SAHKARI SANGH LTD.,GHAZIPUR vs. INCOME TAX OFFICER - 1 (5), BHADOHI

IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI BENCH, VARANSI BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.196/VNS/2026 A.Y. 2015-16 Sahkari Sangh Limited, vs Income Tax Officer, Jangipur, Ghazipur-233305 Range-3(5), Ghazipur PAN: AAJAS8794F (Appellant) (Respondent) And ITA No.214/VNS/2024 A.Y. 2017-18 Sahkari Sangh Limited, vs Income Tax Officer, Jangipur, Ghazipur-233305 1(5), Bhadohi PAN: AAJAS8794F (Appellant) (Respondent) Assessee by: Sh. Rahul Gabhawala, C.A. Revenue by: Sh. Sabayasachi Chakraborty, Sr. DR Date of hearing: 14.05.2026 Date of pronouncement: 30.06.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed by the assessee against the separate orders of the ld. CIT(A), NFAC dated 21.02.2026 and 24.10.2024, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the orders of the ld. AO passed under section 147 r.w.s. 144 of the Income Tax Act, 1961 for the A.Y. 2015-16 on 24.03.2023 and under section 144 for the A.Y. 2017-18 on 12.12.2019 respectively. As both these appeals pertain to the same assessee and similar issues are involved, the same are taken up

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited together for the sake of convenience. The grounds of appeals in these two appeals are as under:- ITA No. 196/VNS/2026 1. BECAUSE the Commissioner of Income Tax (Appeals) erred in not grasping that the Appellant society was created for the benefits of its members only and following the purpose of mutuality, the entire income of the society is exempt from the Income tax. 2. BECAUSE, the Ld. Commissioner of Income Tax (Appeals) did not take into consideration two more cases with all similar facts for the AY 2016-17 and 2015-19 of the Appellant society, which had been set aside for fresh assessment by Ld. Commissioner of Income tax (Appeals). 3. BECAUSE, the Ld. Commissioner of Income tax (Appeals) have erred in passing the order in hurry without providing the reasonable opportunity of being heard to the appellant. 4. BECAUSE the Commissioner of Income Tax (Appeals) erred in passing the appellate order without providing the appellant sufficient time to respond and thereby not allowing a reasonable opportunity of being heard. 5. BECAUSE the Ld. Commissioner of Income tax (Appeals) dismissed the case de passed the appellate order without going into the merits of the case. 6. BECAUSE, the Commissioner of Income Tax (Appeals) have erred in not providing the deduction of section 80Pof the Income Tax Act. 7. BECAUSE the Ld. Commissioner of Income Tax (Appeals) erred in dismissing the case without deliberating on whether the transfer of the Appellant society from one jurisdictional authority to another was done without following the principles laid down under the provisions of section 127 of the Income Tax Act. 8. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice. 9. The Appellant craves leave to, add to, alter or amend any of the grounds of appeal before the final hearing of the appeal.”

ITA No. 214/VNS/2024 “(1) the Id. CIT(A) has erred in law and on facts, in upholding the ex-parte assessment order dated 12.12.2019 [passed by ITO-1(5), Bhadohi, hereinafter referred to as Assessing Officer), by invoking the provisions of section 144 of the Act and upholding the addition of Rs.93,09,990/- which

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited represented cash deposits (so to say) in its Savings Bank Account with Axis Bank, Ghazipur; (2) the CIT(A) while upholding the ex-parte assessment order dated 12.12.2019 that had earlier been passed by ITO-1(5), Bhadohi, has erred in law and on facts in not taking cognizance of the facts, an enumerated herein below (i) the appellant has been a Cooperative Society as constituted by its members and duly incorporated way back on 27.10.1939; (ii) as per the object clause of the appellant society, it has been dealing with its members and selling them fertilizers for agricultural produce, as procured from IFFCO, Phoolpur (state of Uttar Pradesh); (iii) such activity (carried on by the appellant Society) is exempt from taxation under section 80P(2)(a)(iii)/(iv) of the Act; (iv) it was out of realizations on account of supply of fertilizers to its members and overall pattern of the Bank Account (referred to by the Id. Assessing Officer) it was evident that payments had been made out of opening balance of Rs.23,25,480/-, for procurement of fertilizers (for being sold to its members); (v) its members, in turn purchased the fertilizers from the appellant society, (vi) such sale proceeds (as realized from its numbers) had been deposited by the appellant society in its Saving Bank Account with Axis Bank, Ghazipur, (vii) such cash deposits in its Savings Bank Account with Axis Bank, Ghazipur, could not have been considered in isolation with the withdrawals made therefrom, as such cash deposits were fully made for making payments to IFFCO (for procurement of fertilizers from them); (viii) so far as financial year 2016-17, relevant to the assessment year 2017- 18 was concerned, the 'outgoings' in the said saving bank account were fully covered by credit balance of Rs.23,25,480/-(brought forward from the preceding year) and other deposits made during the year, out of sales resulting into "no peak balance" during the financial year 2016-17, relevant to the assessment year 2017-18; and (ix) factually speaking, no addition was called for (3) in any case the activities carried out by the appellant, ever since its inception in the year 1939, the transactions were covered by section 80P(2)(a)(iii)/(iv) of the Act, and no addition whatsoever was called for, either on facts or in law; (4) in any case, even if it was to be held and noted that there had been no response from the officials of the appellant Society, the Id. Assessing Officer

