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Facts
The assessee, a cooperative society, did not file its return for AY 2017-18. Upon being served a notice, it filed a return declaring a total income after claiming a deduction u/s 80P. The AO treated the return as invalid, denied the 80P deduction, and made additions on account of unexplained cash deposits during demonetization.
Held
The Tribunal held that the addition for unexplained money was not justified as the assessee had provided details of the source of funds. Regarding the 80P deduction, it was held that the assessee was entitled to it as the conditions for denial under section 80A(5) were not met. Thus, the income was to be assessed as per the return filed.
Key Issues
Whether cash deposits during demonetization can be treated as unexplained money without considering the source? Whether 80P deduction is allowable even if the return filed in response to a notice u/s 142(1) is treated as invalid?
Sections Cited
69A, 80P, 144, 250, 142(1), 80A(5), 80AC, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
This appeal at the instance of assessee pertaining to the Assessment Year 2017-18 is directed against the order dated 26.12.2023 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 30.12.2019 passed u/s.144 of the Act.
Assessee has raised following grounds of appeal :
“1] The learned CIT(A) erred in confirming the addition u/s 69A to the extent of Rs.4,07,500 by holding that the cash deposits in SBNs made during 15.11.2016 to 30.12.2016 out of amount received from members by the assessee credit cooperative society is to be taxed as unexplained money u/s 69A on the ground that the appellant credit society was not legally permitted to accept SBNs from its members during demonetization period without appreciating that the said addition was not justified in law and on facts.
2] The learned CIT(A) ought to have appreciated that assuming without admitting that the assessee credit society was not permitted by Govt. to accept old SBNs from its members, still it is to be noted that no addition u/s 69A could have been made in the hands of the assessee society once it was established that the said cash deposits were made out of income belonging to the members and it did not represent any income of the assessee society and therefore, the said addition was not justified in law and on facts. 3] Without prejudice to the above ground, it is submitted that as per the provisions of section 5 of Specified Bank Notes (Cessation of Liability) Act, 2017 and other provisions, the restriction placed on acceptance or transfer of SBNs was from 31.12.2016 and hence, even on this count, there was no violation on the part of the assessee society under the said law in accepting deposits from its members prior to 31.12.2016 and therefore, the reason stated by the lower authorities for making the above addition u/s 69A is also factually incorrect. 4] The assessee submits that the A.O. may please be directed to allow the deduction u/s 80P(2)(a)(i)/ 80P(2)(d) in respect of the total income of Rs.5,85,119 including interest income of Rs.2,49,440 which is allowable to the appellant credit cooperative society as per the provisions of law applicable for A.Y.2017-18 and there is no reason to deny the deduction u/s 80P merely because a valid ITR for A.Y.2017-18 was not filed by the assessee. 5] The appellant craves leave to add/ alter/ amend any of the grounds of appeal.
3. Registry has informed that there is delay of 455 days in filing the appeal before this Tribunal. Assessee has filed application for condonation of delay stating that assessee relied on the advice of Chartered Accountant who stated that the appeal before Tribunal could be filed only after receiving the Revised Demand notice along with computation sheet, which was not in accordance with law. This resulted in filing of the appeal with delay. Relying on certain judgments, it is prayed that the delay be condoned. Contents of the said condonation application reads as follows :
“1. The assessee submits that in the present case, the appellate order u/s 250 passed by the CIT-(A), NFAC, Delhi was received by the appellant through email on 26.12.2023. Thus, the due date for filing the appeal before Hon'ble ITAT was 24.02.2024. The appeal is being filed on 27.05.2025. Thus, there is a delay of 461 days in filing the present appeal before Hon'ble ITAT. The assessee submits that the above delay in filing the appeal was on account of reasonable cause.
2. In this regard, it is submitted that the appellant is a small credit cooperative society based in Nashik. Upon receipt of the appellate order passed u/s 250 dated 26.12.2023, the Manager of the appellant society, handed over the said CIT(A) Order to its CA, Mr. Manoj Tambe. The CA informed the appellant that the appeal before Hon'ble ITAT could be filed only after receiving the Revised Demand Notice along with the Computation Sheet of revised liability computed by the A.O. after passing the Order giving Effect to CIT(A) Order. The Computation Sheet for revised demand after Order giving effect to CIT(A) Order was not issued by the A.O. to the assessee for a substantial time period after passing the Order giving effect to CIT(A) order. With the intention to obtain the said Computation Sheet of revised demand from the A.O., the assessee raised multiple grievances with the A.O. online from time to time, viz. 20.03.2024, 21.06.2024, 27.08.2024 and the C.A. was also following up with the Jurisdictional A.O. from time to time. The Computation Sheet for revised demand was finally issued by the A.O. physically on 06.03.2025. After receipt of the Computation Sheet for revised demand as per Order giving Effect to CIT(A) Order, the Manager of the assessee society made enquiries regarding Counsels practicing before Hon'ble ITAT Pune to file appeal against the CIT(A) Order. Since there are not many Counsels in Nashik who practice before Hon'ble ITAT Pune, locating and identification of Counsel took some time.
