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Facts
The assessee, a mutually aided cooperative society, did not file its income tax return for AY 2017-18. The AO noticed a cash deposit of Rs. 15,28,000/- during the demonetization period and completed the assessment under section 144, treating the entire bank credits as unexplained money under section 69A.
Held
The CIT(A) restricted the addition to Rs. 15,28,000/-, observing that no credible evidence was provided to explain the source of cash deposits. However, the Tribunal, considering the additional evidence filed by the assessee and the consistent pattern of deposits, decided to admit the evidence and restore the issue to the AO for re-verification.
Key Issues
Whether the addition made by the AO and confirmed by the CIT(A) for unexplained cash deposits during the demonetization period is justified without properly considering the evidence and the nature of the assessee's business?
Sections Cited
144, 69A, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI RAVISH SOOD & SHRI MADHUSUDAN SAWDIA
ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by M/s. Navodaya Mutually Aided Co- operative Thrift Society Ltd. (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 11.12.2024 for the A.Y. 2017-18.
The assessee has raised the following grounds of appeal :
“ 1. That on facts and circumstances of the case and in law, the order u/s. s. 144 of the Income Tax Act, 1961 is bad in law; 2. That on the facts and circumstances of the case, the NFAC/CIT(A) erred in confirming an addition towards unexplained money under section 69A of the Act amounting to Rs.15,28,000/-. 3. The appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal. Each of the grounds are without prejudice to each other.”
The brief facts of the case are that, the assessee is a mutually aided cooperative society registered under the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995. The assessee had not filed any return of income for the assessment year 2017–18. As per information available with the Revenue, the Learned Assessing Officer (“Ld. AO”) noticed that the assessee had deposited cash of Rs.15,28,000/- in its bank account with SBI during the demonetisation period i.e., from 09.11.2016 to 30.12.2016. Accordingly, the Ld. AO issued a notice under section 142(1) of the Income Tax Act, 1961 (“the Act”) on 30.01.2018, calling upon the assessee to file its return of income. However, the assessee neither filed any return nor responded to the notices issued. During the assessment proceedings, the Ld. AO further found that the assessee had total credits of Rs.2,23,18,124/- in its bank account with SBI during the year under consideration. Since there was no compliance, the Ld. AO completed the assessment under section 144 of the Act on 04.12.2019 by treating the entire bank credits of Rs.2,23,18,124/- as unexplained money under section 69A of the Act.
Aggrieved with the order of Ld. AO, the assessee preferred appeal before the Ld. CIT(A). After considering the submissions and the remand report, the Ld. CIT(A) restricted the addition to Rs.15,28,000/- being the amount of cash deposited by the assessee in bank during the demonetisation period. The Ld. CIT(A) observed that no credible evidence explaining the source of cash deposit was furnished. The relevant findings of the Ld. CIT(A) are recorded at para no. 6.3.5, page no.12 of the appellate order, which is to the following effect :
Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before this Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that the assessee is a mutually aided cooperative society engaged in the activity of collecting deposits from its members and extending loans to them. The impugned cash deposits during demonetisation were sourced from collections of monthly subscriptions, share contributions, and instalments towards loans such as education loan, festival loan, marriage loan, and general purpose loans from members. The Ld. AR contended that the society maintains regular books of account which are duly audited by a Chartered Accountant. In support, the Ld. AR placed on record the cash book and members’ collection reports (page nos. 115 to 157 of the paper book) as additional evidence, which include records of receipt of loan repayments by members and receipt of member subscriptions. It was submitted that these clearly demonstrate that the cash deposited during the demonetisation period had a proper source. It was further argued that similar cash deposit patterns exist throughout the year and, in fact, the cash deposits in the succeeding two years during the relevant period were higher compared to those during the demonetisation period. Moreover, the Ld. CIT(A) has not made any adverse remarks with respect to other deposits and transactions outside the demonetisation window. Hence, the adverse view taken only for lack of evidence during the limited demonetisation period is unjustified. Accordingly, the Ld. AR prayed for admission of additional evidence and deletion of the addition, or in the alternative, restoration of the matter to the file of the Ld. AO for proper verification in the interest of justice.
Per contra, the Learned Departmental Representative (“Ld. DR”) supported the orders of the lower authorities. It was submitted that the assessee failed to furnish any evidence either before the Ld. AO or before the Ld. CIT(A) regarding the nature and source of the cash deposits during the demonetisation period. The additional evidence produced now was not before the revenue authorities and hence should not be admitted without proper verification.
Accordingly, the Ld. DR submitted that there is no infirmity in the order of the Ld. CIT(A).
We have heard the rival submissions and perused the material available on record. It is observed that the assessee has now filed additional evidence in the form of members’ collection reports, cash book extracts and sample copy of receipts (page nos. 115–157 of the paper book) to demonstrate that the source of cash deposits during demonetisation was the routine collection of member subscriptions and loan instalments. On perusal, we find that these documents prima facie support the explanation of the assessee. However, these were not produced before the Ld. AO during assessment proceedings. We also note the submission of the Ld. AR that the pattern of cash deposits is consistent throughout the year and that the deposits in subsequent years during the relevant period are even higher than those during the demonetisation period. Significantly, the Ld. CIT(A) has not made any adverse remarks regarding other transactions except for the demonetisation-related deposits, and the adverse view was taken primarily due to lack of contemporaneous evidence. Considering these facts, and in the larger interest of justice, we are of the view that the additional evidence should be admitted and the issue should be restored to the file of the Ld. AO for due verification. The Ld. AO shall examine the evidence placed by the assessee, verify the same with reference to the books of account and member-wise collections, and decide the matter afresh after giving due opportunity to the assessee. Accordingly, the order of the Ld. CIT(A) is set aside on this issue and the matter is restored to the file of the Ld. AO for de novo adjudication.
In the result, the appeal of the assessee is allowed for statistical purposes.