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited could, rather should himself found out and ascertain its case for exemption under section 80P(2)(a)(iii)/(iv) of the Act; (5) for the reason that the 'cash deposits' made during the financial year 2016-17, relevant to the assessment year 2017-18, were liable to be set off, by the opening balance (as had been brought forward in the same bank account itself, from the preceding year) and cash deposits made during the year under consideration, stood fully set off from the corresponding payments made to IFFCO (the supplier of fertilizers to the appellant society) and other outgoings, no addition was called for, by invoking the provisions of section 69 of the Act; (6) all the deposits in the Savings Bank Account of the appellant with Axis Bank, Ghazipur, stood fully recorded in the cash book and other records maintained by the appellant, in regular course and provisions of section 69 reading as under:- Unexplained investments 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." were not applicable either on facts or in law; (7) addition of Rs.93,09,990/- is wholly arbitrary, much too high and excessive; (8) in any case, the ex-parte assessment order dated 12.12.2019 had been passed by the ld. Assessing Officer at Bhadohi, whereas jurisdiction lay with the Assessing Officer at Ghazipur; (9) the order appealed against, is contrary to the facts, law and principles of natural justice; (10) in support of Grounds of appeal as appearing hereinfore, a detailed resume of factual position marked as ANNEXURE - I, is enclosed herewith.”

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited income escaping assessment and initiated proceedings under section 147. The AO records that he issued several notices to the assessee during the course of the assessment proceedings but the assessee did not respond to any of those notices. Accordingly, he proceeded to complete the assessment in a best judgment manner under the provisions of the section 144. Since there was no explanation for the cash deposited of Rs. 1,14,62,263/-, he brought the same to tax as unexplained money under section 69A of the Income Tax Act and initiated penalty proceedings under section 271(1)(c). 3. Aggrieved with the said assessment order, the assessee filed an appeal before the ld. CIT(A), NFAC. Before the ld. CIT(A), it was submitted that all the cash deposits made in the said bank account were on account of deposits made by its members for the purchase of fertilizers and stood fully set off from the corresponding payments made to IFFCO for supply of the same. It was also alleged that the re-assessment order was invalid as the notice under section 148 had been issued by the jurisdictional Assessing Officer while the same should have been issued by the NFAC. It was submitted that the assessee was a cooperative society and ever since its inception it had been dealing with its members, all of whom were agriculturists / farmers. It had been, besides rendering other services and inputs, supplying fertilizers to them in small quantities for growing crops in their fields and the transactions related to sale of fertilizers and relaxation made from them had been recorded in the cash book which constituted the books of accounts within the meaning of section 2(12A) of the Income Tax Act. The ld. CIT(A) recorded that he issued three notices to the assessee but these were not complied with and the assessee had failed to submit detailed information in support of its grounds of appeal. He therefore, was of the opinion that no interference was called for in the impugned order passed