It is submitted that thereafter, the relevant documents and information were forwarded to the Counsel. The appeal came to be drafted and filed within a short period thereafter, on 27.05.2025 i.e. within a period of two months from the end of the month in which the Computation Sheet revising the demand as per Order giving Effect to CIT(A) Order was received by the assessee. In view of the above facts, there was a delay of 461 days in filing the present appeal. The Affidavit of the regular C.A. affirming the above facts is attached herewith. Accordingly, it is submitted that the delay in filing the appeal was due to bona fide reasons mainly attributable to reliance placed on the professional advice tendered by the C.A. and hence, it is prayed that the said delay in filing the appeal may please be condoned in the interest of justice.
4. In this respect, the assessee places reliance on the decision of Hon'ble Jurisdictional Bombay High Court in case of Vijay Vishin Meghani v. DCIT [(2017) 398 ITR 250 (Bom)(HC)] wherein it has been held that a legal advice tendered by a professional and the litigant acting upon it one way or the other could be a sufficient cause to seek condonation of delay and holding so, a huge delay of 2984 days was condoned by Hon'ble High Court.
5. Reliance is also placed on the decision of the recent decision of Hon'ble Supreme Court in the case of Inder Singh v. State of Madhya Pradesh [2025 LiveLaw (Supreme Court) 339] dated 21.03.2025 wherein while condoning the delay of 1537 days in filing appeal, Hon'ble Apex Court held that the considerations of merits are not to be altogether ignored while considering the issue of condonation of delay and a meritorious matter should not be rejected adjudication only on the ground of delay.
Lastly, reliance is also placed on the decision of Hon'ble ITAT, Pune in case of Lubricare Pvt. Ltd. v. DCIT [ITA No. 01/PUNE/2023] & Others, dated 23.01.2023 wherein substantial delay of 997 days to 2197 days in different cases, has been condoned by holding that none should be deprived of adjudication on merits unless it is found that the litigant deliberately delayed filing of appeal.
7. In view of the above facts and judicial decisions cited, the assessee humbly prays that the delay in filing the present appeal may kindly be condoned in the interest of justice and the case may be decided on merits. The appellant would be very grateful if the delay is condoned and the appeal is adjudicated on merits.”
I have heard the rival submissions and gone through the averments made in the condonation application. Hon’ble courts in plethora of judgments observed that when consideration of an appeal on merits is pitted against the rejection of a meritorious claim on the technical ground of the bar of limitation, the Courts lean towards consideration on merits by adopting a liberal approach towards ‘sufficient cause’ to condone the delay. The Court considering an application under section 5 of the Limitation Act may also look into the prima facie merits of an appeal. A liberal approach may be adopted when some plausible cause for delay is shown. Hon’ble Supreme Court in the case of Inder Singh Vs. State of Madhya Pradesh judgment dated 21.03.2025 (2025 INSC 382) condoned delay of 1537 days sub-serving the cause of justice. It was held so while observing that the appeal filed by the appellant with a delay was unintentional, much less due to any deliberate laches, and was well-explained by the State before the High Court. Hon’ble Court further held that in cases where the merits are significant, a more liberal approach may be adopted to allow for the examination of the case on its merits. Having gone through the averments made in the condonation application and considering the ratio laid down by the Hon’ble Court in the case of Inder Singh (supra), I am of the view that due to ‘reasonable cause’ assessee failed to file the appeal within the stipulated time. I therefore condone the delay of 455 days and admit the appeal for adjudication.
Brief facts of the case are that the assessee is a Cooperative Society and did not file the return of income for A.Y. 2017-18. Based on the information about cash deposit in the bank account during the demonetization period, assessee was served with notice u/s.142(1) of Act to which assessee furnished the return on 08.01.2018 declaring gross total income of Rs.5,85,119/- and also claimed deduction u/s.80P of the Act at Rs.3,35,680/- then declared total income of Rs.2,49,440/- but the said return was found to be invalid return. Ld. Assessing Officer carried out the assessment proceedings and firstly observed that since the return of income is invalid assessee is not entitled to deduction u/s.80P of the Act at Rs.3,35,680/- and assessed the income at Rs.5,85,119/-. Further, ld. AO observed that cash of Rs.14,85,000/- has been deposited which was claimed to be received from the Members of the Cooperative Society. Since this amount was received during the demonetization period, ld. AO made addition for the said sum invoking section 69A of the Act for unexplained money. Income assessed at Rs.20,70,119/-.
