ITO WARD-10(1), AKURDI vs. GADAGADEVI VIVIDH KARYAKARI SAHAKARI SANSTHA MARYADIT, PUNE

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ITA 3331/PUN/2025Status: DisposedITAT Pune11 June 2026AY 2020-216 pages
AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the additions, finding that the cash deposits were from the society's normal business activity of providing credit facilities to its members and were accounted for. The Tribunal upheld the CIT(A)'s order, finding no contrary material from the Revenue.

What were the facts?

The assessee, a co-operative credit society, did not file its return of income for AY 2020-21. The Assessing Officer (AO) made additions under Sections 68 and 69A for unexplained cash deposits and credits, totaling Rs. 2,59,40,616. The assessee contended that these deposits were from its members in the normal course of business.

What were the issues?

Whether cash deposits made by a co-operative credit society from its members in the normal course of business can be treated as unexplained cash credits/money under Sections 68 and 69A when the society has not filed its return of income.

Which sections of the Income-tax Act were involved?

Section 68,Section 69A,Section 147,Section 148,Section 142(1),Section 144,Section 133(6),Section 80P

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

Before: SHRI RAMA KANTA PANDA & Ms. ASTHA CHANDRA

For Respondent: Shri Rajesh Gawali, Addl.CIT-DR

PER ASTHA CHANDRA, J.M.:

The appeal filed by the Revenue is directed against the order dated 30-10-2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”], u/s. 250 of the Income Tax Act, 1961 (the “Act”), pertaining to Assessment Year (“AY”) 2020-21. 2. None appeared for and/or on behalf of the assessee when the matter was called out for hearing today i.e. on 08-06-2026. Even on earlier date of hearing on 28-04-2026, neither any one represented the assessee nor any adjournment application was filed. However, the assessee has filed written submission dt. 01-06-2026, giving its counter reply in respect of grounds of appeal raised by the Revenue. Under these circumstances, we proceeded to decide the appeal based on the material available on record, including the written submission filed by the assessee and with the assistance of the Ld.DR.

2

3.

Briefly stated, facts as curtailed from the material available on record are that the assessee is a co-operative credit society and engaged in the activity of accepting deposits and providing credit facilities to its Members, mostly crop loans. For AY. 2020-21, the assessee did not file its return of income. Based on the information available on Insight Portal, it was found that the assessee entered into substantial transaction of cash deposit of Rs. 2,59,28,476/- and cash withdrawal of Rs. 12,140/-, aggregating to Rs. 2,59,40,616/- into its bank account with Pune District Central Coop Bank Ltd. (“PDCC Bank”). Since the return of income was not filed by the assessee, the said transactions remained unexplained and, therefore, the case of the assessee was reopened u/s. 147 of the Act by issue of notice u/s. 148 of the Act on 20-03-2024. The assessee failed to comply with the notice issued u/s. 148 of the Act. Thereafter, various notices u/s. 142(1) of the Act and show cause notice u/s. 144 of the Act were issued to the assessee, which also remained un-complied with by the assessee. However, the assessee filed its response to the last notice issued u/s. 142(1) of the Act on 26-12-2024 and the final show cause notice issued on 10-02-2024. Being dis-satisfied with the submissions/reply filed by the assessee and after obtaining confirmation from PDCC Bank u/s. 133(6) of the Act, the Ld.AO proceeded to complete the assessment, assessing the total income of the assessee at Rs. 2,59,40,616/- thereby making an addition of Rs. 12,140/- on account of unexplained money u/s. 68 of the Act and Rs. 2,59,28,476/- on account of unexplained cash credit u/s. 69A of the Act, vide his order dt. 17-03-2025 passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act.

4.

Aggrieved, the assessee filed an appeal before the Ld.CIT(A)/NFAC.

5.

