INCOMETAX OFFICER, WARD-1, MEHSANA, MEHSANA vs. SHRI MEU JUTH VIVIDH KARYAKARI SAHKARI MANDALI LIMITED, MEHSANA

PER ANNAPURNA GUPTA, AM:

These three appeals relate to the same assessee and are filed by the Revenue against separate orders of National Faceless Appeal Centre, all dated 07.10.2024, for the Assessment Years (A.Ys.) 2015-16, 2016-17
& 2019-20. 2. It was common ground that the issue involved in all the three appeals filed by the Department was identical, pertaining to addition made to the income of the assessee society on account of cash found deposited

ITA Nos.2179, 2187 & 2188/Ahd/2024
(A.Ys. 2015-16, 2016-17 & 2019-20)
Act, 1961 (hereinafter referred to as ‘the Act’) and the quantum pertaining to each year amounted to Rs.2,18,39,700/-, Rs.2,19,73,195 &
Rs.1,36,49,800/- for the A.Ys. 2015-16, 2016-17 & 2019-20 respectively.
3. The facts pertaining to the addition made in all the three years, it was stated, was identical with majority of the cash found deposited in the Bank of Baroda account of the assessee and some amount in the loan accounts of the assessee. The Assessing Officer made addition of the entire cash deposited, noting that the assessee had failed to discharge its onus of establishing the source of the same, since the assessee only furnished details of persons from whom cash was received but did not substantiate it with the ledger account maintained by the assessee in this regard.
Before the CIT(A), the assessee contended that it was a Co-operative
Society, duly registered under the State Co-operative Society Act as a Seva Sahkari Mandali. That it was doing activity by way of purchase of quota items for lower/below poverty income group, such as BPL and APL
Ration Card holders, like Kerosene, Wheat, Rice, Sugar and Fertilizers from the Government and sell it to members of BPL and APL Ration Card holders of the assessee Society as per norms of the Government in the village. The assessee contended that the cash deposited in its Bank account was on account of the trading in quota items and commission income. As for the amounts deposited in the loan accounts of the assessee, it was explained that the assessee society was also providing
Kishan Cash Credit (KCC) Crop Loan to the members for farming purposes. That it had taken KCC loan from Mehsana District Central Co-

ITA Nos.2179, 2187 & 2188/Ahd/2024
(A.Ys. 2015-16, 2016-17 & 2019-20)
Thus, the assessee submitted the source of cash deposited in its bank account being attributable to the trading in quota items and commission income and recovery of KCC loan and interest income receipt on KCC loan given to its members. The Ld. CIT(A) noted that the assessee was duly registered as a Co-operative Society ,from the copy of certificate of registration furnished by the assessee. He further noted that the assessee had obtained loan from Mehsana District Central Co-operative
Bank, from the certificate furnished by the assessee in this regard obtained from the said bank certifying the amount of loan given to the Society. He further noted that the assessee’s books of account were audited, from which he noted the financials of the assessee society and based on all the above he held that the assessee’s explanation regarding cash deposits and source of fund was sufficiently supported. Accordingly, he deleted the addition made in the hands of the assessee for all the three years. His findings in this regard in A.Y. 2015-16 are reproduced hereunder for clarity:-
“4.1 Appeal Notices were issued to the assessee on 06.06.2024,
25.06.2024 fixing the case for 21.06.2024, 10.07.2024 respectively. The assessee has filed written submission on 10.07.2024, 12.07.2024 and 17.08.2024. The assessee has attended the video conference on 09.08.2024. 4.2
I have gone through the assessment order and record available.
Brief facts of the case are that in the case of Shri Meu Juth Vividh
Karyakari Sahkari Mandali Limited for AY 2015-16, the assessment was reopened under section 148 of the Income Tax Act due to significant cash deposits of Rs.1,71,44,700 in its Bank of Baroda account. The assessee did not file its return initially and was flagged under the Non-filer
Monitoring System. After issuing a notice under section 148 on 31-03-
2022, the assessee filed its return on 13-06-2022. ITA Nos.2179, 2187 & 2188/Ahd/2024
(A.Ys. 2015-16, 2016-17 & 2019-20)
Additionally, the assessee had deposited Rs. 44,85,000 in its loan accounts with a co-operative bank, but could not explain the source of these deposits.
Further, the assessee's cash flow statement showed an opening cash balance of Rs. 18,73,224, but it did not provide adequate records before
AO (such as previous ITRs or audited accounts) to justify this.
Consequently, the assessing officer concluded that the total cash deposits of Rs. 2,18,39,700 remained unexplained and invoked section 68 of the Income Tax Act, which permits the addition of unexplained cash credits to the income of the assessee.
As a result, Rs. 2,18,39,700 was added to the assessee's returned income under the head "Income from other sources," and penalty proceedings under section 271(1)(c) were initiated for concealment of income.
4.3
I have gone through the assessment order and record available. In the instant case, the appellant has argued that Loans given to members under the Kishan Cash Credit (KCC) scheme and from the sales of quota items. Therefore, it is unjustified to invoke Section 68 for unexplained cash deposits when the appellant has provided all necessary documents to substantiate the sources of income. The cash deposits totaling Rs.
2,18,39,700/- were derived from legitimate activities, including loan recoveries and sales transactions, which were duly recorded in the financial statements and audited reports. Furthermore, the interest income from the KCC loans has already been offered for taxation. It is essential to emphasize that under Section 68, the burden shifts to the assessee to explain the nature and source of cash deposits. However, in this case, the explanation has been provided, backed by documentary evidence. The Assessing Officer's refusal to accept the explanation and proceed with an addition under Section 68 is unreasonable and without sufficient grounds.
In light of the documents submitted:
Bank statements, KCC loan recovery list, audited financial statements,
Cashbook, and the sales made during the year. The addition of Rs.2,18,39,700/- is unjustified, as the source of these deposits is clearly established and corroborated.

ITA Nos.2179, 2187 & 2188/Ahd/2024
(A.Ys. 2015-16, 2016-17 & 2019-20)
During the appellate proceedings, the appellant has submitted the copy of certificate of registration as co-operative society, Mehsana which is pasted below:

ITA Nos.2179, 2187 & 2188/Ahd/2024
(A.Ys. 2015-16, 2016-17 & 2019-20)
The appellant has also submitted audit report of the society for the financial year 2014-15 from Commissioner and