnish the documents in support of its claim and the AO will also provide an opportunity of being heard to the assessee before passing any order.

In the result, appeal filed by the assessee is allowed for statistical purposes.