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Facts
The assessee, Sarvodaya Nagri Co-operative Pat Society, appealed against an order from the CIT(A) concerning assessment year 2017-18. The core issue is an addition of Rs. 6,70,500 made by the Assessing Officer (AO) under section 69A, relating to cash deposited in a bank account during the demonetization period. The assessee claimed the deposit was accounted for in their books, but the AO and CIT(A) found this incorrect and not declared in the income return.
Held
The Tribunal noted that the source of the cash deposit was not properly verified by either the AO or the CIT(A). While the assessee claimed the deposit was recorded in their books and they acted as a conduit for depositors, they failed to present the relevant books of account. However, to meet the ends of justice, the Tribunal decided to set aside the impugned order.
Key Issues
Whether the addition of Rs. 6,70,500 under section 69A for cash deposited during demonetization is justified, and whether the assessee was provided a proper opportunity of being heard.
Sections Cited
69A, 80P, 234A, 234B, 234C, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO
The appeal by the assessee is emanating from the impugned order dated 07/02/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017–18.
In its appeal, the assessee has raised following grounds:–
“1. The order passed by CIT(A) is without providing reasonable opportunity of being heard and is in violation of principles of natural justice. Dismissal of grounds is unjustified and unwarranted. 2. The order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre dated 07/02/2024 is illegal, invalid and bad in law.
2 Sarvodaya Nagri Co–operative Pat Society ITA no.330/Nag./2024 3. The learned CIT(A) erred in upholding the ex-parte assessment framed u/s 144 of I.T. Act 1961. 4. The addition made in assessment framed at Rs.6,70,500/- u/s 69A of I.T. Act 1961 is illegal, invalid and bad in law. 5. The addition made in assessment framed at Rs.6,70,500/- u/s to 69A of I.T. Act 1961 is unjustified, unwarranted and excessive. 6. The learned A.O. erred in making addition at Rs.6,70,500/- u/s 69A in respect to deposit in bank account of Vidarbha Konkan Gramin Bank which is part of recorded transaction in books of account. 7. The learned A.O. ought to have allowed deduction u/s 80P of I.T. Act 1961 at Rs.6,70,500/- for addition if made as it was in respect to transactions of activity of providing credit facilities to its members and deduction u/s 80P has been allowed in the case of assessee and is not in dispute. 8. The assessee denies liability to pay interest u/s 234A, 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234A, 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive. 9. Any other ground that shall be prayed at the time of hearing.”
There is a delay of 48 days in filing the present appeal. The said delay is hereby condoned in view of the sworn Affidavit furnished by the employee of the assessee.
The only issue raised by the assessee relates to the addition of ` 6,70,500, under section 69A of the Act in respect of cash deposited in bank account of Vidarbha Konkan Gramin Bank.
The source of cash deposit was never verified neither by the Assessing Officer nor by the learned CIT(A). Para–9 and 10 of the assessment order passed by the Assessing Officer is relevant which is reproduced below:–
“9. The assessee was given an opportunity to show cause by 26.03.2022 why the assessment should not be completed as per the draft assessment order. The assessee was also given the option to present his case through video conference by clicking the seek Video Conferencing button available against the show cause notice on the portal. The assessee furnished its reply dated 26.03.2022 the relevant extracts of which are reproduced as under:
3 Sarvodaya Nagri Co–operative Pat Society ITA no.330/Nag./2024
"We have received above notice on portal in that notice on Point No. 2 you have shown that Account No. 6046201030000094 which is maintained at Vidarbha Konkan Gramin Bank, Nagpur, are in name of Saryodaya Nagari Co operative credit society Ltd, Shegoan. We have disclosed all transaction of above bank in our co-operative society account & same account has been reflecting in Balance sheet for said assessment year. We will submit cash book & Bank ledger which prove that we have shown this transaction in our books of accounts. As today is Saturday & society has close the day & we have received notice on Friday please allow us time till Monday so that we can submit cash books & bank ledger statements which is proof that we have shown all these transaction of Vidarbha Kokan Gramin Bank in our books of accounts. At the time of filing of return, CA has not shown the cash deposited in bank account in income tax retum form then it does not mean that we have not shown these transactions in our books of accounts." The assessee also opted for video conferencing. Accordingly, the date of video conferencing was fixed for 29.03.2020 at 2.50 p.m. At the given point of time and date, the assessee sought adjournment. However, since the case is going to be barred by limitation, the request of the assessee cannot be acceded to. Hence the assessment is being made as per the further submissions made by the assessee as discussed above. 10. The submissions of the assessee have been considered but carry no force. On examination of the material available on record, it is observed that the assessee society has deposited cash of Rs.6,70,500/- in its bank account during the demonetization period (i.e. 09.11.2016 to 30.12.2016). Even the assessee has not declared the said cash deposit in the return of income filed for the year under consideration. In its reply furnished above, the assessee has only stated that the cash deposit of Rs.6,70,500/- has duly been accounted for in its books of account, which is not correct. As per the audit report in form 3CD, the books of account of the assessee society have duly been audited by the counsel of the assessee and it is hard to believe that the counsel made a mistake by not mentioning the amount of cash deposit in the return of income. Hence, the contention raised by the assessee is not acceptable.”
Before us, the learned Counsel, Shri Kishore P. Dewani, appearing for the assessee vehemently submitted that all the deposits are duly recorded in the books of account, however, he has not presented any books of account to buttress his contention. However, there is some force in his contentions that the money belongs to the depositors and the assessee is only a conduit. Keeping in view the overall facts and circumstances of the case and to meet the ends of justice, we deem it fit and appropriate to set aside the impugned
4 Sarvodaya Nagri Co–operative Pat Society ITA no.330/Nag./2024 order passed by the learned CIT(A) by restoring the matter to the file of the learned CIT(A) for denovo adjudication in line with our observations supra. The learned CIT(A) is directed to grant sufficient opportunity of being heard to the assessee. The assessee is also directed to adduce all the evidences which are connected to the issue so raised.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 27/01/2025
Sd/- V. DURGA RAO JUDICIAL MEMBER NAGPUR, DATED: 27/01/2025 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur