INCOME TAX OFFICER, JUNAGADH vs. SHRI NAVDA MAHILA DOODH UTPADAK SAHKARI MANDLI LIMITED, VANTHALI JUNAGADH GUJARAT

The grounds of appeal

The assessee craves leave to add, alter, amend, or withdraw any ground of appeal at the time of hearing.”

The grounds of appeal raised by the assessee in are as under:

First, we shall adjudicate the Revenue’s appeal in for assessment year (A.Y.) 2018-19.

Succinct facts are that the assessee, Shri, Navda Mahila Doodh Utpadak Sahkari Mandali Ltd, has made cash withdrawal of Rs. 1,04,96,000/- during the Financial Year (FY) 2017-18. Inspite of such huge transaction, the assessee did not file its return of income. Subsequently, the assessee filed its income tax return (ITR) declaring income as NIL. During the assessment proceedings, the assessee submitted that it is a Cooperative- society which carried out activities of purchasing of milk from its members and sold to Rajkot District Cooperative Milk Producers Union Ltd. The assessee submitted that it is situated at village Navada which is at remote location of Taluka Vanthall, District Junagadh (Gujarat) having total population around 2500 Only. Main object of such cooperative society is to provide the service & support to the farmers & husbandry of Navada Village & nearly villages only. There is no profit motive even if profit is earned incidentally. The assessee is neither engaged in business activity. The assessee stated that the cash withdrawal of Rs.1,04,96,000/- was made for payment to members (farmers) of C-op Society against purchases from them. In support of evidence of such cash withdrawal, the assessee submitted ITR, balance sheet, Trading & P&L Account and bank statement for FY 2017-18. The assessee had furnished the list of members to whom cash purchase transaction were made. The assessee argued that the books maintained by the assessee, were not demanded by the assessing officer, hence the addition made by the assessing officer is without any verification. However, the assessee's reply was found not convincing to the Assessing officer and therefore, assessing officer held that the assessee has not satisfactorily explained the source of cash withdrawals of Rs. 1,04,96,000/-. Therefore, assessing officer held that assessee has grossly failed to substantiate its claim

The assessing officer further held that since the claimed source of amount and entire amount is added as unexplained money of the assessee, the question of considering the same as business income and consequent claim of deduction u/s. 80P does not arise.

The assessing officer also held that if at any stage of appellate proceedings the assessee succeeds to that the source of his amount was his business receipt then the resultant profit from such business will not be entitled for deduction under section 80P of the Act, as the assessee has not filed its Return of Income within the stipulated time provided u/s 139(1) of the Income Tax Act.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition on merit, however, confirmed the action of the assessing officer on reopening of the assessment.

Learned DR for the Revenue submitted that addition made by the assessing officer in respect of withdrawal of the cash amount to the tune of Rs.1,04,96,000/- should be sustained in the hands of the assessee, as the assessee has withdrawn the amount from his bank account, however, no explanation was submitted against the withdrawal of the amount from his bank account, and utilisation of the amount.Therefore, Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

On the other hand, Ld. Counsel for the assessee submitted that addition of Rs. 1,04,96,000/- made by the A.O. u/s 69A of the Act. The ld.Counsel submitted that section 69A is not applicable in case of assessee as no money, bullion, jewellery or other valuable articles found are unrecorded in books of accounts by the A.O. Further, on merits, CIT(A) has given detailed finding on Page 17 of his order that withdrawals of cash were made for making payment to members for which evidence were filed before both the lower authorities.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. The assessing officer has made an addition of 1,04,96,000/- under section 69A of the Act, alleging that the source of bank withdrawals was unexplained. We note that Ld. Counsel for the assessee, submitted that section 69A is not applicable in case of assessee, that is, assessing officer made addition under Page 5 of 10 & 617/Rjt/2025 -AY 2018-19 Shri Navda Mahila Doodh Utpadak Sahkari Mandali Ltd. wrong section, which is not acceptable. However, we note that mistake in quoting the section can be cured by the higher authorities, and if all the facts are narrated in the assessment order, the addition should be sustained in the hands of the assessee based on the facts. For that we rely on the findings (as Per Chagla CJ,).Navinchandra Mafatlal v CIT [1955] 27 ITR 245, 261, affirmed, [1961] 42 ITR 53 (SC), where it was held as follows:

