KRYA VIKRAYA SAHAKARI SAMITI LIMITED DEOLI,DEOLI TONK vs. ITO TONK, TONK

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 135/JPR/2025
fu/kZkj.k o"kZ@Assessment Years : 2017-18
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAK6269L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Mrs. S. K. Gogra, Advocate.
jktLo dh vksj ls@ Revenue by: Shri Gautam Singh Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 17/9/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 03/11/2025

vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

By way of the present appeal, the assessee – appellant challenges the findings of the National Faceless Appeal Centre,
Delhi [ for short “CIT(A)] recorded in the order passed as per provision of section 250 of the Income Tax Act 1961 [ for short Act
] dated 21.06.2024 for the assessment year 2017-18. Ld. CIT(A) passed that order because the assessee had challenged assessment order dated 31.10.2019 passed under section 143(3) of the Act by ITO, Ward, Tonk [ for short AO] before him.
Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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2.1
In this appeal, the assessee has raised following grounds: -
“1. Commissioner of Income tax, Appeals erred in law and facts of the case in dismissing the appeal by making ex-party appeal. The appeal order was against the law and unlawful, unjustifiable and against the natural justice, hence appeal deserve to be allowed.
2. Commissioner of Income tax, Appeals erred in law and facts of the case in not deleting the addition Rs. 27,62,000/- unexplained money of cash deposited SCN in bank during period of demonetization Rs.
27,62,000/- which is unlawful, unjustifiable and against the natural justice hence deserve to be deleted.
3. Commissioner of Income tax, Appeals erred in law and facts of the case in allowing the deduction under section 80P of the Income Tax
Act, 1961 to extent of Rs. 50000/- only which is unlawful, unjustifiable and against the natural justice hence deserve to be allowed un fill.
4. Commissioner of Income tax, Appeals erred in law and facts of the case in not quashing the tax demand Rs. 3007324/- which is totally wrong without any basis, which is unlawful, unjustifiable and against the natural justice hence deserve to be deleted.
5. Commissioner of Income tax, Appeals erred in law and facts of the case in not deleting the interest charged under section 234a, 234b and 234C which is unlawful, unjustifiable and against the natural justice hence deserve to be quashed.
6. The appellant prays your honour to add, amend alter, delete all or any ground of appeal on or before hearing.”

“Affidavit

I amit Patolia, son of Shri Ummed Raj Patolia age 51 years resident of Deoli authorized signatory of Krya vikrya Sahakari Samiti Ltd, Deoli hereby solemnly affirm and declare as under:
1. I am amit Patolia is Authorized signatory signatory of Krya vikrya
Sahakari Samiti Ltd, Deoli.
2. That we are assessed of income tax by the Assessing Officer, ward,
Tonk on file bearing permanent Account Number AAAA6269L.
3. That I preferred an appeal to the commissioner (Appeals) Jaipur against the Assessing Officer’s order of assessment dated
31.10.2019/21.01.2020 for the assessment year 2017-18. 4. That I received the order of the said Commissioner (Appeals)
Faceless (NFAC) on 29.12.2024. 5. That being aggrieved by the said order the said order was either not received and on random visiting the website such order of CIT(Appeals) was found.
6. That soon thereafter I got in touch with my advisors and had the appeal filed on.
I further declare that the above statement is true and correct to the of my knowledge and belief.
For Krya Vikrya Sahakari Samiti Ltd, Deoli
Place: Deoli
Dated 08.01.2025

Amit Patolia
Authorized Signatory
Deponent
Verification
I amit Patolia, son of Shri Ummed Raj Patolia age 51 years resident of Deoli authorized signatory of Krya vikrya Sahakari Samiti Ltd, Deoli hereby verify that above para 1 to 5 are true and correct to the of my knowledge and belief.