6. Aggrieved assessee preferred appeal before ld. CIT(A). So far as the issue relating to unexplained money, ld. CIT(A) gave partial relief and sustained the addition for deposit of Specified Bank Notes (SBNs) received during 15.11.2016 to 30.11.2016 at Rs.4,07,500/-. Ground raised by the assessee challenging the benefit of deduction u/s.80P of the Act also dismissed.
Now the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee referring to the decision of this Tribunal in the case of Hudhyashwar Nagari Sahakari Path Sanstha Maryadit Vs. ITO – order dated 24.03.2025 has submitted that since the source of cash deposit during the demonetization period is from its Members, addition cannot be made solely for the reason of the deposit during the demonetization period in case the assessee is able to explain the source of cash deposit is from its members, to the satisfaction of the Revenue Authorities. Secondly, with regards to benefit of deduction u/s. 80P of the Act, reliance placed on the decision of the Tribunal in the case of Sanchar Gramin Bigarsheti Sahakari Patsanstha Maryadit Vs. ITO – and 2433/PUN/2024 order dated 06.01.2025 by submitting that section 80AC has been amended from A.Y.2018-19 and prior to the said amendment, section 80A(5) can be invoked only if the assessee files the return but fails to make a claim. In a situation where assessee has not filed the return or had made a claim in the return filed in response to notice issued by Assessing Officer, then such deduction cannot be denied if all the other parameters of getting deduction u/s. 80P of the Act are complied with. Reliance was also placed on the decision of Hon’ble High Court of Kerala in the case of Chirakkal Service Cooperative Bank Ltd. & Ors Vs. CIT – and others dated 15.02.2016 where it has been held that even the assessee can make a claim of deduction u/s. 80P of the Act in the return filed in compliance to notice u/s. 142(1) of the Act.
On the other hand, ld. Departmental Representative supported the orders of the lower authorities.
I have heard the rival contentions and perused the record placed before me. The issue for my consideration is regarding addition for unexplained money of Rs.4,07,500/- sustained by ld.CIT(A). I observe that the assessee has filed complete details for the source of cash deposit of Rs.14,85,000/- deposited in the bank account during the demonetization period. Ld.CIT(A) was satisfied with the details of cash deposit of Rs.10,77,500/- but sustained the remaining amount of addition solely on the ground that it has been deposited between 15.11.2016 to 30.12.2016. It is surprising to note that on one hand ld.CIT(A) has accepted the source of the cash deposited during the demonetization period from 08.11.2016 to 14.11.2016. The assessee has successfully explained the source of cash deposit before ld.CIT(A) as has been held by this Tribunal in the case of Hudhyashwar Nagari Sahakari Path Sanstha Maryadit (supra) that mere deposit of SBNs during the demonetization period in itself cannot be a ground to make the addition u/s.69A of the Act if the source of such case received is explained. In view of the said decision and the observation made herein above, I delete the addition of Rs.4,07,500/- sustained by ld.CIT(A) and allow the grounds of appeal No.1 to 3 raised by the assessee.
Second issue for my consideration is regarding benefit of deduction u/s.80P of the Act raised by the assessee in the ground of appeal No.4. Admittedly, the assessee did not file the regular return of income but in compliance to notice u/s. 142(1) of the Act assessee has furnished return of income and has made a claim of deduction u/s. 80P at Rs.3,35,680/- but return has been found to be invalid. Now under these given circumstances, whether section 80A(5) of the Act can be invoked needs to be examined. Amendment has been made in section 80AC of the Act from the A.Y. 2018-19 which provides that for claiming deduction u/s. 80P of the Act return has to be filed within the due date prescribed u/s. 139(1) of the Act. The assessment year under consideration is A.Y. 2017-18. If the return filed by the assessee in compliance to notice u/s. 142(1) of the Act is considered, then assessee’s claim of deduction u/s. 80P of the Act ought to have been allowed to the assessee. Even if the invalid return is considered as nonest return, then the situation will be that no return has been filed and even in such situation also section 80A(5) cannot be invoked because it only comes into effect if the assessee has filed a valid return but fails to make a claim of deduction u/s.80P of the Act. In both the given situations, assessee deserves to succeed and the deduction u/s. 80P of the Act at Rs.3,35,680/- should have been allowed by the Assessing Officer. I draw support from the judgment of Hon’ble High Court of Kerala in the case of Chirakkal Service Cooperative Bank Ltd. (supra) and also by the decision of this Tribunal in the case of Sanchar Gramin Bigarsheti Sahakari Patsanstha Maryadit (supra). Accordingly, the income of the assessee should be assessed at Rs.2,49,440/- in place of total income considered by ld.AO at Rs.5,85,119/-. In other words, total income of assessee should be considered at Rs.2,49,440/- as was stated in the return of income filed on 08.01.2018 before the Assessing Officer. Ground No.4 raised by the assessee is partly allowed.
In the result, appeal of the assessee is partly allowed. Order pronounced on this 14th day of July, 2025.