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Facts
The assessee, a credit co-operative society, received cash deposits from members and deposited them into a bank. The Assessing Officer (AO) made an addition under Section 68 for unexplained cash credits and disallowed a deduction under Section 80P due to delayed return filing. The Ld. CIT(A) deleted the Section 68 addition and allowed the Section 80P deduction, which the revenue challenged before the Tribunal.
Held
The Tribunal remitted the issue of the Section 68 addition back to the AO for further verification, stipulating that no addition should be made if the assessee provides details proving the deposits were from members. Regarding the Section 80P deduction, the Tribunal reversed the Ld. CIT(A)'s decision, allowing the revenue's ground and restoring the AO's order of disallowance, citing the amended Section 80AC(ii) and the assessee's delayed return filing.
Key Issues
1. Whether cash deposits received by a co-operative society from its members can be treated as unexplained cash credits under Section 68. 2. Whether a co-operative society is entitled to deduction under Section 80P when the return of income is filed under Section 148, in light of Section 80AC(ii).
Sections Cited
68, 80P, 148, 142(1), 143(1)(a)(v), 139, 139(1), 139(4), 80AC(ii), 69A
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the revenue challenging the order of the NFAC, Delhi dated 11/07/2024 in respect of the A.Y. 2018-19 on following grounds of appeal: “(i) The Hon'ble CIT(A) erred in allowing the assessee claim of Rs.2,92,66,468/- which was added u/s 68 of the Act by stating that "the submission of the appellant is considered, the very fact which comes out is that the appellant is a cooperative society providing the banking and credit facilities to its members and is governed under government regulation by relying on the Hon'ble High Court of Gujarat Pragati Co-operative Bank Ltd. Vs. CIT in 149 taxmann149. The Hon'ble CIT(A) should have appreciated the fact that during the course of assessment proceedings, the assessee did not give the identity, genuineness and credit worthiness of the persons from whom the assessee has stated to have collected cash in spite of repeated requests. The Banking Institutions are regulated by the provisions of Banking Regulations Act, 1949 and guidelines issued by RBI are only permitted to accept cash deposits. The assessee is a society, not a Banking Institution and not governed by Banking Regulations Act, 1949 and RBI and hence is not permitted to accept cash deposits from its members. The Hon'ble CIT(A) relying on above referred case is erroneous. (ii) The Hon'ble CIT(A) erred in allowing the assessee claim of exemption of Rs.9,78,468/- u/s 80P of the Act relying on: 1) The decision of Hon'ble ITAT Rajkot [Para 7.1 & 7.2 of 6.3.2 of Page 14] in the case of Medi Seva Sahkari Mandali Ltd. Vs. the ADIT(CPC) relying on Section 143(1)(a)(v) was with effect from 01-04-2021. The Hon'ble CIT(A) should have appreciated the fact that w.e.f 01-04-2021, where return has been made u/s 139 or in response to a notice u/s 142(1), the return shall be processed u/s. 143(1)(a)(v) by disallowing deduction claimed under Chapter VI-A. In the instant case, the return is filed u/s 148 for Asst Year 2018-2019 and deduction u/s 80P is not admissible as per provisions of Section 80AC(ii) of the Act. 2) The decision of Hon'ble HC of Kerala in the case of Chirakkal Service Co-op Bank Ltd, Kannur Vs CIT 2016]68 taxmann.com 298(Kerala) wherein the return filed beyond period stipulated u/s 139(1) or 139(4) or u/s 142(1) or Section 148 can also be accepted and acted upon for entertaining claim raised u/s 80P provided further proceedings in relation to such assessments are pending in statutory hierarchy of adjudication in terms of provisions of Act. In this case no further proceedings in relation to such assessments are pending in statutory hierarchy for Asst Year 2018-2019 and deduction u/s 80P is not admissible as per provisions of Section 80AC(ii) of the Act.
3) The case of ASR Engg. & Projects Ltd [2019] 111 taxmann.com 49 [Hyderabad-Trib] cannot be relied upon as in this case, the assessee has not filed return u/s 139(1) of the Act. 4) In respect of decisions relied upon in Para 6.6.3 of the Order, the assessment pertains to Asst Year 2017-2018 and hence is not applicable in the instant case.”
The brief facts of the case are that the assessee is a credit co-operative society and during the year, the assessee had deposited cash to the tune of Rs. 2,78,97,500/- with the Raichur District Co-operative Central Bank Ltd. and on that basis notice u/s. 148 was issued for which the assessee filed their return of income declaring a gross total income of Rs. 9,78,468/-. Thereafter, the notices u/s. 142 and 143 were issued seeking the details of the cash deposits as well as cash withdrawals from the said bank. The assessee filed its response on 22/10/2022 and enclosed the copy of the ITR , profit & loss account, balance sheet and the computation of income. Thereafter, on 27/10/2022, the assessee submitted their bank account statement of Indian Bank and Raichur District Central Co-operative Bank. Again the assessee submitted the bank account details on 04/11/2022 and also the written submission by stating that the society had extended credit facilities to its members and also accepting deposits from its members. The assessee further submitted that the main source of income is the deposits from the members and the interest received from the members and also on the monies deposited into bank through which the interest was received. The assessee submitted that the deposits made in the banks are nothing but the deposits given by the members and the withdrawals are the monies withdrawn for the purpose of providing loans to the members. Thereafter, on 07/01/2023, the assessee submitted the cash book in PDF in support of their contention that the monies deposited in the Raichur Co-operative Bank is the amounts deposited by the members which in turn deposited into the said bank. On the same day, the assessee filed their written submissions, byelaw copy and the CBDT Circular copy in support of their submissions.