During the appellate proceedings, the assessee submitted before the Ld.CIT(A)/NFAC that the day-to-day activity of the assessee society is to 3 accept amounts either in cash or through banking channel being deposits, repayment of loan, share application money etc, from its members and also advances money to its members as per their need for specific purposes mainly through banking channel. Further, the assessee submitted that the said activity of the assessee society is backed by several documentary evidences viz. Registration Certificate, Bye Laws of Society, Profit and Loss Account and Balance Sheet etc., which were duly submitted before the Ld.AO. The assessee submitted that as per the Profit and Loss Account, the society achieved net profit of Rs.21,85,133/- for the year under consideration and was eligible to claim the entire profit as exempt u/s. 80P of the Act. The assessee submitted that, therefore, the net income of the assessee society was Rs. Nil. The assessee also submitted supporting documents such as cash book, bank statements, balance sheet, P&L account, audit report, list of members of the society etc. in support of its claim. Hence, the addition made u/s 69A is erroneous and, therefore, should be deleted.

6.

After considering the above submissions of the assessee, the Ld.CIT(A)/NFAC allowed the assessee‟s appeal by observing as under:

“6.2 The submissions of the appellant are considered. It is seen that the appellant is a credit co-operative society operating in the rural area to cater the financial needs of the small farmers. The appellant is engaged in the activity of accepting deposits and providing credit facilities to its members, mostly crop loans. The appellant has submitted supporting documents such as certificate of registration, list of members of the Society, cash book, bank statements, balance sheet, P&L account, audit report etc to establish that it is engaged in the activity of extending credit facilities to the farmers. On perusal of the submissions made by the appellant it is evident that the cash deposits made in the current account of the appellant pertain to the deposits, share application money, loan repayment instalments etc. received from its members. The supporting documents submitted by the appellant clearly establishes that the cash deposits were received from its members in the normal course of business activity and the same have been accounted for. Therefore, the said cash deposits cannot be considered as unexplained money u/s 69A of the Act. Various courts have held that once the cash deposits made in the bank account have been shown to be out of the business activity of the assessee then the provision of section 69A are not applicable. In the instant case, the appellant has demonstrated that the cash deposits are out of its normal business activity of providing credit facilities to the farmers. It is seen that the AO has not brought on record any material to 4 show that the said cash deposits were not from the regular business activity of the appellant and that it was from any other source or business. Therefore, in the absence of any material to show contrary facts, the action of the AO to invoke the provisions of section 69A is erroneous and thus, the addition made of Rs. 2,59,28,476/- is hereby deleted. Accordingly, all the grounds raised by the appellant are Allowed.”

7.

Dissatisfied, the Revenue is in appeal before the Tribunal, raising the following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact finding of the AO that as the assessee has not furnished the details source of cash deposits.

2.

On the facts and circumstances of the case and in law, the learned CIT(A) has erred in accepting that the cash deposit was made out the business activity of the society, wherein the assessee has not declared any income and loss by filing valid return of income for the relevant A.Y. 2020-21.”

8.

The Ld.DR has submitted that the Ld.CIT(A)/NFAC is not justified in deleting the addition(s) made by the Ld.AO as the assessee has not furnished the details of source of cash deposits made in its bank account with PDCC Bank. He filed the written submission reproduced below:

“In this case the issue involved is cash deposited by the assessee society which is not supported with documentary evidences about its genuinity before AO. Therefore addition of Rs 2,59,28,476 was made in the hands of assessee. Since assessee failed to produce the explanation to the satisfaction of AO the income was assessed with such addition. The Ld. CIT(A) did not remanded to the file of AO and deleted the said addition without opportunity to the Assessing Officer, on basis of fresh evidences.

Hence it is prayed that the order of AO may be upheld and order may be passed considering the merit of the case.”

9.

We find that in its written submissions filed before us, the assessee has contended that it had filed the requisite submissions (Pgs. 18-21 Paper Book refers) along with documentary evidences during the assessment proceedings before the Ld.AO, explaining the source of cash deposits made in the bank account, which is mainly on account of loan repayment/EMI paid in cash which is directly deposited by the borrowers in Bank account of the Society maintained with PDCC Bank. However, the Ld.AO failed to appreciate the assessee‟s submission and completed the assessment by 5 making the impugned addition(s). The Ld.CIT(A)/NFAC has deleted the entire addition(s) made by the Ld.AO, after considering the assessee‟s submission and various documents produced before him during the appellate proceedings for the reasons which we have reproduced in the preceding paragraphs. Giving its rebuttal to each of the two grounds raised by the Revenue, the assessee in its written submissions has submitted as under:

