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Facts
The assessee, Janta Co Operative Credit Limited, appealed against an assessment order for AY 2017-18 which made additions under Section 68 read with Section 115BBE for unexplained cash deposits during demonetization and disallowed interest expenses. The assessee contended that reassessment proceedings under Section 147/148 were initiated during ongoing regular assessment and that the CIT(A) dismissed the appeal in limine without considering merits. There was a delay of 183 days in filing the appeal to the Tribunal, attributed to a change in the society's administration.
Held
The Tribunal condoned the 183-day delay in filing the appeal, citing 'reasonable cause' and a liberal approach. It dismissed the legal grounds concerning the validity of reassessment proceedings, confirming that the AO validly framed the assessment under Section 143(3) read with Section 147. However, the Tribunal restored all issues related to the merits, including additions under Section 68 read with Section 115BBE and rejection of books under Section 145(3), back to the file of the Ld. AO for de novo adjudication, granting the assessee a fresh opportunity to explain.
Key Issues
Whether the delay in filing the appeal to the Tribunal should be condoned; validity of reassessment proceedings initiated during ongoing regular assessment; correctness of additions under Section 68 read with Section 115BBE for cash deposits during demonetization; and whether the assessee was denied a reasonable opportunity of being heard on merits.
Sections Cited
143(3), 147, 148, 142(1), 68, 115BBE, 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Per Dr. Manish Borad, AM:
1. This appeal by the assesse is directed against the order dated 29.06.2024 of the Commissioner of Income Tax (Appeals), New Delhi for A.Y.2017-18 which is arising from the assessment order u/s 143(3) of the Act dated 26.09.2019 framed by Income Tax Officer, Burhanpur.
2. Assessee has raised following grounds of appeal:
1. Janta Co Operative Credit Limited “1. The learned CIT (A) failed to understand the facts and 1 circumstances of the case and erred in confirming the unlawful assessment order passed by the assessing officer.
2. The learned CIT (A) failed to understand that the assessing officer initiated the reassessment proceedings u/s 147/148 of the Act, during the pendency of ongoing regular assessment proceedings, which is void and bad in law.
3. The learned CIT (A) failed to understand that the assessment order passed by the learned AO was void and bad in law as the same was claimed to have been passed in continuation of the original proceedings initiated vide notice dated 14.03.2018 u/s 142(1) of the Act, but such proceedings are still alive on the ITBA portal and the order is showing to be passed in continuation of proceedings initiated u/s 148 of the Act, which is bed in law and on facts.
4. The learned AO has failed to conclude the proceedings-initiated u/s 148 of the Act and to communicate such fact to the appellant before passing alleged order in 4 continuation of the assessment proceedings initiated vide notice dated 14.03.2018 u/s 142(1) of the Act and therefore the assessment order passed by the learned AO is void and bad in law.
5. The learned CIT (A) failed to provide reasonable opportunity of being heard and present his case to the appellant.
6. The learned CIT (A) has failed to appreciate that the cash deposited in the bank account of the appellant is fully explained and erred in confirming the genuine transactions of the appellant as undisclosed cash credits u/s 68 of the Act and further erred in confirming the application of provisions of section 115BBE of the Act, which is bad in in law and on facts.
7. The learned CIT (A) failed to understand that the appellant society is maintain regular books of accounts, erred in 7 confirming the unlawful and illogical rejection of books of account w/s 145(3) of the Act by the assessing officer, which in bad in law and on facts.
8. The Learned AO has failed to understand that the appellant society is being run for the benefits of poor villagers and is being administered by the governing body, most of which 8 are not well educated and do not understand the complexed provisions of Income tax law, erred in not appreciating the genuine transactions of the society and treating the same as unlawful, which is bad in law.
9. The Learned AO has failed to understand the facts of the case and erred in confirming the baseless and unlawful disallowance of interest expenses of the appellant, which is quite unjust”. 3. Registry has informed that there is delay of 183 days in filing the appeal before this Tribunal. Ld. Counsel for the assessee referring to the affidavit stated that the tenure of the elected board of director of the society expired on 26.03.2023 and the Dy.