3. Again on 22/02/2023, the assessee submitted the following details: a) Written submission b) Commercial loan holders list c) Gold loan list d) FD loan list e) Mortgage loan list f) Regular members list g) FD depositors list h) SB Accounts i) Pigmy depositors list and j) Profit & loss appropriation account
The assessee also filed the resolution copies for current account opening, pigmy commission, CBDT circular, interest on investments and RD list. The AO without properly considering the replies and the details submitted before him, had alleged that the assessee had not submitted the names, details of the members who had deposited cash nor the ledger of such persons. Therefore the AO had made the addition of Rs. 2,82,88,000/- as the income u/s. 68 of the Act. The assessee also disallowed the deduction claim made u/s. 80P in the return filed pursuant to the notice issued u/s. 148 for the reason that the return of income was not filed in time and therefore the assessee was not entitled for such deduction. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and contended that the assessee is a co-operative society offering credit facilities to its members and also received the deposits in cash from the members which in turn were deposited with the Raichur District Co-operative Bank and therefore the amount deposited in the said bank is nothing but the deposits received by the assessee from its members and therefore addition u/s. 68 could not be made. The assessee also on 08/06/2024 uploaded the written submissions and the following documents, cash book for the entire year giving details of cash collected which has particulars of a. Cash Book for the ENTIRE YEAR giving details of cash collected which has particulars of Date of receipt, Nature of Receipt, Payer name and account number, Amount, Head under which collected etc. b. The cash collected through pigmy agents constitutes substantial portion of cash received. We are enclosing on random basis, few receipts/vouchers issued on collection of Pigmy amount. c. We are enclosing few vouchers on random basis, in proof of cash received from members for various deposits such as current account, FD, RD, etc. d. Head wise details of cash receipts and payments during the year. e. Scanned copy of Day book giving details of cash received for few dates. f. Profit and Loss A/c, Balance Sheet and bye laws to establish the nature of activities of the appellant.
The Ld.CIT(A) after considering the various documents submitted by the assessee particularly cash book which gives details of the cash collected from the members, the date of receipt, nature of receipt, payer name and account number, amount and head under which collection was made and also by considering the judgment of Hon’ble Gujarat High Court, Hon’ble Supreme Court and the order of Hon’ble Hyderabad Bench of the Tribunal and on that basis, the Ld.CIT(A) had deleted the addition made u/s. 68 of the Act. Insofar as the denial of deduction u/s. 80P(2)(a)(i) of the Act, the Ld.CIT(A) had also deleted the same by relying on the judgements as well as the orders of the Tribunal in which it was held that if the claim of deduction was made in the return filed u/s. 148, it could be allowed. As against the said order of the Ld.CIT(A), the revenue is in appeal before this Tribunal.
At the time of hearing, the Ld.AR filed a paper book enclosing the financial statements for the A.Y. 2018-19, extract of cash book of the A.Y. 2018-19, acknowledgement copies for responses submitted before the NFAC and the acknowledgment copies for the responses submitted before the AO and prayed that the Ld.CIT(A) had considered the various documents filed before it and on that basis, the appeal was allowed. The Ld.AR further submitted that the assessee had also submitted the cash book for the entire year in which all the details required by the AO was available and therefore the order of the Ld.CIT(A) is in order and requires no interference. The Ld.AR further submitted that on going through the cash book, it could be ascertained that the amount deposited by the assessee were received only from the members whose KYC particulars are available with the assessee 68 of the Act is not correct in the facts and circumstances of the case. The Ld.DR appearing for the appellant reiterated the grounds raised in form 36 and also some judgements and prayed to allow the appeal filed by the revenue.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the written submissions filed by the assessee before the Ld CIT(A) which reads as follows:
As seen from the above said findings of the Ld CIT(A),he has considered the issue based on the documents filed before the AO and hold that the amounts received from its members and deposited into the bank account could not be treated as unexplained cash credit. The ld CIT also considered the fact that the assessee is governed under Govt. regulations and therefore the addition u/s 68 of the Act could not be made. The Ld CIT also considered the cash book filed before the AO and satisfied himself that all the details are available and therefore addition u/s 68 of the Act could not be made. The Ld.CIT(A) had also relied on the judgement of the Hon’ble Gujarat High Court reported in 149 taxmann 149 in the case of Pragati Cooperative Bank Ltd Vs CIT and deleted the addition made u/s 68 of the Act.
11. The revenue had not produced any contra evidence to disprove the claim made by the assessee. But unfortunately the AO had observed that no details about the names of the members, details of the members who had deposited cash nor the ledger of such persons were made available. Even though we are convinced that there is no case for making addition u/s. 68 of the Act in order to peruse the details such as names of the members and the amount deposited by them to show that the same are not unexplained cash credit, we are remitting this issue to the file of AO. We make it clear that we are satisfied that the addition made u/s. 68 could not be made if the details furnished by the assessee would explain the fact that the members alone deposited the cash which in turn deposited with the assessee’s bank account, no addition u/s. 68 could be made. We remit this issue only for the limited purpose of verifying the details. In the result, this grounds are allowed for statistical purposes.
Insofar as the deduction granted u/s 80P of the Act by the Ld CIT(A) even though the assessee had not filed their ROI, we are not agreeing with the finding given by the Ld CIT in view of the amended Section 80AC(ii) of the Act. We therefore allow the said ground raised by the Revenue and restore the order of the AO. The orders relied on by the Ld CIT would not be applicable to the facts and circumstances of the present case.
In the result the appeal filed by the Revenue is partly allowed.
Order pronounced in the open court on 24th February, 2025.