ADHAR NAGARI SAHAKARI PATSANSTHA LIMITED,THANE vs. INCOME TAX OFFICER WARD 1(1), KALYAN, KALYAN

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “A” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.2454/Mum/2026 (AYs: 2017-18) Adhar Nagari Sahakari Patsanstha vs. ITO, Ward 1(1), Limited Mohan Plaza, Wayale Nagar, Khadak Ground Floor Rajdeep Building, Opp Pada, Kalyan (W), KALYAN, Kalyan- Kalher Bus Stop, Bhiwandi-421302. Dombivali-421301. PAN/GIR No: AABAA1151C (Appellant) (Respondent) Assessee by Shri Sanjiv Brahme, CA Revenue by Shri Surendra Mohan (Sr. DR) Date of Hearing 16.07.2026 Date of Pronouncement 06.10.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the orders passed u/s 250

of the Income-tax Act, 1961 (in short, ‘Act’) by National Faceless Appeal Centre

[in short “CIT(A)”] dated 29.12.2025 for assessment year (AY) 2017-18.

“1. The Learned CIT(A) NAFAC has erred in confirming the Action of ASSESSING OFFICER in making addition of Rs. 1,23,50,000/- towards cash deposit.

for A.Y. 2017-18 declaring return of income at Rs.Nil. The case was selected for

scrutiny, and notices u/s 143(2) and 142(1) of the Act were issued. However, the

assessee failed to comply with the statutory notices and did not furnish any

explanation regarding the cash deposits. Accordingly, the AO completed the

assessment ex-parte u/s 144 of the Act on the basis of material available on

record. On the basis of information obtained from TJSB Sahakari Bank Ltd. and

Saraswat Co-operative Bank Ltd. u/s 133(6), the AO noticed that the assessee had

deposited cash aggregating to Rs.1,23,50,000 during the demonetisation period,

i.e., on 10.11.2016, 11.11.2016 and 12.11.2016. Since the assessee failed to

furnish any explanation or supporting evidence regarding the source of such cash deposits, the AO treated the amount of Rs.1,23,50,000 as unexplained cash credit u/s 68 of the Act and subjected the same to tax u/s 115BBE. The AO further

observed that the assessee had claimed deduction of Rs.24,46,098/- under

Chapter VI-A. Since the assessee had earned interest/commission income from

sources other than its members, including commission from Torrent Power, the AO held that the said income was not eligible for deduction u/s 80P and

consequently disallowed the deduction of Rs.24,46,098/-. Accordingly, the total

income of the assessee was assessed at Rs.1,47,96,098/-. Consequential interest

was charged and separate penalty proceedings u/s 271AAC of the Act were

initiated.

During the appellate proceedings, the assessee furnished additional evidences

including replies to Cash Transaction 2016 notices dated 15.02.2017, member-

wise details of depositors, break-up of cash deposits, financial statements and

earlier appellate orders. The additional evidences were forwarded to the AO and

remand reports dated 05.08.2025 and 19.08.2025 were obtained. In respect of the addition of Rs.1,23,50,000/- u/s 68 of the Act, the assessee contended that

the cash deposits represented regular business receipts from its members and

that the deposits made during the demonetisation period were out of

accumulated cash arising from its regular cash-intensive business. It was further 3 submitted that replies to the Cash Transaction 2016 notices had already been

furnished on 15.02.2017 containing details of the depositors and nature of

transactions. The assessee also pleaded violation of principles of natural justice

and sought admission of further evidence under Rule 46A. The CIT(A), however,

held that the assessee had failed to satisfactorily establish the nature and source

of the cash credits. The CIT(A) observed that the assessee had not furnished

contemporaneous cash-book analysis, day-wise cash movement, daily collection

registers, member-wise ledgers, KYC documents and independent evidence

regarding the identity and financial capacity of the depositors. The CIT(A) further

observed that the assessee had failed to reconcile its claimed cash-in-hand of about Rs.97.65 lakh as on 08.11.2016 with the comparatively low cash balances

reflected in the audited accounts of earlier years. It was also held that the Cash

Transaction 2016 replies, by themselves, did not establish the genuineness of the

underlying cash sources. In view of the non-furnishing of primary evidence even

during the remand proceedings, the CIT(A) upheld the addition of Rs.1,23,50,000/- u/s 68 read with section 115BBE of the Act and dismissed the grounds relating thereto. As regards the disallowance of Rs.24,46,098/- u/s 80P,

the assessee submitted that its receipts comprised income from loans to

members, bank deposits and various incidental/service activities such as

processing fees, passbook charges, notice charges, loan-form fees, locker rent, pre-maturity withdrawal charges and commission. The CIT(A) noted that similar receipts had been held eligible for deduction u/s 80P(2)(a)(i) in the assessee's own

cases for earlier assessment years. He deleted the said addition and appeal was

partly allowed.

Tribunal. The Ld. AR has filed written submission and paper book giving copies of

various details filed before the lower authorities. He has also relied on various

decisions of the different Tribunals in support of the issues raised in the grounds

of appeal. He submitted that the AO passed an ex parte order ignoring various

details submitted before him including the replies to Cash Transaction 2016. He

further submitted that the CIT(A) admitted the additional evidence and called for

a remand report from AO. However, copies of the said remand reports were not

given to the assessee to rebut the findings of the AO. Therefore, the order of

CIT(A) is in clear violation of the principles of natural justice.

cash deposit during the demonetization period from 09.11.2016 to 31.12.2016 was Rs.2,28,72,000/- including the deposit of SBNs of Rs.1,23,50,000/-. The

appellant had also furnished and uploaded Cash Transaction 2016 and had given

copy of the same to the then AO. The said cash transaction gives full details of members along with their names, addresses, PAN, amount and remark column,

which itself is self-explanatory. He also submitted that the additional evidence

submitted during the appellate proceeding were forwarded to the AO who submitted remand reports dated 05.08.2025 and 19.08.2025. However, the

remand reports were not provided to the assessee to rebut the findings of the AO. Considering the facts mentioned above, we are of the considered opinion

that the assessee was not provided proper and effective opportunity to explain

its case on merit. The remand report should have been given to the assessee to rebut the findings therein. However, the CIT(A) proceeded to decide the appeal

without obtaining rejoinder from the assessee in respect of the remand reports

submitted by the AO. We are, therefore, of the opinion that the assessee deserves one more opportunity to explain its case on merit. Accordingly, we set

aside the order of CIT(A) and remand back the matter to his file for fresh

adjudication after providing copy of the remand reports. The assessee should be given adequate and reasonable opportunity of being heard to the assessee. The assessee is at liberty to file further explanation and clarification before the CIT(A).

Accordingly, the grounds are allowed for statistical purpose.

8.1 We make it clear that we have not expressed any opinion regarding the

merit of addition, which the CIT(A) shall decide independently in accordance with

law.

Order is pronounced on 06.10.2026.

Sd/- Sd/- (ANIKESH BANERJEE) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 06.10.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order ABHINAV Digitally signed by ABHINAV ANANT GAVANDE ANANT Date: 2026.10.13 14:54:22 GAVANDE +05'30' Assistant Registrar ITAT, MUMBAI