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited under section 147 r.w.s. 144 r.w.s. 144B of the Act and accordingly, he dismissed the appeal of the assessee. 4. In the A.Y. 2017-18, also the assessee did not file its return and the Assessing Officer noticed that the assessee had deposited Rs. 92,46,300/- in the bank account maintained by it at Axis Bank out of which Rs. 25,37,500/- was deposited during the demonetization period. He therefore, issued a notice under section 142(1) of the Act but the same were not complied with. He came to the conclusion that since the assessee was fully aware of these services of the notices, due to the fact that it had also been served by way of affixture, and yet not responded, the assessee had no explanation to offer with regard to the deposits and therefore, after computing the extent of total deposits and credit transfers to be Rs. 93,09,990/-, he held them to be unexplained and added them back to the income of the assessee under section 69 of the Income Tax Act. 5. Aggrieved with the said order, the assessee went in appeal before the ld. CIT(A). In this case, the ld. CIT(A) called for a remand report from the AO. The AO issued a letter to the assessee before preparing the remand report seeking certain information, but the same was not responded to. Thereafter, the AO commented that the appeal of the assessee was fit to be dismissed because the assessee had failed to produce any documentary evidence in support of its claim regarding deposit in bank account out of sale proceeds of fertilizers either at the time of assessment or at the time of appeal proceedings. It had only submitted a copy of a bank statement and hand written cash book which failed to substantiate the claim made by the assessee. The ld. CIT(A) perused the remand report and forwarded a copy to the assessee for a rejoinder. However, since no rejoinder was forthcoming, he confirmed the addition made by the AO in the absence of documentary 6

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited evidences to substantiate its contentions and he accordingly dismissed the appeal of the assessee. 6. Now the assessee, aggrieved by these orders has come in appeal before us. Sh. Rahul Gabhawala, C.A. (hereinafter referred to as the ld. AR), representing the assessee, submitted that in the assessment year 2015-16, there was no intention to not comply with the notices. However, compliance could not be made because the notices had been sent to the email address of the earlier counsel which had been given while filing of the return and therefore, the assessee was unaware about the service of the same. It was for this reason also that the appeal was delayed. After the assessee came to know about order, it filed the appeals and it had also got a paper book prepared by 20.01.2026 for filing on 21st morning. However, in the meanwhile, the order was passed and the assessee was unable to file its response for the ld. CIT(A). Accordingly, it was prayed that since the default was inadvertent, the same may kindly be condoned and in the interest of justice, the matter may be restored back to the file of the AO where the ld. AR undertook to ensure compliance, so that the true facts may be brought out and the assessee may present the necessary evidences in support of them. Arguing with regard to the matter in A.Y. 2017-18, the ld. AR submitted that hereto the assessee was not aware about the issuance of notices and it was due to this that the order was passed ex parte. However, before the ld. CIT(A), it had been explained that the cash deposit in its bank account was made by the members who purchased fertilizers and a copy of this bank account had been furnished before the ld. CIT(A). A perusal of this bank account would have revealed to the ld. CIT(A) that pay outs were made to IFFCO from the same, which stood as evidence for the claims of the assessee. The ld. AR submitted that if further documentary evidence was required, the

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited matter may kindly be restored back to the file of the AO where he undertook to ensure compliance and demonstrate that the deposits in the said bank account were not unexplained. 7. On the other hand, Sh. Sabayasachi Chakraborty, Sr. DR (hereinafter referred to as the ld. DR) arguing on behalf of the Revenue stated that perusal of the conduct of the assessee in both assessment years revealed non- compliant behavior and demonstrated that in fact the assessee had nothing to say in this regard. He, therefore, submitted that the additions made by the AO should be confirmed and the appeals dismissed. 8. We have duly considered the arguments of both parties and the facts of the case. We note that owing to the fact that the assessee had not filed its return of income and not complied with the notices issued by the AO, the AO has treated the deposits in its bank account as unexplained. However, the assessee has attempted to show that the said deposits are not unexplained but are on account of receipts recorded in its cash book from the sale of fertilizers to its members and as proof of the same it has brought on record the fact that out of that same bank account, payments had been made to IFFCO for purchase of fertilizers. The submission of the bank account has not been found to be sufficient evidence by the lower authorities and therefore, we deem it appropriate in the interest of justice that the matter should be restored to the file of the AO with a direction to the assessee to produce all relevant material pertaining to the nature of these deposits before the AO so as to enable him to take a final view on whether the deposits claimed to be made on account of purchase of fertilizers by members from the assessee AOP, are justified and thereafter to take a fresh decision in accordance with law. The assessee is cautioned that failure to make compliance could lead to drawing of an adverse inference against it. As the matter stands restored to 8

ITA No.196/VNS/2026 ITA No. 214/VNS/2024 A.Ys. 2015-16 & 2017-18 Sahkari Sangh Limited the file of the AO, both appeals of the assessee are allowed for statistical purposes. 9. In the result, both the appeal in ITA No. 196/LKW/2026 for the A.Y. 2015-16 and appeal in ITA No. 214/VNS/2024 for the A.Y. 2017-18 are held to be allowed for statistical purposes. Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30.06.2026.

Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30/06/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.