For Krya Vikrya Sahakari Samiti Ltd, Deoli
Place: Deoli
Dated 08.01.2025

Amit Patolia
Authorized Signatory
Deponent”
6. The brief facts of the case are that the return of income declaring total income at Rs. NIL was filed electronically on 30.10.2017 vide acknowledgement No. 269409091301017 which was processed u/s 143(1) by the CPC. The case was selected for scrutiny assessment through manual selection criteria with the approval of competent authority in view of CBDT's Instruction No.
4/2018 dtd. 20.8.2018 and hence notice u/s 143(2) was issued on Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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27/9/2018 which was duly served upon the assessee. Thereafter, notice u/s 142(1) dt. 02.09.2019 was issued along with questionnaire. In compliance to these notices assessee attended and submitted the details called which includes copy of tax audit report and copy of bank account statement(s). Assessee also produced books of account along with cash book, ledgers and vouchers which were examined on test check basis by the ld. AO in that proceeding before him.

Ld. AO noted that the assessee is a co-operative society under the name M/s Deoli Kriya Vikriya Sahkari Samiti Ltd., Deoli, registered under Co-operative Societies Act 1953 and is engaged in trading of fertilizers, pesticides, seeds and controlled &
decontrolled items. On examination of the details filed and books of account produced as well as from the copy of the Bank A/c statement of Baroda Rajasthan Khetriya Gramin Bank, Deoli (A/c
No. 41690200000142), it was gathered that assessee deposited an amount of Rs. 27,62,000/- on different dates (10.11.2016 to 19.11.2016) in SBN (Specified Bank Notes) during the period of demonetization (i.e. 09.11.2016 to 31.12.2016). Detail of this deposit was filed by the assessee in a tabular form which was kept
Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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on record by the ld. AO. The ld. AO noted that from the cash book filed by the assessee that there remain opening cash balance on 9.11.2016 at Rs. 653/- only. The cash-book and ledger accounts of the parties revealed recovery in SBN from debtors for goods at Rs.
27,62,000/- after date of announcement of demonetization on 8th
Nov., 2016. The assessee also admitted this fact.
As per the Gazette Notification of the Ministry of Finance,
Dept. of Economic Affairs, on 8th Nov., 2016, and subsequent notifications, only certain entities were allowed to accept these
SBNs against sale of goods only and the assessee was neither such entity nor falls into any broader category of such entities.
Therefore, show cause notice was issued to the assessee dated
21.10.2019, asking explain and show cause as to why the amount of Rs. 27,62,000/- received from different parties in SBN after
08.11.2016 as recorded in the cash book and thereafter deposited in bank A/c should not be treated unexplained money u/s 68 of the Act. In response the assessee filed the reply. Ld. AO noted that the reply filed was considered in the light of facts of the case and provisions of law and the same was not found acceptable for the following reasons:
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4.1
There is no dispute with regard to the fact that assessee accepted old currency notes (SBN or demonetized currency notes) during course of demonetization period. This fact has been admitted by the assessee and is also evident from the cash-book and the ledger accounts of the parties.
4.2
It is also fact that the Govt. of India vide its notification dated
8.11.2016, discussed supra, discontinued SBN (Rs. 1000 and 500
currency notes) as legal tender and did not allow any entity / person to accept demonetized currency notes against any transaction. Liberty was given was to certain entities like Dairy booths, Petrol pumps, Gas agencies, Medical shops, Consumer societies run by govt., etc. to accept these
SBN with certain conditions against sale of goods/services only and not to accept demonetized currency against outstanding dues. This liberty was only given to banks to deposit the said currency notes in customer's account. The assessee does not find place in the list of the exceptions laid down in the said notification.
4.3
The submission of the assessee at point no. 1 of the reply with regard to language of notification no. 3407(E) dated 08.11.2016 is not relevant in instant case for the reason that it is only meant for exchange of currency notes by the Banks. As mentioned above, in the third para of the above gazette notification, it is explicitly mentioned that "the SBNs shall not be ceased to be legal tender... to the extent of transactions specified below....". Thereby, to the extent of transactions mentioned in this above gazette notification and other such subsequent notifications, all other transactions and dealings in SBNs were not legal in the eyes of law. The Central Government has also issued further gazette notifications on the issue and added many other cases/situations where dealing in old SBNs will be allowable but nowhere among them was recovery of debt in SBNs included. The intention of the legislation was thus very clear on this issue and one cannot presuppose that non-mentioning of any guidelines on any trade- mechanism in these gazette notifications would render that particular mechanism legal. Non-mentioning about limitation for any recovery from debtors in the said notification does not give legal right to the assessee to presume or make any meaning favourable to him.