Registrar of Society, Burhanpur have appointed an administrator till the new board elected vide order dated 09.05.2023 for routine functioning of the society. The administrator has authorised Mr.Pradeep Pavde as Manager of the scoeity for legal proceedings vide order dated 25.02.2025. The application for condonation of delay along with an affidavit have been filed before this tribunal which is reproduced below:-
Affidavit Name : Pradeep S/o Ramchandra Pavde Manager, Janta Credit Coop St. Ltd Chapora Address : Vill Chapora, Dist. Burhanpur (M.P.) PAN : AAAAJ8060C Age : 54 years 1,Pradeep S/o Ramchandra Pawde aged about 54 years, resident of Indi hereby state on solemn oath and confirmed by me as under- 1. That I am manager and authorized person to represent Janta Credit Operative Society Limited, Burhanpur M.P. 3
That the Assessment proceedings were completed in the case of Janta Credit Co-Operative Society Limited, Burhanpur M.P. and the income was assessed ata total income of Rs. 7,45,315/- as against the returned Loss of Rs. - 73,320/-vide order dated 26.09.2019 for the assessment year 2017-18 and demand of Rs. 8,38,046/-was raised.
3. That an appeal had been filed before the CIT (A), against the said order of assessment for the A.Y. 2017-18, on dated 22.10.2019.
4. That the appeal filed before learned CIT (A) was decided on 29.06.2024.
5. That professional advice was sought from the local tax consultant of Burhanpur. On consultation I came to know that an appeal against the order passed by Ld. CIT(A) on 29.06.2024 can be filed within 60 days from the date of receipt of order.
That as the tenure of the elected Board of director of the Society was expired on dt. 26/03/2023 and the Dy. Registrar of Society, Burhanpur have appointed an Administrator Shri Chandress Patel, Inspector (till the new board elected) wide order No. vidhi/2023/362, dt. 09/05/2023 for routine functioning of the society (copy attached).
7. That the Administrator Shri Chandress Patel has authorized me, as in the capacity of manager of the society, for further legal proceedings require to file appeal etc. wide his order No. 03/2025, Dt.25/02/2025 (copy attached).
8. That the appeal fee of Rs. 10,000/- was deposited on 21.08.2024 i.e. well before the due date for filling of appeal before the Hon. ITAT.
Owing to the above-mentioned reasons there is a delay of 186 days (Considering that the appeal would be filed on 02.03.2025) in filing of appeal.
10. It is most humbly prayed that appellant viz. Janta Credit Co- Operative Society Limited, Burhanpur M.P. had all intention to pursue the matter with all seriousness and that the appellant, represented by me, may please not to made to suffer for the delayed section by the competent authority, which was beyond Me and my tax counsel's control. Therefore, in the interest of natural justice the delay in filing appeal may please be condoned. There is a delay in filing the appeal which may please be condoned. Sd/- (Depondent) 4
We have heard the rival submissions and gone through the averments made in the affidavit. Hon’ble courts in plethora of judgments observed that when consideration of an appeal on merits
is pitted against the rejection of 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 as well explained by the Hon’ble court further held that in cases where the merits are significant, a more liberal approach may be adopted through the averments made in the affidavit and considering the ratio laid down by the Hon’ble Court in the case of Inder Singh
(supra), we are of the view that ‘reasonable cause’ prevented the assessee in filing the appeal within the stipulated time. We therefore condone the delay of 183 days and admit the appeal for adjudication.
On merits of the case, Ld. Counsel for the assessee argued referring to the following written submission:-
Your honor it is, judicially, well accepted principle that two simultaneous proceedings can not be run or conducted by the AO. It is a fact on record that the during the pendency of the of ongoing regular assessment proceedings, the learned AO had initiated the re-assessment proceedings u/s 147/148 of the Act, which is bad in law. Though the learned AO has claimed that the reassessment proceedings were dropped, but in fact the ultimate assessment was completed and closed by him under the proceedings initiated by him u/s 147/148 of the Act and the proceedings of regular assessment is still showing as pending on the ITВА. We may further submit that the learned AO has neither served any order of closing the re-assessment proceedings-initiated u/s 147/148 of the Act, nor we could find any communication regarding the closure of such proceedings and the generation and intimation of DIN regarding such closure of re-assessment proceedings.
On the facts of the case, it is beyond any doubt that the learned AO had conducted two simultaneous proceedings.