Now coming to the merits of the case, we find that during the appellate proceedings, the assessee submitted that the return of income, B/s, Trading & Profit and loss account and bank statement for the financial year (FY) 2017 and the list of members to whom the assessee had entered into cash purchase transaction of milk with quantity of litres purchased and amount of cash paid to them during the FY 2017-18 were submitted during the assessment proceedings, clearly reflecting the withdrawals in the normal course of business and their corresponding utilization. From the documents and explanation filed, no discrepancy or suppression has been pointed out by the assessing officer. The identity and source of the bank withdrawals are not in doubt. The addition has been made without rejecting the books of account or demonstrating that the withdrawals were used for unexplained or undisclosed purposes. During the appellate proceedings, the assessee has furnished the certified balance sheet and cash book, ledger book, receipt of doodh sangh (credit entry), receipt of statement of sangh, Audited report of the society by the cooperative auditor, cash payment register for milk purchase. Reliance is placed on the judgment of Page 6 of 10 & 617/Rjt/2025 -AY 2018-19 Shri Navda Mahila Doodh Utpadak Sahkari Mandali Ltd. Hon'ble ITAT, Ahmedabad in the case of DCIT v/s M/s Satrhav Farms & Resorts dated 24.08.2022.The ld.CIT(A) noticed that there were no cash deposited in bank account or money is found by the assessing officer. All the receipt received were from transfer entry and the assessee produced the Copy of bank Account to the assessing officer and also gave the other relevant evidence for withdrawing the cash and paid this cash to the members. The assessee has produced all the relevant evidence like cash withdraw for payment for milk purchase list & relevant bank statement for receipt from transfer from Shri Sorath Junagadh Jilla Sahakari Doodh Utpadak Sangh ltd. Hence, it is clearly established that the activities of the assessee i.e. withdrawing the cash for payment to member for purchasing milk is on regular business activities and hence when relevant evidence and satisfactory explanation for cash withdrawing are produce to the assessing officer. Considering the above facts, ld.CIT(A) deleted the addition of Rs.1,04,96,000/-. We have gone through the above findings of the learned CIT(A), on merit, and noted that there is no infirmity in the conclusion reached by the learned CIT(A).The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the appeal of the revenue.

In the result, appeal filed by the revenue, is dismissed.

The Ld. Counsel for the assessee also submitted that notice issued by the assessing officer u/s. 148 of the Act was not signed. Since, the notice u/s.148 of the Act is not signed, therefore, entire re-assessment proceedings may be quashed.

On the other hand, ld.DR for the revenue, submitted that the assessee has not filed the return of income u/s 139(1) of the Act, therefore, assessee is not entitled to claim the deduction under section 80P of the Act.

The ld.DR for the revenue, also submitted that notice under section 148 of the Act, has been signed by the appropriate authority, moreover, this ground was neither raised during the assessment proceedings nor during the appellate proceedings, before the learned CIT(A).

We have heard, both the parties and perused the materials available on record. The ld.CIT(A) noted that the issue of whether section 80AC bars deduction if return is filed in response to section 148, has been examined by courts. In the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT, the Hon'ble Kerala High Court held that "return can be under sections 139(1), 139(4), 142(1) or section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under section 80A(5), the claim for deduction under section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under Page 8 of 10 & 617/Rjt/2025 -AY 2018-19 Shri Navda Mahila Doodh Utpadak Sahkari Mandali Ltd. any of the above provisions. The amendment to Section 80AC with effect from 1-4-2018, however, mandated that for an assessee to get a deduction under section 80P of the I.T. Act, he had to furnish a return of his income for such assessment year on or before the due date specified in section 139(1) of the I.T. Act. In other words, after 1-4-2018, even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1) of the Act.Further, the Bangalore Bench of the Tribunal in the case of Madhu Souharda Pathina Sahakari Niyamitha Vs. ITO in (Order dated 02.01.2024), and Sri Kalabhairaveshwara Multi-Purpose Co- operative Society Ltd Vs. ITO, by following the judgment of Hon'ble Kerala High Court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT (supra) has decided the issue in favour of the Revenue.The ld.CIT(A) noted that in the present case the assessee has filed its return in response to the notice issued u/s 148 of the Act. The assessee carried out huge transaction during the FY 2017-18, inspite of which it did not file its return of income for the relevant assessment year (AY). Hence, by considering the facts of the case and the above judicial pronouncement, it is clear that the assessee has not filed the return of income u/s 139(1) of the Act. Hence deduction u/s 80P claimed by the assessee is not allowable to the assessee, hence ground raised by the assessee, was dismissed by ld.CIT(A). Hence, the assessee’s appeal deserve to be dismissed by upholding the order passed by the CIT(A) and this is dismissed.

The Ld. Counsel for the assessee also submitted that notice issued by the assessing officer u/s. 148 of the Act was not signed. However, we note that assessee did not raise any specific ground to this effect, in the grounds of appeal

In the result, appeal filed by the assessee, in is dismissed.

In the combined result, appeal filed by the revenue is dismissed and appeal filed by the assessee, is also dismissed.