BHAGWAN SINGH GOUR RUNNING AASHIRWAD FUEL POINT,VILLAGE NEEMKHEDI POST RUNAHA vs. ITO- 4 (3) CV R JAYA KUMAR, INCOME TAX DEPARTMENT OFFICE OF ITO

name and style of “Ashirwad Fuel Point” at Village Ruhaha. During the demonetization period, the assessee deposited cash in Specified Bank Notes (SBN) totaling to Rs. 67,60,000/- in his current bank accounts maintained with SBI. Before the Assessing officer, the assessee submitted that the deposit of SBN were out of cash sales of petroleum and other related products in the old currency notes after 08.11.2016 which had ceased to be legal tender from the mid night of 08.11.2016 by the Government of India. However, Ministry of Finance issued a Notification dated 08.11.2016 vide S.O. 3408(E)-F.No. 10/3/2016 to the effect that SBN did not cease to be legal tender for specified services after 08.11.2016 for a specified period to enable people in India to run their urgent needs. As per Clause “e” of the said Notification, it was stated that “for purchase of petrol, diesel and gas at the station operating under the authorization of public sector oil marketing company” it was permitted to accept SBN. The Assessing Officer was of the view that the assessee being a dealer of “Essar Oil Ltd.” and not being a Public Sector Marketing Company did not fall under the said clause. Accordingly, the Assessing Officer rejected the claim of the assessee and added a sum of Rs. 56,02,000/- being the difference of cash in hands as on 08.11.2016 of Rs. 11,58,000/- and cash was deposited in SBN amounting to Rs. 67,60,000/- after 08.11.2016 to 31.12.2016 as cash deposits from undisclosed sources.

“The appellant further went on to explain the money considering it as legal tender and cited case laws which does not come in rescur of him as the facts of the case is distinguishable. In my considerate view, in the present case, if the appellant received Bhagwan Singh Gour Running Aashirwad Fuel Point vs. ITO Asst.Year –2017-18 - 4–

SBN after 8.11.2016 the same cannot be treated as sale proceeds from fuel but should be considered as the appellant’s own money considering the Govt notification dated 8.11.2016 and subsequent notification. Thus, considering the discussion made above, I find no infirmity in the addition of the Rs. 56,02,000/- u/s 69 and accordingly confirm the same. The ground No.2 and 3 are thus, dismissed.”

law which prohibits acceptance of SBNs after the due specified date, however, so far as invocation of Section 69 of the Act is concerned, once the assessee has offered an explanation regarding the source of deposits and such explanation has not been found to be non-genuine, then the provisions of Section 69 of the Act cannot be invoked.

“13. First of all, we note that the contention of the assessee that it was under genuine and bona fide belief that it was permitted to accept SBN during demonetization period cannot be accepted. Therefore, we are unable to accept the contention of the assessee that the assessee was under a genuine and bona fide belief that the assessee could accept SBN post announcement of demonetization towards settlement of loan granted / advanced by the assessee to it’s members. However, the issue for consideration before us is that whether acceptance of such SBN during the demonetization period could lead to making of addition under Section 68 of the Act. It would be useful to reproduce the relevant extract of the Section 68 of the Act for ready reference: “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.” 14. In the instant facts, the assessee has submitted before the Assessing Officer that it was engaged in the business of providing credit facilities to it’s members, most of whom were small businessman residing in remote areas. When the demonetization was announced, the assessee extended a facility / assistance to it’s members whereby, the assessee society offered to accept SBN from it’s members towards settlement of the loan which had earlier been extended to them before the demonetization period. Thereafter, the assessee upon having accepted the SBN from it’s members, deposited the same in the bank account held by the assessee. The assessee had also furnished complete details of it’s members including their names, PAN, address etc. The assessee had also given a specific explanation that this amount received by the assessee society from it’s members was only towards settlement of debt / loan which Bhagwan Singh Gour Running Aashirwad Fuel Point vs. ITO Asst.Year –2017-18 - 6–

had earlier been given by the assessee society to it’s members. Further, once the assessee had furnished complete details of it’s members from whom cash had been received by way of SBN towards settlement of debt, it was open to the Assessing Officer to issue notice to various parties and verify the details furnished by the assessee, in case the Assessing Officer doubted the genuineness of the list of parties provided by the assessee. However, no such exercise was carried out by the Assessing Officer. Therefore, in our considered view so far as applicability of Section 68 of the Act is concerned, no addition is called for in the hands of the assessee since the assessee has been given a plausible explanation regarding the source of SBNs received by the assessee society during the demonetization, as settlement of debt / loan extended to it’s members during the pre-demonetization period. Further, the assessee had given complete list of persons from whom SBN were accepted including their name, address, PAN No. etc. The details of parties submitted by the assessee has not been doubted by the Assessing Officer. Accordingly, looking into the language of Section 68 of the Act, we are of the considered view that no addition is called for under Section 68 of the Act. This view also find support from the decision of ITO vs. CD Patani Nagri Sahkari Pat Sanstha in ITA No. 727/Pun/2022 vide order dated 28.03.2023, in which the ITAT on similar set of facts made the following observations:- “4. We have heard both the parties and perused the records. It is observed that assessee is a Co-operative Credit Society engaged in the business of providing credit facilities and accepting deposits from its members. It is registered under section 9 of the Maharashtra Cooperative Societies Act. The Assessing Officer(AO) in the assessment order observed that assessee has deposited Rs.1,21,99,435/- in the form of banned currency notes during demonetization period. These deposits were accepted by the assessee after 08.11.2016. The assessee provided detailed list of customers from whom such banned currency notes were accepted as deposits and these were duly credited to those customers accounts. The assessee submitted during assessment proceedings that identity of persons and nature of deposits were duly explained and all relevant records were filed, hence, section 68 was not applicable in assessee’s case. However, the AO added Rs.1,21,99,435/- under section 68 of the Act as unexplained cash credits. There is no dispute that assessee provided list of customers who had deposited banned currency into the account. There is no dispute that all those persons were members of the assessee society. Once the assessee has filed all the relevant details regarding the depositors, the onus shifts on the revenue. The AO has not carried out any independent inquiries and merely added the amounts u/s 68. ITAT Pune Bench in ITA No.561/PUN/2022 for A.Y. 2017- 18 dated 03.01.2023 has held in identical facts as under : “4. I have heard the rival submissions and perused the relevant material on record. It is seen that the assessee is a Urban Cooperative Credit Society which received Rs.1,78,400/- from 15 depositors whose all the necessary particulars have been given. The list comprises receipt of Rs.85,970/- from 3 small saving agents and Rs.94,000/- from 12 customers. The assessee furnished necessary Bhagwan Singh Gour Running Aashirwad Fuel Point vs. ITO Asst.Year –2017-18 - 7–

details in respect of the depositors. The AO refused to accept the genuineness of the transaction and made the addition u/s.68 of the Act. The ld. AR has brought to my notice an order passed by the Bangalore Bench of the Tribunal in Prathamika Krushi Pattina Sahakari Sangha Niyamitha Itagi Pkpssn (ITA No.593/Bang/2021) dt. 01-06-2022 in which the addition made under similar circumstances has been deleted. In this order, the Tribunal relied on another order in Bhageeratha Pattina Sahakara Sangha Niyamitha Vs. ITO – ITA No.646/Bang/2021 dt. 18-02-2022, that has been referred to in para 5 of the order. No contrary order on such facts, in favour of the Revenue, has been brought on record by the ld. DR. Respectfully following the precedent, I overturn the impugned order and direct to delete the addition of Rs.1,78,500/- sustained in the first appeal.” 5. Respectfully following the decision of ITAT Pune Bench in the case of M/s.Bhagur Urban Credit Co-operative Society Ltd., in ITA No.561/PUN/2022, it is held that addition made by AO under section 68 are not maintainable. Accordingly, AO is directed to delete the addition of Rs.1,21,99,435/-. Thus, grounds of appeal raised by the Revenue are dismissed.” 15. Further, in the case of Merchants Credit Co-operative Society Ltd. vs. ITO in ITA No. 329/Bang/2023 vide order dated 24.08.2023 on similar set of facts, ITAT again held that no addition is called for under Section 68 of the Act on account of acceptance of SBN. The ITAT made the following observations while allowing the appeal of the assessee on similar set of facts: “7. We have considered the rival submissions. The assessee is a credit co- operative society dealing with the members only. During the demonetisation period the members of the society have deposited cash in pygmie a/c, SB A/c, loan a/c. etc. The assessee has produced a list of depositors and the amount deposited by members with denominations of currency. The assessee has accepted the deposits from its members from 9.11.2016 to 14.11.2016. As per Gazette Notification of RBI & Govt. of India dated 08.11.2016, the assessee was not authorized to accept cash deposits in SBNs. The AO observed that the assessee was not authorized to receive or collect money in SBNs of Rs.1,000 and Rs.500 which were not in legal tender w.e.f. 09.11.2016 and such transactions on or after 09.11.2016 cannot be entered in cash book. The cash deposits made by the members of the society had no value as such. The Assessing Officer issued show-cause notice by observing that the impugned amount should be treated as income of the assessee u/s 69A of the Act., however the AO made addition u/s 68 of the I.T. Act. The assessee has satisfied the requirement of section 69A of the Act and the AO did not give further opportunity to the assessee for addition u/s 68 of the I. T. Act. During the assessment proceedings, assessee filed the details of list of depositors and loanees who made cash deposits. The AO accepted that it was money deposited by the members and noted that the assessee had brought the entries in its books of account, therefore section 68 will apply and Bhagwan Singh Gour Running Aashirwad Fuel Point vs. ITO Asst.Year –2017-18 - 8–

accordingly treated it as income u/s. 68. There is no doubt that the assessee has satisfied the identity of the deposits, who are members of the society and genuineness of the transactions because the amounts have been deposited in the members accounts only. If the AO had any doubts that the assessee has not satisfied the ingredients of section 68, he could have asked further details from the assessee, but the AO has not done the same, which clearly shows that the assessee has discharged its duty to satisfy the requirement of section 68. We further note that the SBNs have been deposited in the members accounts, accordingly, the assessee did not get any extra benefit as observed by the AO in his order at para No. 06 which was treated as income us 69A of the Act. In view of this, the provisions of section 68 is not applicable in the present facts of the case and the AO without discussing in detail has made addition u/s. 68 which is not proper. Therefore the addition is deleted. 8. In the result, the appeal by the assessee is allowed.” 16. Again in the case of Saidatar Co-operative Credit Society Ltd. vs. ITO in ITA No. 1613/Mum/2021 vide order dated 05.09.2022, the ITAT again on similar set of facts allowing the appeal of the assessee on this issue with the following observations: “9. Thus, provisions of section 69A of the Act are applicable only in the case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article. In the present case, it is an accepted fact that assessee is a Co-operative Credit Society and in its business it accepts deposits from its members and also gives credit to its members which is repaid by them. The cash/money deposited by its members is further deposited by the Society in its bank account. Thus, in the facts of the present case, the assessee who is a registered Co-operative Credit Society cannot be considered to be the owner of the money, which only belongs to its members and same is retained by the assessee as its custodian. Further, from the perusal of the record we find that the assessee provided the details of cash deposited during the demonetisation period before the Assessing Officer in reply to the notices issued. From such reply filed by the assessee, forming part of the paper book, we find that assessee also provided name and address of the members who have deposited cash with the assessee during the year under consideration. The assessee has also provided the PAN number of some of its members. However, the Assessing Officer without commenting upon any of these details added the cash deposit made during the period of demonetisation as undisclosed income of the assessee. We find that though Assessing Officer has issued notice under section 133(6) of the Act to the bank seeking information regarding the details of bank statement and KYC details of the assessee, however, neither such notice under section 133(6) was issued nor examination/enquiry was done from the members. During the hearing before us, the assessee also submitted the list of members along with their PAN/TIN No. who had deposited cash during the demonetisation period in old currency notes. Be that as it may, since Bhagwan Singh Gour Running Aashirwad Fuel Point vs. ITO Asst.Year –2017-18 - 9–

this money is of the members of the assessee society and the same is not owned by the assessee society, therefore, we are of the considered view that Assessing Officer has wrongly made the addition under section 69A of the Act, in respect of the cash deposit made during the demonetisation period.” 17. Accordingly, looking into the facts of the instant case, the observations made by us in the preceding paragraphs and the judicial precedents on the subject, we are of the considered view no addition is called for under Section 68 of the Act. 18. In the result, Ground No. 2 of the assessee’s appeal is allowed.”

आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant 2. ""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A)- 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, इंदौर/ DR, ITAT, Indore 6. गाड"फाईल/ Guard file. आदेशानुसार/ BY ORDER,

उप/सहायकपंजीकार(Dy./Asstt.