4.4
The second point of its submission is also not tenable in the eyes of law for the reason that the government of India specifically announced that above said currency notes would not be legal tender for any transaction subject to certain exceptions. Here, the transaction means any type of transaction including recovery from debts and sale of goods. In the exceptions, Govt. allowed purchase of certain commodities in SBNs and by mentioning these specific exceptions, it is clear that any other transactions except transactions for purchase of goods as mentioned in the notifications is out of scope of specified exceptions. Hence, transactions relating to recovery from debtors is not Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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part of exceptions underlined in the said notifications. Hence, this contention of the assessee does not carry any weight.
4.5
The other contention of the assessee at point no. 3 is also not acceptable for the ground and reasons discussed at para 6.4. 4.6
The contention of the assessee at point no. 4 is also not relevant in view of specific language and announcement in notification No.
3408(E) dated 8.11.2016, wherein SBN were ceased to be legal tender for any type of transaction except certain exceptions mentioned therein.
The assessee is trying to construe the meaning of legal tender as per its convenience which favours it. Hence, this plea also falls flat due to lack of legal ground.
4.7
The submission at point no. 5 is also irrelevant and illogical in view of above discussions and specific language used in notifications dated 8.11.2016. 4.8
The argument at point no. 6 is also not acceptable. The assessee is arguing that goods-debtor is an asset and recovery from debtors is dealing in its own money as reflected in its balance-sheet in monetary terms. This argument is not convincing because once the government announced that SBN ceased to be legal tender from a particular date, then the said debtor was legally bound to deposit his cash balance in his bank account and to pay the dues to the assessee in legal currency. There was no privilege to the debtor for goods or assessee to settle their dues in SBN after the liberty granted by the government to deposit/ exchange the SBN through Banks. Hence, this argument also does not carry any weight.
4.9
The contention at para 7 of the reply appears repetition of earlier submissions discussed above. Here, dispute is not with regard to identity, creditworthiness and genuineness of the debtors but only dispute is that assessee has written-off its debtors by debiting its cash book by equivalent amount of cash in SBN which ceased to be legal tender from 8th Nov. 2016 and the said money was later on utilized for meeting its liabilities. By this way. the source of cash introduced in the books of account of the assessee cannot be said to be legal and from explained sources in terms of sec. 68 of the Act for the reason that source of cash of Rs. 27,62,000/- was not a valid source in the eyes of law. Here, it is pertinent to mention that though the source of money of Rs. 27,62,000/- introduced in its books of accounts is identifiable. still it cannot be treated as explained source in absence of elements of legality of the currency notes/money introduced in the books of accounts and genuineness of the transaction between two parties.
Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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After considering the facts of the case, submission of the assessee and various notifications issued by the Govt. of India with regard to demonetization of currency notes of Rs. 500/- and Rs. 1000/-, the explanation of the assessee was not found acceptable for lack of merit. In light of the facts and circumstances of the case, there has been an open violation of the government's guidelines on demonetization and assessee has written-off its debtors and debited its cash book by equivalent amount of cash in SBN which ceased to be legal tender and which was later on utilized for meeting liabilities. By this way, the source of cash in its book cannot be said to be from explained sources in terms of section 68
of the Act for the reason that source of cash of Rs. 27,62,000/- introduced in cash book was not a valid source in the eyes of law as the currency notes which were accepted by the assessee were ceased to be legal tender. Though the source of money of Rs.
27,62,000/-introduced in its books of accounts is identifiable, still it cannot be treated as explained source in terms of section 68 in the absence of elements of genuineness of the transaction and legality of the currency notes/money introduced in the books of accounts. As such, addition of Rs. 27,62,000/- was made u/s 68 of the Act to the total income declared by the assessee. Tax is Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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charged on this addition in accordance with the provisions of section 115BBE of the Act.