2. Your honor the appellant is a registered credit co-operative society and under the rules of the Societies Act, it cannot accept the loan or advance the loan to anyone other than its members. 6
Your honor while making additions u/s 68 r.w.s. 115BBE of the Act, the learned AO has vehemently relied on two things; a. That on the 08.11.2016, the closing cash balance of the appellant was 7,62,719, whereas the demonetized specified notes of Rs. 11,80,000/-were deposited on 10.11.2016 in the bank accounts of the appellant. b. Identity and the creditworthiness of the depositors were not established.
Your honor, the learned AO, in his assessment order has vehemently relied on the ground that the appellant society had a cash balance of only Rs. 7,62,719/- as on 08.11.2016 and on 10.11.2016 it had deposited specified bank notes of Rs. 11,80,000/- in its bank account.
Your honor the learned AO has also stated in his assessment order that the appellant had not informed about the receipts of specified notes, after the demonetization date i.e. 08.11.2016 and had also not submitted the details of the persons, from whom the specified notes, were received by it on 10.11.2016.
Your honor, we had requested the learned AO to allow us the inspection of the assessment file and to provide us the copies of all the submissions made by the appellant during the course of the assessment proceedings.
Your honor, we are submitting herewith the statement of the manager of the appellant society, recorded by the learned, during the course of re- assessment proceedings on 10.06.2016, where in it has been categorically mentioned and stated by him, on oath, that the appellant society had accepted the specified bank notes from its member on 10.11.2016.
In the same statement the learned AO had asked the manager to produce the cash book and books of accounts, which the appellant had produced before him for verification and the learned AO had verified the same and had asked the manager to explain the source of the specified notes deposited in the bank account, which was duly answered by the manager. (Copy of the statement recorded is submitted herewith.)
Your honor the learned AO had placed on records the copies of the cash book pages of 08.11.2016 and 10.11.2016 on records, which we have procured from the assessment file with the learned AO and submitting herewith for your kind perusal.
Janta Co Operative Credit Limited Your honor the cash book page of 10.11.2016 contains the complete list of the members, from whom the amount was received by the appellant society on 10.11.2016, which was deposited by it in its bank account on the same day.
We may further submit that the complete certified list of its member, in the form and proforma to be maintained by it, under the Societies Act was also submitted before the learned AO. (The same was also procured by the appellant from the assessment file of the learned AO).
Since the list is very long and big, we are submitting the few pages thereof for the kind perusal of your honors.
On perusal of the details of the members, mentioned in such list, your honor will find that the complete details, except PAN of the members, as asked by the learned AO is available therein.
It will be important to note that the appellant is a credit co-operative society, which was formed with an objective to develop saving habit in poor villagers and also to help them by way of providing need-base small loan, as and when required, and therefore the member of the appellant society are poor villagers and therefore they neither have the necessity or the requirements of having a permanent account number.
Your honor when such statement was recorded by the learned AO himself and copies of the cash book was placed on assessment records by him, it is difficult to understand that how he had reached to the conclusion that the source and identity of the depositors were not informed and established by the appellant.
Your honor it has been held by various courts that where the source and identity of the depositors are being established in the case of credit co- operative society, provision of section 68 can not be invoked. Needless to say, that when the provisions of section 68 are not attracted, provisions of section 115 BBE can also not be invoked.
It will also be important to note that the appellant credit society is not the owner of the specified bank notes deposited in the bank. The specified bank notes have been collected from the members of the appellant society and the beneficial owner of deposits received by the appellant society in the form of specified bank notes are the members of the appellant society and the appellant, by accepting the specified bank notes and deposit thereof in the bank accounts, have not derived any benefit out of such exercise.
Janta Co Operative Credit Limited Your honors for the members of the society, appellant society is nothing but a bank and they make their financial transactions with the society in the same way and manner in which any individual or a person does it with a banking company.
Your honors we rely on the following decisions, which squarely covers the instant case. a. Bhageeratha Pattina Sahkara sangh Niyamita Vs ITO, ITA 646/Bang/2021. b. Prathamik Krushi Pattina Sahkari Sangh Niyamitha Vs ITO, ITA 593/Bang/2021.
Though we are sure that your honors would please agree with us that the provisions of section 68 r.w.s. 115BBE of the Act are not applicable in the present case, still we would humbly submit that, in any case, this honorable bench has already decided that the special rate of tax u/s 115BBE is not applicable for the assessment year under consideration i.e. AY 2017-18. (Shailesh Kumar Kalwadia HUF vs DCIT-ACIT 1(1), appeal No. 903/Ind/2024 A.Y. 2017-18.
