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Facts
The assessee, Malda Co-operative Agriculture & Rural Development Bank, a primary cooperative society, collected Specified Bank Notes (SBNs) from its members against existing loan liabilities during the demonetization period. The Assessing Officer and CIT(A) treated these SBN deposits as unexplained income, arguing that the assessee was not an authorized banking institution to collect SBNs, leading to an addition.
Held
The Tribunal found that the assessee, though not a cooperative bank under Section 80P(4), had collected the SBNs from its members against loan recoveries. It was established that the assessee provided sufficient details regarding the identity, genuineness, and creditworthiness of the members and their deposits. Consequently, the Tribunal ruled that the addition made by the lower authorities as unexplained income was unsustainable.
Key Issues
Whether the collection of Specified Bank Notes (SBNs) by a cooperative society from its members against loan liabilities during demonetization can be considered unexplained income, especially when the assessee provides details of the depositors.
Sections Cited
80P, 80P(4)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
O R D E R
Per Bench : This is an appeal filed by the assessee against the order dated 30.03.2024, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, passed in DIN & Order No.ITBA/NFAC/S/250/2023- 24/1063680358(1), for the assessment year 2017-2018. 2. Shri N.C.Mondal, FCA appeared on behalf of the assessee and Shri Raja Sengupta, CIT-DR appeared on behalf of the revenue. 3. It was submitted by the ld. AR that the only issue in assessee’s appeal was against the action of the ld. CIT(A) in confirming the addition representing the demonetized currency being the Specified Bank Notes (SBN) collected by the assessee from its member s and deposited in the accounts. It was the submission that the Assessing Officer held that the assessee was not a specified category of banking institution which was entitled to collect the SBNs from its members. It was the submission that these amounts which represented SBNs were the deposits made by its members against loans and other liabilities owed by them to the bank. It was the submission that for the purpose of the provisions of Section 80P of the Act, the assessee is deemed as a bank. It was the submission that if the assessee had not collected the said amounts from its members, the amounts could have become bad debts. It was the submission that on account of business exigencies, the assessee had taken receipts as given by the members. It was the submission that the details of each member and the amounts and the notes as given by each of the members, were available and were produced before the Assessing Officer. It was the submission that the addition as made by the Assessing Officer and as confirmed by the ld. CIT(A) is liable to be deleted.
In reply, ld. CIT-DR submitted that the Assessing Officer in page 11 at para 6.2.3 has brought out the banks which are entitled to collect the SBNs. It was the submission that the assessee is not one of the banks as mentioned, who is authorized to collect SBNs. It was the submission that the ld. CIT(A) has also considered the facts in depth when he has dismissed the appeal of the assessee. It was the prayer that the order of the ld. CIT(A) and that of the ld. Assessing Officer be upheld.
In reply, ld. AR also placed before us a copy of the order of the coordinate bench of the Tribunal in the case of Bongaon Cooperative Credit Society Limited, passed in order dated 18.11.2024.
6. We have considered the rival submissions. A perusal of the facts in the present facts clearly shows that the assessee has produced the details of the persons from whom the SBNs have been collected by the assessee. The assessee, admittedly, a primary cooperative society and is entitled to deduction u/s.80P of the Act but it is not a cooperative bank as per the terms of the provisions of Section 80P(4) of the Act. Be that as it may, the assessee has also categorically admitted that the amounts received in the form of SBNs are from its members and these receipts are against the loan liabilities that are owed by the said members to the assessee. When a debtor is being realized when a bank would not be looking at the issue as to whether the notes are SBNs or not, the interest of the bank lies to recover its loans. The details of the members who have deposited the SBNs were also very much available before the Assessing Officer. If at all the Assessing Officer wanted to examine the same, it was very much opened to him. The Assessing Officer, however, chose to disregard the persons, who have deposited the SBNs and has sought to treat the receipts as unexplained income of the assessee, which is a credit cooperative society. The repayments of the loans from the members are very much available in the accounts of the assessee. The amounts have come in cash book only. The source of all the deposits has also been explained by the assessee. The identity of the debtors is also very much available before the Assessing Officer. The statement against the loan accounts are also available before the Assessing Officer. Thus, clearly the identity, genuineness and the creditworthiness of the receipts of the SBNs from its members are also proved and consequently the same cannot be treated as an unexplained income in the hands of the assessee. This being so, we are of the view that the addition as made by the Assessing Officer and as confirmed by the ld. CIT(A) is unsustainable and consequently we delete the same. 7. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 30/04/2025.