The assessee was a consumer cooperative society which deals in controlled and uncontrolled items like fertilizers, seeds and controlled items like sugar and wheat supplied by the Govt. of Rajasthan to the registered sub-dealers. For this activity, assessee gets commission from the Govt. These trading activities falls in the category of consumer society eligible for deduction in accordance with provisions of Sec. 80P(2)(ii) of the act. The assessee society is not exclusively trading for marketing of agriculture produce of its members. The status of the assessee has also been a matter of dispute in past, and the appellate authorities have also held that the controlled and decontrolled items are covered under sec.
80P(2)(c)(ii) of the Act. The assessee has claimed 100% deduction u/s 80P(2)(a)(iii) of the act at Rs. 1,25,441/-. Vide show-cause dated 21/10/2019, the assessee was asked to explain why it has claimed 100% deduction against profits of Rs. 1,25,441/- in spite of being a consumer cooperative society wherein u/s 80P(2)(c)(ii) of the Act, basic deduction of Rs. 50,000/- is allowed from profits.
Further, it was asked to explain and show-cause as to why the Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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difference amount of Rs. 75,441/- should not be disallowed. In reply, the assessee submitted that since the assessee was a co- operative society and that are doing marketing of agriculture products produced by their members, the deduction claimed is covered u/s 80P(2)(a)(iii) of the Act where 100% profit is exempted without limit, and further that considering the same in section 80P(2)(c)(ii) in place of 80P(2)(a)(iii) is incorrect and that the error may kindly be rectified in your records. This reply of the assessee not convincing the ld. AO because the activities being carried out by the assessee. The provision of Sec. 80P(2)(a)(iii) of the Act, on which the assessee places its reliance, says that in the case of a co-operative society engaged in the marketing of agricultural produce grown by its members, the whole of the amount of profits and gains of business attributable shall be allowed as deduction.
However, the cash in hand is not as elaborated by the assessee in his reply. The assessee was not exclusively engaged in marketing of agricultural produce of its members but also engaged in trading/supply of controlled and decontrolled consumer goods like sugar, wheat etc. supplied by the Government for distribution among BPL consumers through various sub-dealers located in the Deoli tehsil. For this activity, assessee gets commission from Krya Vikraya Sahakari Samiti Ltd. Deoli, Tonk.
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government on which tax is also deducted by the state government. This fact is evident from the 26AS statement wherein
TDS of Rs. 1,81,782/- has been made on commission payment for rendering services to the government. Hence, the argument of the assessee was not acceptable in view of facts of the case and specific provisions of law on the issue. In view of above discussion, deduction claimed by the assessee was restricted to Rs. 50,000/- and the balance amount of Rs. 75,441/- was disallowed.
7. Aggrieved from the above assessment order, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here below:-
“5.1 It may be added here that all the above notices have been served on the appellant through his designated mail ID through ITBA. It can be seen from the above that in spite of several notices issued, the assessee did not submit any detailed submission to substantiate its claim. The matter is therefore decided on the basis of available records.
6. The assessee deposited a cash of Rs.27,62,000/- in Specified Bank
Note during the period of demonetization. On the perusal of details filed by the assessee during the assessment proceedings, it is seen that the opening cash balance on 9.11.2016 was Rs.653/- and cash book and ledger account of the parties revealed recovery in Specified Bank Note from debtors for goods at Rs.27,62,000/- after date of announcement of demonetization. As per the Gazette Notification of the Ministry of Finance, Department of Economic Affairs dated 08.11.2016 and subsequent notification only certain entities were allowed to accept these SBN against the sale of goods only the appellant was neither such entity nor falls into any category of such entities. Though the source of money was explained by the assessee it does not fall within
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the ambit of Gazette Notification of the Ministry of Finance, Department of Economic Affairs dated 08.11.2016. Further, appellant claimed 100%
deduction u/s.80P(2)(a)(iii) of the Act of Rs. 1,25,441/-. Being a consumer cooperative society the basic deduction of Rs.50,000/- is allowed from profit as per section 80P(c)(ii). The assessee is not only engaged in marketing of agricultural produced of its member but also engaged in trading/supply of consumer products like sugar, wheat etc.