Your honor since the cash deposited in the form of specified notes have been fully explained by the appellant, the very reason for rejecting the books of accounts by the learned AO lost its footings.
We may further submit that the learned AO, without providing any opportunity to the appellant, to present its case arbitrarily rejected the books of accounts of the appellant, which is not only bad in law but is a gross violation of principles of natural justice also.
Others: The learned AO had without providing any opportunity of being heard or to present its case, disallowed the interest on overdraft on ad-hoc basis, which is not only incorrect but is also a gross violation of principles of natural justice.
Your honor the learned AO has also failed to appreciate that the appellant, though late, had filed its return of income."
6. Further Ld. AR submitted that Ld. CIT(A) has dismissed the appeal in limine without dealing with the merits of the case and to go before the Ld. Jurisdictional Assessing Officer. Ld. Departmental Representative did not oppose this request.
We have heard the rival contentions and perused the record placed before us. We observe that the assessee is a cooperative society working with the object to develop saving habit in poor villagers and also to help them by providing need base small loan as and when required and collect nominal charges in respect of such services. It is stated that the society is being run by the elected board of directors from the villagers mostly not well educated and not aware of the income tax act and other rules and regulations. During the demonetization period falling during the financial year 2016-17 there were cash deposit of Rs.11,80,000/- by the assessee society in its three bank accounts. Based on this information coupled with the fact that the assessee did not file its return of income, notice u/s 142(1) of the Act issued on 14.03.2018 asking the assessee to furnish the return of income but the assessee failed to respond. Even on further three occasions the assessee did not responded to the notices issued u/s 142(1) of the Act. Subsequently some details were furnished along with the cash assessee had a cash balance as per cash book on 8.11.2016 at Rs.7,62,719/-. Further in the cash book it is shown that the assessee society received cash of Rs.5,63,512/- on 10.11.2016 from various persons and the assessee was asked to furnish the details of the depositors and their address, father’s name, PAN,copy of deposit slips, relationship of such depositors with the office bearers of the society etc but the assessee failed to respond. Considering the legal tender money of Rs.1,00,260/- and the cash balance shown in the cash book Ld. A.O made the addition for unexplained cash deposit at Rs.6,62,159/- and further disallowed interest expenses at Rs.1,56,476/-. The contents of the assessment order indicates that the assessee failed to file necessary details to the satisfaction of the Ld. A.O and there after the assessee preferred appeal before Ld. CIT(A) but again in absence of requisite details the assessee failed to succeed.
Before us the assessee has raised some grounds raising legal issue of validity of assessment proceedings stating that the assessment proceedings are void and bad in law as they have been initiated during the ongoing regular assessment proceedings. failed to make requisite contentions in support of the legal issues.
We also find that the Ld.A.O has carried out valid reassessment proceedings as a notice for carrying out reassessment proceedings can be issued during the course of ongoing regular proceedings and in the instant case Ld.A.O has finally framed the assessment order u/s 143(3) r.w.s. 147 of the Act. It is also an admitted that that the assessee has neither filed regular return of income and further failed to respond to the notices issued by Ld. A.O on four occasions.
Considering these facts we find that since the reassessment proceedings are valid therefore legal issues raised in Ground No.1 to 4 are hereby dismissed.
9. So far as remaining grounds of appeal are concerned on merits, in Ground No.5 assessee has stated that Ld. CIT(A) failed to provide reasonable opportunity of being heard. During the course of hearing Ld. Counsel for the assessee has prayed for providing one more opportunity to go before Ld. Jurisdictional Assessing Officer (Ld.JAO) CIT(A) for filing all requisite details explaining the source of deposits received from its members. Reference has also been made to judicial precedence in the written submission, in support during the demonetization period is explained by the society then making addition u/s 68 r.w.s. 115BBE is uncalled for. Under the given facts and circumstances of the case and in the larger interest of justice and being fair to both the parties we hereby restore all the issues raised on merits back to the file of Ld. A.O for denovo adjudication. The assessee shall be given sufficient opportunity of being heard to appear/submit documents explaining the source of alleged cash deposit and correctness of interest expenditure claimed in the Income & Expenditure account before the Ld. JAO.
The assessee is directed not to seek any adjournment without any valid reason. Accordingly Ground No. 5 to 8 are allowed for statistical purpose.
In the result appeal of the assessee is partly allowed for statistical purpose.