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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAIL & SHRI GAGAN GOYAL
PER SANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 29/07/2021, passed under section 250 of the Income Tax Act, 1961 (―the Act‖) by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [―learned CIT(A)‖], for the assessment year 2017–18.
In its appeal, the assessee has raised following grounds:
In the facts of the case and in Law, the learned AO erred in passing order u/s 144 without granting adequate opportunity of being heard and also passing order u/s 144 even though details were furnished to him during the course of assessment.
Saidatar Co–operative Credit Society Ltd. ITA No.1613/Mum./2021
In the facts of the case and in Law, the learned AO erred in treating the return of income as invalid. 3. In the facts of the case and in Law, the learned AO erred in making addition of Rs.27,82,985/- by arbitrarily adding cash deposit made during demonetization period amounting to Rs.18,07,000/- as undisclosed income u/s 69A r.w.s 115BBE and also estimating business income of Rs.9,75,985/- by a. Disregarding the fact that entire cash deposit is fully accounted for and disclosed in the audited books of the Appellant; b. Without rejecting books of accounts u/s 145(3); c. Arbitrarily rejecting details of cash deposits even though each and every details was submitted about the source and nature of receipt. 4. In the facts of the case and in Law, the learned AO erred in disallowing deduction u/s 80P(2)(a)(i) by disregarding the fact that the said disallowance u/s 80AC was applicable in AY 2017-18 as wrongly held by the AO. 5. In the facts of the case and in Law, the learned CIT(A) erred in confirming the addition by rejecting all the grounds of appeal without considering detailed facts submitted by the Appellant and also misinterpreting section 80AC. [B] Relief Prayed: The appellant therefore prays as follows, 1. To quash the order passed in violation of natural justice. 2. To treat the return of income as valid. 3. To delete the addition of Rs.27,82,985/- made u/s 69A r.w.s 115BBE. 4. To delete the disallowance of deduction claimed u/s 80P(2)(a)(i) of the Act. [C] General • The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion. • This appeal is filed on time and the same may please be allowed in full. A Detailed paper book along with case laws will be submitted at the time of hearing.‖
Saidatar Co–operative Credit Society Ltd. ITA No.1613/Mum./2021 3. The grievance of the assessee, in the present appeal, is against disallowance of deduction under section 80P(2)(a)(i) of the Act and addition of Rs. 27,82,985 to the total income of the assessee.
The brief facts of the case, relevant to the issues involved in the present appeal, are: The assessee is a registered Co-operative Credit Society under the Maharashtra Cooperative Societies Act, 1960 vide Registration Certificate No. MUMBAI/DDR – 3/RSR/(CR)/9371/2003 – 2004. As per the assessee, its only and sole aim is to encourage thrift and co-operation among the members by pooling financial resources and using the same to help the needy members. Pursuant to the information, received on Actionable Information Monitoring System (AIMS), module of ITBA, with respect to the cash deposited in bank account by the assessee during the period of the demonetisation i.e. 08/11/2016 to 31/12/2016, system generated notice was sent to the assessee requiring it to file its return of income for assessment year 2017–18. However, assessee failed to file its return of income as per the conditions in manner prescribed in Rule 12 of Income Tax Rules, 1962, on or before 22/02/2018 for the relevant assessment year. However, the assessee filed its return of income on 08/08/2019, for the year under consideration, after prescribed date under Rule 12 of Income Tax Rules, 1962 and hence the said return filed by the assessee was treated as invalid return by the Assessing Officer. Further, during the course of assessment proceedings, notices under section 142(1) were issued to the assessee for furnishing the details, which was responded by the assessee. The Assessing Officer also issued notices under section 133(6) of the Act to the assessee‘s bank i.e. Mumbai District Central Co-operative Bank, Borivili (West), Mumbai branch to get the details of bank statement and KYC details of the assessee. The assessee filed the details pursuant to the notice issued by the Assessing Officer, however, same were not found to be acceptable by the Assessing Officer. In the absence of valid return of income filed as per Rule 12 by 22/02/2018, the Assessing Officer passed the order dated 28/11/2019 under section 144 of the Act and computed the total taxable income of the assessee
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at Rs. 27,82,985 after disallowing the cash of Rs. 18,07,000, deposited during the demonetisation period, under section 69A read with section 115BBE of the Act. Further, the Assessing Officer treated 10% of the total credits (excluding the cash deposits during the demonetisation period) as business income of the assessee. In appeal, learned CIT(A) vide impugned order dated 29/07/2021 dismissed the appeal filed by the assessee, by observing as under:
―7.1 in the absence of details being filed regarding the cash deposits, the AO has added the entire cash deposits during the demonetization period u/s 69A rws 115BBE after due verification from the assessee's bank and based upon the details provided by the bank. 7.2 The business income estimated at 10% of cash deposits received of Rs. 97,59,856/- [excluding those during demonetization period] is reasonable for the line of business and in the absence of complete details of depositors being filed. The list furnished by the appellant is incomplete in many respects including not containing PAN of the depositors. 7.3 As regards, the assessee's claim that 80P(2) deduction should have been allowed on these deposits, the same could not be allowed by the AO in the absence of a valid return. The return of income for AY 2017-18 filed by the appellant on 22/02/2018 was beyond time and therefore invalid.‖ Being aggrieved, the assessee is in appeal before us.
During the course of hearing, learned Authorised Representative (‗learned AR‘) submitted that cash deposited by its members with the assessee has further been deposited in the bank account and therefore the ownership of the cash lies only with the members. The learned AR further submitted that the actual amount of cash deposited by the assessee, during the demonetisation period, in its bank account was only Rs. 17,90,500, however, the Assessing Officer considered the cash deposit to be Rs. 18,07,000 without any basis. The learned AR submitted that out of the aforesaid cash deposit of Rs.17,90,500, only Rs.2 lakh was deposited in old currency notes of Rs.1,000 and Rs.500 by its members, which was also between the period 09/11/2016-14/11/2016. The learned AR also referred to
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the details of its members who have deposited cash with the assessee, during the year under consideration.
On the other hand, learned Departmental Representative vehemently relied upon the orders passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. In the present case, it has not been disputed by the Revenue that assessee is Co-operative Credit Society, during the year under consideration and is in the business of Credit Co-operative Society and provides financial assistance to its members by granting loans. It is also not in dispute that return of income was filed by the assessee only pursuant to the notice issued under section 142(1) of the Act. In the said return, the assessee has claimed to have declared total income of Rs. Nil, after claiming deduction under section 80P of the Act of Rs. 2,34,364. It is the plea of the assessee that as part of its activity of Co-operative Credit Society, assessee received total cash deposit of Rs. 1,12,72,341, during the year under consideration, from the following source:
Sr. Amount (Rs.) Details of receipt of cash No. 1,02,53,490 Daily deposit 1. 2,90,000 Dam Duppat Deposit 2. 2,71,101 Savings deposit 3. 4,57,750 Recovery of loans 4. 1,12,72,341 Total
As per the assessee, the cash deposited in its bank during the year is as under:
Amount (Rs.) Period 56,38,800 01/04/2016 to 08/11/2016 09/11/2016 to 31/12/2016 (1000 and 500 old 2,00,000 notes) 09/11/2016 to 31/12/2016 (other than 1000 and 15,90,500 500 old notes)
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31,71,770 01/01/2017 to 31/03/2017 1,06,01,070 Total
To substantiate its claim, the assessee has also filed statement of accounts no. 00281806000030 and 00281106000069 maintained with Mumbai District Central Co-operative Bank, Borivili (West), Mumbai branch, forming part of the paper book from page No.197–219. Thus, as per the assessee cash amounting to Rs.17,90,500, was only deposited in its bank account during the demonetisation period. We find that the above submission is duly corroborated from the entries in the aforesaid statement of accounts forming part of the paper book. Thus, we are of the considered view that Assessing Officer has erred in considering the amount of Rs. 18,07,000 instead of Rs.17,90,500, deposited during the demonetisation period. Further, the Assessing Officer has added the amount deposited during the demonetisation period under section 69A of the Act. In this regard, it is pertinent to analyse the provisions of section 69A of the Act, which reads as under:
―69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is 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 acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.‖
Thus, provisions of section 69A of the Act are applicable only in the case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article. In the present case, it is an accepted fact that assessee is a Co-operative Credit Society and in its business it accepts deposits from its members and also gives credit to its members which is repaid by them. The cash/money deposited by its members is further deposited by the Society in its bank account. Thus, in the facts of the present