“In the first ground of appeal, the Revenue alleged that, the assessee has not furnished the details of source of cash deposits. In this regard, your Honour's kind attention is invited to para 3 of the submission dated 17.02.2025 filed by the assessee Society explaining the source of cash deposits made in the bank account and also furnished various documentary evidences in support of the claim. In the said submission, it was specifically brought to the notice of the Assessing Officer that, all the cash deposit transactions in the bank account are duly accounted for in the regular books of account of the Society and thereafter, the net profit for the year under consideration was computed. The Assessing Officer failed to point out any specific deficiency in the submission filed by the Society even though having sufficient time in hand to pass the assessment order. So also, while rejecting the submission filed by the Society, the Assessing Officer has not brought on record any material to show that the said cash deposits made in the bank account were not from the regular business activity of the Society of providing credit facilities to its members but from some other source or business. In absence of any contrary material, there was no reason to reject the submission filed by the Society. The addition was made by the Assessing Officer merely on suspicion and in a arbitrary manner. The Assessing Officer totally ignored the facts explained by the Society in its submission dated 17/02/2025 wherein it was communicated that, the cash deposited in the bank accounts of the Society is mainly on account of loan repayment/EMI paid in cash which is directly deposited by the borrowers in Bank account of the Society maintained with PDCC Bank. The names of the members who have directly made cash deposits in the Bank account of the Society are clearly reflecting in the bank account statement of the Society. Thus, the bank account statement itself is a third party documentary evidence which explains the source of cash deposits made in the account. Apart from this, all these transactions are duly recorded in the books of account of the Society. The Assessing Officer without applying his mind to the facts and evidences submitted before him and in gross violation of conditions laid down in section 69A of the Income Tax Act, made an. addition of Rs. 2,59,28,476/- in an arbitrary manner. The Hon. Commissioner of Income Tax (Appeals) duly considered these facts and held that, the action of the Assessing Officer to invoke the provisions of Section 69A of the Act in the present case is erroneous and therefore, the addition made of Rs.2,59,28,476/- was deleted. In view of the above, the ground No.1 raised by the Revenue is not sustainable and deserves to be dismissed. In a second ground of appeal, the Revenue alleged that, the Hon. Commissioner of Income Tax (Appeals) has erred in accepting that the cash deposit was made out of business activity of the Society, when the assessee has not declared any income and loss by filing valid return of income for the relevant A.Y.2020-21. In this regard, the Hon. Commissioner of Income Tax (Appeals) observed that, the Assessing Officer has not brought on record any material to show that the said cash deposits made in the bank account were not from the regular business

6 activity of the Society of providing credit facilities to its members but from some other source or business. It is worthwhile to consider that, all these transactions are duly recorded in the books of account of the Society and a Co-operative Audit of the said books of account was also carried out. Merely, non filing of return of income by the Society for the year under consideration, cannot automatically alter the nature otherwise. Thus, there is no substance in this ground of appeal. Further, once the Hon. Commissioner of Income Tax (Appeals) has held that, the action of the Assessing Officer to invoke the provisions of Section 69A of the Act in the present case is erroneous, the other grounds do not have legs to stand. Considering the overall facts discussed hereinabove, this ground of appeal is also deserves to be dismissed.”

10.

From the discussion above and in the absence of any contrary material brought on record by the Revenue before us to controvert the findings of the Ld.CIT(A)/NFAC, in our view, the Ld.CIT(A)/NFAC has passed a reasoned order based on the factual findings which are duly recorded by him in his impugned order. We, therefore, do not see any reason to interfere with the findings of the Ld.CIT(A)/NFAC. The order of the Ld.CIT(A)/NFAC is hereby upheld and the grounds of appeal raised by the Revenue are accordingly dismissed.

11.

In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open Court on 11-06-2026 (RAMA KANTA PANDA) (ASTHA CHANDRA) VICE PRESIDENT JUDICIAL MEMBER पुणे/Pune; दिन ांक/Dated : 11-06-2026 Tadepalli Tadepalli Naga Murali Naga Murali Mohan Date: 2026.06.12 Mohan 13:05:15 +05'30'

आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent

3.

The concerned Pr.CIT, Pune

4.

DR, ITAT, „A‟ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, ////

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