supplied by the Government for distribution among below poverty line consumer. Therefore the AO restricted the deduction claim by the assessee to Rs.50,000/- and balance amount of Rs.75,441/- added to total income. During the appellate proceedings the assessee was non- responsive hence the additions made by the AO is upheld and the assessee's appeal is dismissed.
7. The issue of non-compliance by assessee at appellate stage has been considered and decided by the Hon'ble Supreme Court and Various High Courts as discussed below:
"1. The decision of the Hon'ble High Court of Mumbai in the case of M/s Chemipol v/s. Union of India [Central Excise Appeal No.62 of 2009]
clearly states, that every court judicial body or authority, which has a duty to decide a matter between two parties, inherently possesses the power to dismiss the case in default. For the sake of reference, the relevant extract of the judicial pronouncement rendered by the Hon'ble
High Court of Mumbai quoting decision of Hon'ble Supreme Court in case of Nandramdas v Dwarkadas, AIR 1958 MP 260, is reproduced below:
"Now the Act does not give any power of dismissal. But it is axiomatic that no court or tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared nor cared to remain present. The dismissal, therefore, is an inherent power which every tribunal possesses."
2. The principle that every Court that is to decide on a matter of dispute, inherently possesses the power to dismiss the case for default, has been upheld by the Hon'ble Supreme Court in case of Dr. P. Nalla
Assurance vs. Srinivasan (2000) 3 SCC 242. In the latter case, the Apex Court has held as under-
"That every court or judicial body or authority, which has a duty to decide a list between two parties, inherently possesses the power to dismiss a case in default. Where a case is called up for hearing and the party is not present, the court or the judicial or quasi-judicial body is under no obligation to keep the matter pending before it or to pursue the matter on behalf of the complainant who had instituted the proceedings. That is not the function of the court or, for that matter of a judicial or quasi judicial body. In the absence of the complainant,
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therefore, the court will be will without its juri iction to dismiss the complaint for non prosecution. So also, it would have the inherent power and juri iction to restore the complaint on good cause being shown for the non appearance of the complainant."
3. The Hon'ble Bombay High Court has also laid down the proposition that where the appellant in spite of notice is persistently absent and the Tribunal on facts of the case is of the view that the appellant is not interested in prosecuting the appeal, it can in exercise its inherent power to dismiss the appeal for non-prosecution. In the case of CIT Vs.
B. N. Bhattacharya reported at 118 ITR 461, it was held that appeal does not mean merely filing of appeal but effectively pursuing it.
4. The Hon'ble ITAT Delhi (ITR No.2006/Del/2011 dt.19.12.2001) in the case of Whirlpool of India Ltd. v. DCIT had dismissed appeal for non attendance at hearings, inferring that assessee was not interested in prosecuting of appeal.
5. 3013/Del/2011 date ACIT (ITA No. In the case of Chadha Finlease
Ltd. V. ACIT (ITA of order 20.12.2011) the Hon'ble ITAT Delhi had dismissed the appeal for non-attendance at hearings.
6. In a decision in the case of CIT v. Gold Leaf Capital Corporation Ltd.
on 02.09.2011 (ITA No.798 of 2009), the Hon'ble High Court of Delhi had held that a negligent assessee should not be given many opportunities just because that quantum of amount involved is high.
Necessary course of action is to draw adverse inference; otherwise it would amount to give premium to the assessee for his negligence.
When the assessee is non-cooperative, it can naturally be safely concluded that the assessee did not want to adduce evidence as it would expose falsity and non genuineness."
8. As can be seen from the above the continuous non-compliance on the part of the appellant only leads to the conclusion that the appellant is not interested in pursuing the appeal. The appeal cannot be decided merely on the basis of grounds of appeal and the statement of facts as no corroborative evidence of any kind is submitted. Hence the above appeal of the appellant is dismissed and the order of the AO is confirmed.
9. In the end the appeal is dismissed.”
8. Feeling dissatisfied with the above order of the ld. CIT(A), the assessee preferred the second appeal before this tribunal. Apropos to the grounds raised by the assessee, ld. AR of the assessee relied upon the following written submission:-
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“MAY IT PLEASE BE YOUR HONOURS,

Most respectfully the humble appellant is submitting herewith the WRITTEN
SUBMISSIONS which are very crucial to understand facts and legality of case and same may please be considered while deciding this appeal case.

WRITTEN SUBMISSIONS

GROUND
NO.1:ERRONEOUS
ADDITION
U/S.68
DURING
DEMONETIZATION OF RS.27,62,000/-