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Facts
The assessee, a Credit Co.Op. Society, deposited cash in its bank account during the demonetization period. The AO made an addition of Rs. 12,04,000/- on account of unexplained cash credit, considering deposits made after November 14, 2016. The CIT(A) confirmed this addition.
Held
The Tribunal held that the addition made by the revenue authorities was arbitrary and based on assumptions and presumptions. The assessee had provided sufficient evidence to explain the source of cash deposits, which was not rejected by the authorities with any plausible reason.
Key Issues
Whether the addition on account of unexplained cash credit is sustainable when the assessee has provided evidence substantiating the source of deposits?
Sections Cited
250(6), 68
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA
(�नधा�रण वष� / Assessment Year : 2017-18) बनाम/ Shree Sihor Peoples Co. The Income Tax Officer Op. Credit Society Ward-1(8), Bhavnagar Vs. Limited Mota Chowk, At Sihor, Sihor – 364240, District: Bhavnagar, Gujarat �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAEAS5202M (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri B. R. Popat, AR. ��यथ� क� ओर से/Respondent by : Shri Nitin Kulkarni, Sr. DR 17/04/2025 Date of Hearing Date of Pronouncement 25/04/2025 O R D E R The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi (in short ‘the CIT(A)’) under Section 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) dated 30.11.2024 pertaining to Assessment Year 2017-18.
The grounds raised in the appeal by the assessee are as under:
“1. The learned CIT(A) has erred in law and on facts in confirming the action of the AO in assessing the Appellant at Rs. 12,04,000/- and that too, by treating the aggregate of this amount, which was deposited in its banking account during specified period as unexplained cash credit under section 68 of the Act Sihor Peoples Co. Op. Credit Society Limited vs. ITO] A.Y. 2017-18 - 2 – 2. The learned CIT(A) has erred in law and on facts in rejecting the ground taken by the Appellant, without even supplying the copy of the remand report he may have received from the AO in the appellate proceedings, clearly violating thus (i). the mandate of the law in its true letter and spirit; and (ii). the Constitutional of India.”
The solitary grievance of the assessee is against the addition made to its income on account of cash found deposited in its bank account during demonetization period source of which allegedly remained unexplained to the tune of Rs.12,04,000/-, which was confirmed by the Ld. CIT(A).
The facts on record are that the assessee is a Credit Co.Op. Society engaged in carrying business of financial activities by providing credit facility to its members and deriving interest income from the same. The case of the assessee was taken up for scrutiny, noticing that there was huge cash deposit in bank during the demonetization period i.e. 08.11.2016 to 30.12.2017. The AO made addition of cash deposited by the Society after 14th November, 2016 amounting to Rs.12,04,000/-, though he noted the total cash deposit during the demonetization period to be Rs.20,12,021/-. Thus, he excluded the cash deposited by the assessee from 08th November, 2016 to 13th November, 2016. Thus only cash deposited thereafter, from 14th November, 2016 onward, of Rs.12,04,000/- was treated as being from unexplained sources.
I have gone through the orders of the authorities below and I am convinced that the addition made in the present case is not sustainable for the reason that it has been made solely on the basis of assumption and presumption despite the fact that the Sihor Peoples Co. Op. Credit Society Limited vs. ITO] A.Y. 2017-18 - 3 – assessee furnished all possible details, facts and evidences in support of its explanation of the source of the cash deposit. The orders of the authorities below reveal the assessee to have explained the source as relating to cash received from its depositors/borrowers by way of repayment of loan installments. In support of this, the assessee had stated to have maintained regular books of accounts which were duly audited under the provisions of Gujarat State Co.Op. Act and had furnished the complete books of accounts including the cash book revealing the source of cash deposits as being the repayment by its depositors. Copies of receipts issued to all the borrowers from whom cash had been received was submitted as also copies of ledger accounts of all such depositors was submitted to the authorities below. These facts are recorded at para 7.4 of the CIT(A)’s order and also in the order of the AO. Now, despite this explanation of the assessee duly substantiated with evidence, I have noted that the authorities below have merely done a data analysis of the loan recovery by the assessee in the preceding years, loan repayment in cash in different months of the impugned year and finding huge discrepancies in the same, they treated the assessee’s explanation as unsatisfactory. The Revenue authorities noted a huge surge in loan repayment in cash in October and November 2016 noting it to be more than 77% of the cash loan repayment of the year. They also noted that the loan recovery during the third quarter of the impugned year to have risen by 47.5% as compared to the preceding year. Based on this data analysis, it was held by the authorities below that the assessee’s explanation of the cash deposits being sourced from the loan repayment by its borrower is not convincing.
Sihor Peoples Co. Op. Credit Society Limited vs. ITO] A.Y. 2017-18 - 4 – 6. I am not at all in agreement with the Revenue authorities. It is not the case that the assessee had not supported its explanation with evidences. As noted above, the assessee had furnished name of all the depositors or borrowers who had repaid their loans during the demonetization period. The assessee has furnished copies of ledger accounts as also copies of receipts issued to them. Copy of the entire cash book of the assessee as also its entire books of accounts, which were duly audited, were furnished to the Revenue authorities. In the light of all these evidences before the Revenue authorities, wherein they had all information about the details and particulars of person from whom the assessee had received cash as repayment of loan, without finding any infirmity in these evidences, the Revenue authorities could not have adopted the data analysis technique for rejecting the assessee’s explanation. The course of action to be followed by the Revenue was to verify the details furnished by the assessee and if found to be incorrect or unreliable, then adopt any other method for arriving at any conclusion but without giving any plausible reason for rejecting assessee’s specific explanation of the source of cash deposit supported with evidences, the adoption of data analysis for arriving at the conclusion that the assessee’s explanation was not satisfactory is totally incorrect and against the due process of law.
In the light of the same, I have no hesitation in holding that the basis adopted by the Revenue authorities for treating the cash deposits in the bank account of the assessee amounting to Rs.12,04,000/- as unexplained is completely arbitrary and based on assumptions and presumption alone when the fact is that the Sihor Peoples Co. Op. Credit Society Limited vs. ITO] A.Y. 2017-18 - 5 – assessee furnished explanation duly supported with evidences which has not been rejected nor any plausible reason for rejecting the same given by the Revenue authorities. The addition, therefore, made in the case of the assessee, I hold it not sustainable and direct deletion of the same.
In the result, the appeal filed by the assessee is allowed.
This Order pronounced on 25/04/2025
Sd/- (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 25/04/2025 S. K. SINHA True Copy आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. 3. संबं�धत आयकर आयु�त / Concerned CIT आयकर आयु�त(अपील) / The CIT(A)- 4. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,