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Facts
The assessee, a Co-operative Society, filed its return for AY 2017-18 declaring income of Rs. 32,860/-. The AO treated the society as ineligible for deduction u/s 80P(2)(a)(i) and added Rs. 53,72,500/- as unexplained cash credit from demonetization period deposits.
Held
The Tribunal held that the assessee failed to substantiate the source of cash deposits with documentary evidence. However, in the interest of natural justice, the issue of cash deposit was remitted to the AO for fresh decision after providing a reasonable opportunity of being heard and directing the assessee to produce all relevant documents.
Key Issues
Whether the cash deposits made during the demonetization period can be treated as unexplained cash credit without proper substantiation and opportunity. Whether the assessee is eligible for deduction u/s 80P(2)(a)(i).
Sections Cited
250, 143(3), 143(2), 142(1), 80P(2)(a)(i), 69A, 115BBE, 234A, 234B, 271AAC(1)
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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 13.1.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1072126993(1) passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2017-18.
The assessee has raised the following grounds of appeal:
Brief facts of the case are that the assessee, being a Co- operative Society filed its return of income for the assessment year 2017-18 electronically on 27.10.2017 in the status of AOP/BOI by declaring income of Rs.32,860/-. The assessee society had declared gross total income of Rs.19,92,698/- and claimed an amount of Rs.19,59,842/- as deduction u/s 80P(2)(a)(i) of the Act. Subsequently, the case was selected “under the complete scrutiny” on the basis of CASS and accordingly notices u/s 143(2) as well as 142(1) of the Act were issued to the assessee along with the questionnaire for furnishing the details. Thereafter, the ld. AO concluded the assessment proceedings by treating the assessee society not as Co-operative society eligible for benefit of deduction u/s 80P(2)(a)(i) of the Act. Further, the AO noticed that the assessee society has deposited a sum of Rs.53,72,500/ in cash during the demonetization period. However, as the assessee has not furnished any receipt books, counterfoil for remitting the cash and ledger extract and hence the AO was of the opinion that Sri Shivayogi Paththina Sahakara Sangha Niyamitha, Tumakuru Page 4 of 6 assessee society has not substantiated the source of cash deposit of Rs.53,72,500/- with documentary evidence and added the same to the returned income of the assessee society and brought to tax as unexplained cash credit u/s 69A of the Act. The AO finally assessed on a total income of Rs.73,65,202/-.
Aggrieved by the order of ld. AO, passed u/s 143(3) of the Act dated 20.12.2019, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
The ld. CIT(A)/NFAC however directed the AO to allow the deduction u/s 80P of the Act and on the interest earned from the loan advanced to non-members also if the condition specified as laid out by the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. Vs. CIT & Anr. (2021) 123 taxmann.com 161 (SC) are satisfied by the assessee. Further, with regard to the addition made by the AO u/s 69A of the Act amounting to Rs.53,72,500/-, the ld. CIT(A)/NFAC observed that the assessee society had not submitted the list of creditors who had deposited demonetized currency with the assessee after 8.11.2016. Further, the AO categorically observed that assessee has failed to furnish any documentary evidence to prove the real owners of the banned currency. The assessee claimed that he had furnished all the details before the AO during the course of hearing. The ld. CIT(A)/NFAC also observed that in the course of appellate proceedings, the assessee society has also failed to furnish any evidence to show that KYC of all the creditors and confirmed that those creditors had offered income in their respective hands. Further, the assessee society had failed to furnish evidence in the form of statement to IT authorities about accepting demonetized currency during the period 8.11.2016 to 31.3.2017, which was mandatory for all financial institutes and accordingly, the Sri Shivayogi Paththina Sahakara Sangha Niyamitha, Tumakuru Page 5 of 6 arguments of the assessee society in this regard was rejected and this ground of appeal was dismissed by ld. CIT(A)/NFAC and accordingly, the appeal of the assessee was partly allowed by the ld. CIT(A)/NFAC.
Before us, none appeared on behalf of the assessee.
The ld. D.R. on the other hand relied on the order of ld. CIT(A)/NFAC.
We have heard the ld. D.R. and perused the materials available on record. The only dispute before us is with regard to the addition of Rs.53,72,500/- for the cash deposited as unexplained cash credit u/s 69A of the Act. We take a note of the fact that ld. AO found that the assessee society has deposited a sum of Rs.53,72,500/- in cash during the demonetization period. However, the assessee could not substantiate the source of case deposited with documentary evidence and accordingly, the AO added the entire amount of cash deposited as unexplained cash credit u/s 69A of the Act.
8.1 On going through the order of ld. CIT(A)/NFAC, we also observe that the ld. CIT(A)/NFAC has not allowed this ground of the assessee by holding that even during the course of appellate proceedings, assessee society failed to furnish any evidence to show that KYC of all creditors and confirmed that those creditors had offered income in their respective hands. Further, ld. CIT(A)/NFAC observed that assessee society failed to furnish evidence in the form of statement to IT authorities about accepting demonetized currency during the period 8.11.2016 to 31.3.2017, which was mandatory for all the financial institutes and accordingly dismissed this ground of appeal of the assessee.
8.2 This being so, in the interest of natural justice and fair play, we are inclined to remit this issue of cash deposit to the file of JAO to decide afresh in accordance with the CBDT circular/Guidelines. Needless to say, reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce all the relevant documents/record/information/confirmation /returns/financials in order to substantiate its claim. It is ordered accordingly.