Saidatar Co–operative Credit Society Ltd. ITA No.1613/Mum./2021 case, the assessee who is a registered Co-operative Credit Society cannot be considered to be the owner of the money, which only belongs to its members and same is retained by the assessee as its custodian. Further, from the perusal of the record we find that the assessee provided the details of cash deposited during the demonetisation period before the Assessing Officer in reply to the notices issued. From such reply filed by the assessee, forming part of the paper book, we find that assessee also provided name and address of the members who have deposited cash with the assessee during the year under consideration. The assessee has also provided the PAN number of some of its members. However, the Assessing Officer without commenting upon any of these details added the cash deposit made during the period of demonetisation as undisclosed income of the assessee. We find that though Assessing Officer has issued notice under section 133(6) of the Act to the bank seeking information regarding the details of bank statement and KYC details of the assessee, however, neither such notice under section 133(6) was issued nor examination/enquiry was done from the members. During the hearing before us, the assessee also submitted the list of members along with their PAN/TIN No. who had deposited cash during the demonetisation period in old currency notes. Be that as it may, since this money is of the members of the assessee society and the same is not owned by the assessee society, therefore, we are of the considered view that Assessing Officer has wrongly made the addition under section 69A of the Act, in respect of the cash deposit made during the demonetisation period.
As regards the addition by treating net trade margin of 10% of total credit of Rs. 97,59,856 to be the net profit and therefore taxing the same as business income of the assessee, we find that the assessee in its return of income has claimed deduction under section 80P(2)(a)(i) of the Act being in the business of providing credit facilities to its members. There is no allegation of Revenue that assessee doesn‘t satisfy the condition under section 80P(2)(a)(i) of the Act. Only on the basis that return of income filed by the assessee was not in conformity with Rule 12 of the Income Tax Rules,
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1962 and was filed beyond time, same was treated as invalid. In this regard, it is relevant to note that in order to claim deduction under section 80P, requirement to file the return of income on or before the due date specified under section 139(1) of the Act is relevant only from assessment year commencing on or after 1st day of April 2018, as per section 80AC of the Act. Provisions of section 80AC of the Act, reads as under:
―80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after— (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.—Deductions in respect of certain incomes", no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.‖
At this stage, it is also pertinent to note that prior to its substitution by Finance Act, 2018, w.e.f. 01/04/2018, section 80AC, reads as under:
―80AC. Deduction not to be allowed unless return furnished.—Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.
Thus, from the above it is evident that prior to its substitution by Finance Act, 2018 w.e.f. 01/04/2018, impediment provided under section 80AC was only confined to section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE of the Act. However, after the substitution vide Finance Act, 2018, section 80AC is now also applicable to provision of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", which includes section 80P of the Act. The additional
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restriction provided under section 80AC of the Act w.e.f. 01/04/2018, however, is applicable from assessment year commencing on or after 01/04/2018 i.e. assessment year 2018-19 and onwards. Thus, even after substitution, vide Finance Act, 2018, we are of the considered view that section 80AC is not applicable to the present case, as the year under consideration is assessment year 2017-18. Therefore, in absence of any other objection from the Revenue, in the present case, the assessee being a Co- operative Credit Society is entitled to claim deduction under section 80P(2)(a)(i) of the Act.
Therefore, in view of the above, the Assessing Officer is directed to delete the impugned addition and grant deduction under section 80P(2)(a)(i) of the Act to the assessee. Accordingly, grounds raised by the assessee are allowed.
In the result, appeal by the assessee is allowed. Order pronounced in the open Court on 05/09/2022 Sd/- Sd/- GAGAN GOYAL SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 05/09/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai