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Facts
The assessee, a Cooperative Thrift and Credit Society, filed its return of income for AY 2017-18. During demonetization, the assessee deposited Rs. 1,81,66,569/- in cash, of which a significant portion was in Specified Bank Notes (SBNs). The Assessing Officer (AO) added Rs. 1,72,179/- to the assessee's income as unexplained money under section 69A r.w.s. 115BBE of the Act.
Held
The Tribunal held that Section 69A of the Act cannot be invoked when the money is recorded in the assessee's books of accounts and the sources are not disputed. It was also noted that the assessee satisfied the identity and genuineness of deposits from its members. Following judicial pronouncements, the Tribunal found no prohibition in accepting SBNs during the specified period.
Key Issues
Whether the addition of cash deposits made in Specified Bank Notes during the demonetization period as unexplained income under Section 69A of the Income Tax Act is justifiable.
Sections Cited
143(3), 143(1), 143(2), 142(1), 131, 69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1059479795(1) dated 08.01.2024 for the I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited A.Y.2017-18 arising out of order passed under section 143(3) of Income Tax Act, 1961 (in short ‘Act’) dated 25.12.2019.
Brief facts of the case are that, assessee is Mutually Aided Cooperative Thrift and Credit Society formed under the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 filed its return of income for the A.Y. 2017-18 admitting a total income of Rs.5,55,314/- on 31.10.2017 and the same was summarily processed under section 143(1) of the Act on 13.07.2018. Subsequently, the case was selected for scrutiny under CASS and accordingly notices under section 143(2) and 142(1) of the Act are issued from time to time. In response, assessee furnished the information through online. On verification of the submissions made by the assessee, the Ld. Assessing Officer [hereinafter in short “Ld. AO"] noticed that the assessee has made cash deposits during the demonetization period amounting to Rs.1,81,66,569/- in various banks. Ld. AO required the assessee to furnish the sources for cash deposits made during the demonetization period along with evidences. In response to the summons under section 131 of the Act the CEO of the assessee Shri V.B. Srinivas appeared before the Ld. AO and statement has been recorded from him. The CEO Shri V.B. Srinivas explained the activities of the society and submitted that the society is having 18 branches in Krishna District. He also submitted that the total cash deposits made by the society during the F.Y. 2016-17 is Rs.24,88,72,425/-. However, during the demonetization period assessee
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I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited deposited cash of Rs.1,81,66,569/- out of which Rs.6,98,569/- were valid/new notes and the balance Rs.1,74,68,000/- was in the form of Specified Bank Notes. The explanations furnished by the assessee was examined by the Ld.AO. The Ld. AO observed that assessee is not in the exempted category to receive Specified Bank Notes, being not satisfied with the explanation offered by the assessee, added an amount of Rs.1,72,179/- after considering the closing balance as on 08.11.2016 amounting to Rs.2,38,821/- available in the books of the assessee under section 69A r.w.s. 115BBE of the Act.
Aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld.CIT(A). Before Ld. CIT(A), assessee reiterated the similar submissions and the Ld. CIT(A) did not accept the explanation of the assessee and upheld the order of the Ld. AO.
4. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following revised grounds of appeal: - “1. The CIT(A) has erred in confirming the addition of Rs.1,72,29.179/- by Assessing Officer (A.O) being high denominated bank notes (SBN) deposited in the assessee's bank accounts u/s 69A of the Act during the period 07/11/2016 to 31/12/2016.
2. The CIT(A) has failed to appreciate that the assessee is a co- operative credit society, collecting savings and extends loans to members. Amount deposited into assessee's bank of Rs. 1,72,29,179 /- in form of SBN Notes, towards loan repayments are against dues from members, against pre-existing contractswith proven identity. All such deposits are in the normal course of business duly recorded in the books of assessee and can in no way, be termed as unexplained money u/s 69A of the Act.
Page. No 3 I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited 3. Even assuming that Demonetized notes has ceased to be legal tender, it does not mean that the amount collected by the assessee from its clients would become Unexplained Money. This aspect has been dealt in "Prathamika Krushi Pattina vs The Income Tax Officer, Ward -5, and addition deleted.
On the facts and circumstances of the case, the CIT(A) has erred in confirming the addition made by A.O disregarding the various guidelines, and circulars during demonetisation.
5. Assessee prays to add, amend, forgo any of the above grounds at the time of hearing.”
Ground Nos. 1 to 4 are agitated against the confirmation of the addition by the Ld. CIT(A) of Rs.1,72,29,179/-. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the assessee is regularly depositing cash collected from its Members ever year. He argued that the Specified Bank Notes (Cessation of Liabilities) Act, 2017 specified that the validity of the Specified Bank Notes expires on 31.12.2016. Further he also submitted that the Members have deposited cash into their own savings accounts held with the society. He further submitted that proper KYC procedures have been followed by the Society which is dealing exclusively with its Members. He further argued that transactions in Specified Bank Notes is a procedural violation, but the transaction is not illegal. In support of his arguments, he relied on the following decisions: - S.No. ITAT Appeal No. Appellant Respondent ITAT Sri Bhageeratha Pattina Sahakara 1 ITO Ward - 3 Bangalore Sangha Niyamitha
Page. No 4
I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited S.No. ITAT Appeal No. Appellant Respondent ITAT Merchants CreditCo - The Income operative Society Ltd.., Tax Officer, 2 Bangalore Ward 1 Shri Umiya Cooperative Credit Society Ltd 3 ITO Ahmedabad
Income Tax Sri Tatiparti Officer/Ward1(1) 4 Visakhapatnam Satyanarayana 241,242, Shri Polepalli Srinivasulu 5 243, 244,245 DCIT Visakhapatnam Gupta &246/Viz/2021 Sobha Devi Dilipkumar Income Tax 6 ITA No. 108/Viz/2023 Visakhapatnam Officer Purani HospitalSupplies 7 ITA No.489/Chny/2022 PrivateLimited DCIT Chennai Tamil Nadu 8 ITA No.431/Chny/2023 StateMarketingCorporation ACIT Chennai Ltd Goldman TapesPrivate 9 ITA No.547/Mum/2024 ACIT Mumbai Limited
He therefore pleaded that various judicial pronouncement of the coordinate benches as aforesaid have held that the addition is not justifiable and therefore prayed for its deletion.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] vehemently supporting order of the Revenue Authorities submitted that since the Specified Bank Notes have been declared as ceased to exist, the assessee accepting Specified Bank Notes is violation of the Gazetted Notification dated 08.11.2016. Further Ld. DR also submitted that the assessee
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I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited is not in the exempted category to accept the Specified Bank Notes and hence prohibited to accept the same. He therefore pleaded that the order of the Ld.CIT(A) be sustained.
We have heard both the sides and perused the material available on record including the written submissions and the decisions cited by the Ld.AR. It is the contention of the Ld. AO that the assessee accepted Specified Bank Notes in violation of the notification issued on 08.11.2016 declaring the high value denomination notes as ceased to exist. Ld. AO did not accept the explanation furnished by the assessee regarding the validity of the legal tender of the Specified Bank Notes after 08.11.2016. The Ld. AO also was of the opinion that the assessee is not in the exempted category to receive Specified Bank Notes. The Ld. AO proceeded to tax the cash deposits made during the demonetization period under section 69A of the Act as unexplained money. In our opinion section 69A cannot be invoked in these circumstances, wherein such money is recorded in the books of accounts maintained by the assessee. Further it was also not disputed by the Revenue Authorities that the assessee has received Specified Bank Notes from its members which was deposited into the savings account of the Members held with the society. Accordingly, the sources of income was also not disputed by the Revenue. The only contention of the Revenue Authorities is with respect to the admission of Specified Bank Notes by the assessee whereas the assessee is not in the permitted list of entities to Page. No 6
I.T.A.No.41/VIZ/2024 Sujan Vikas Mutually Aided Cooperative Thrift and Credit Society Limited accept the SBN’s. There is no doubt on the issue that assessee has satisfied the identity of the deposits received from the members of the society and the genuineness of the transactions which have been deposited into the members account. In these circumstances, we find the assessee did not make any extra benefit as observed by the Ld. AO for treating the same as income under section 69A of the Act. Further various judicial pronouncements have held that there is no prohibition in accepting the Specified Bank Notes from 08.11.2016 to 31.12.2016 in the light of Specified Bank Notes (Cessation of Liabilities) Act, 2017. Respectfully following the decision of the various coordinate benches, we are of the opinion that the addition made by the Ld. AO on account of acceptance of Specified Bank Notes under section 69A is not justifiable and could not be sustained. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 18th September, 2025.