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Facts
The Revenue appealed the CIT(A)'s order that allowed the assessee's appeal. The assessee, a cooperative society, had cash deposits of Rs. 2,00,000 and cash withdrawals of Rs. 1,14,44,000 in its bank account. The Assessing Officer (AO) treated these as unexplained money and expenditure, respectively, and made an addition of Rs. 1,16,44,000 to the assessee's income.
Held
The Tribunal held that the CIT(A) had correctly analyzed the facts and submissions. The deposits and withdrawals were reflected in the assessee's books of account and were explained as being in the ordinary course of its business as a cooperative society, with funds belonging to its members. The Tribunal agreed with the CIT(A) that the withdrawals could not be treated as unexplained expenditure under Section 69C.
Key Issues
Whether the cash deposits and withdrawals from the assessee's bank account were correctly treated as unexplained money and expenditure by the AO, and whether the CIT(A) was justified in deleting the addition.
Sections Cited
69A, 69C, 147, 148, 250, 80P
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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2018-19 dated 26.03.2024. 2. The Revenue is in appeal before the Tribunal raising the following grounds of appeal:
“1. That Ld. CIT(A)-NFAC has erred in fact and circumstances in deleting the addition of Rs.2,00,000/- made on account of cash deposits into the bank account of the assessee considered as unexplained money u/s 69A of the Act despite the fact that the assessee during the course of assessment proceedings had failed to substantiate the source of cash deposit with documentary evidences.
That Ld. CIT(A)-NFAC has erred in fact and circumstances in deleting the addition of Rs. 1,14,44,000/- with respect to cash withdrawal made from bank account of the assessee considered as unexplained expenditure u/s 69C of the Act despite the fact that the assessee during the course of ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. assessment proceedings had failed to substantiate the nature & purpose of cash withdrawal with documentary evidences.
That the appellant craves leave to add, alter and/or amend any of the grounds of appeal during the course of hearing of appeal.”
Brief facts of the case are that the assessee is a co-operative Society which claims to be working for the poor farmers. For the year under consideration, the assessee had not filed its original return of income. Subsequently, the case of the assessee was reopened by issuing notice u/s 148 of the Act on 29.03.2022 on the basis of information about the financial transactions as the assessee had deposited cash of ₹2,00,000/- in its current account and had withdrawn cash of ₹1,14,44,000/- from its current account. In response to the notice u/s 148 of the Act, the assessee filed its return of income which was treated as declaratory ‘invalid’ by the Assessing Officer (hereinafter referred to as Ld. 'AO'). Consequently, the assessment u/s 147 r.w.s 144 of the Act was completed by the Ld. AO assessing the total income of the assessee at ₹1,16,44,000/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who, vide order dated 26.03.2024, allowed the appeal of the assessee.
Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before the Tribunal.
None appeared on behalf of the assessee and the appeal was heard with the assistance of the Ld. DR.
It was submitted by the Ld. DR that the assessee is a non-filer and the return filed in response to the notice u/s 148 of the Act was not e- verified. There were cash deposits and cash withdrawals from the bank account. The assessee is a credit cooperative society and the cash deposits were claimed to be received from the members but no ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. documentary evidence for the same was filed. The addition was made u/s 69A as well as 69C of the Act. Before the Ld. CIT(A) the assessee filed the copy of bylaws and date-wise deposits. The bank account balance matched with the cash deposits and the Ld. AO relied upon the decision of Hon’ble Supreme Court of India, in the judgment held in the case of Sasi Enterprises Vs. Assistant Commissioner of Income Tax 2014 [5] SCC 139. The assessee had filed the bank statement but no audit report was filed. The Ld. DR relied upon the order of the Ld. AO and requested that the same may be upheld.
We have considered the facts of the case, the submissions made and the documents filed. The Ld. CIT(A) deleted the addition by holding as under:
“5. Ground No. 1: Brief facts related to issue raised in this ground are that the appellant had not filed its original return of income for the AY 2018-19. Thereafter, case of the appellant was re-opened by way of notice issued u/s 148 of the Act on 29.03.2022 for verifying cash deposits of Rs. 2,00,000/- and cash withdrawals of Rs. 1,14,44,000/- in its current account. In response to notice issued u/s 148, the appellant filed return on 05.06.2022. However, the same was not e-verified and was treated as invalid.
1 During the assessment proceedings, the appellant explained that the cash deposits and withdrawals from its bank accounts were in the regular course of its business as a credit co-operative society and that the source of cash was deposits/repayments of loans received from the members in the regular course of its business. The Assessing Officer in the impugned assessment order has mentioned that no documentary evidences like ledger, receipt, list of the members and their deposits/withdrawn details, P&L account, Balance Sheet along with annexures/schedules and Audit Report were furnished by the appellant during the assessment proceedings. As the appellant could not substantiate the source of cash deposits of Rs. 2,00,000/- and cash withdrawals of Rs. 1,14,44,000/- the AO made the addition of Rs. 1,16,44,000/- to the total income of the appellant by observing as under: “As elaborately discussed, you have miserably failed to substantiate / conclusively prove the source of huge cash deposit and nature & ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. purpose of cash withdrawal, thus, total amounting to Rs. 1,16,44,000/- in your bank account. As you have failed to discharge the onus of cash deposits & withdrawn in your bank account, it is proposed to reject your claim. Therefore, an amount of Rs. 1,16,44,000/- is added back to your returned income as unexplained money u/s 69A & unexplained expenditure u/s.69C of I T Act.”
2 Challenging the above action of the AO, the appellant in its submissions filed on 29.04.2023 submitted as under: We have said the same thing every time in the letter. That is the money deposited does not belong to the society and is not used for its own purposes. The money entirely owned by the members and deposited in their own accounts. When required they withdraw money from their account. Thus the transaction completed through our account. These accounts are in the Tamluk Ghatal Central Co-Operative Bank Ltd. Money deposited by members can never be our income but you did just that unnecessarily. The appellant along with its submissions also furnished copy of its Bye laws, Registration Certificate as a cooperative society, depositors list giving date wise details of deposits made along with Aadhar nos. of the depositors wherever available, withdrawal list, Cash /Day Book, Bank Book, bank account statement and the audited Profit & Loss A/c & Balance Sheet, sample receipts of deposits & withdrawals by members of the appellant society etc.
3 After carefully pursuing the impugned assessment order and the rival submissions of the appellant along with the supporting documents on the above issue, it is noted that: a) As per Profit and Loss account of the appellant, a net loss of Rs. 14,187/- has been reported by the appellant for the year under consideration. Therefore, it seems that probably the appellant did not file its return of income and not claimed any deduction u/s 80P of the Act in view of the reported loss during the relevant year. On checking the e-filing history of the appellant from the database, it is further observed that the appellant has also not filed its return of income for Assessment Years prior to AY 2018-19. For succeeding assessment years, the appellant has filed ITRs for the AYs 2021-22 to 2023-24 only and in both years net loss has been reported and hence no deduction u/s 80P has been claimed in these AYs as well. b) The closing balance of the current account no. 141060092259, maintained by the appellant with the Tamalukghatal Central Co-operative Bank, was Rs. 1,14,320.84 which matches with the Balance reported in the Balance sheet of the appellant as on 31.03.2018. Thus, the net amount of all the deposits and withdrawals made during the year by the appellant in ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. above current account is found duly accounted for in the books of accounts of the appellant. c) Majority of the deposits reflected in the above current account in question are received in modes other than cash only. The Assessing Officer has treated the cash withdrawals of Rs. 1,14,44,000/- as unexplained expenditure u/s 69C of the Act without challenging the corresponding non- cash deposits made in the current account of the appellant. Thus, the cash withdrawals of Rs. 1,14,44,000/- made from the current account of the appellant which is found duly accounted for in its book of account cannot be held to be unexplained expenditure without establishing that the corresponding non-cash deposits were also unexplained money in the hands of the appellant. The AO treated the cash withdrawals as Unexplained Expenditure due to the reason that the appellant did not explain the purpose of the withdrawals. However, it is noted that the appellant had duly submitted before the AO that when the members withdrew their money deposited with the appellant society, the appellant also withdrew the money from it bank account so as to repay them. Hence the purpose of withdrawal is clearly for business purposes in the ordinary course of business of the appellant society. Furthermore, the purpose of cash withdrawals may be any, as long as the source thereof is not questioned, the withdrawals cannot be treated as unexplained expenditure by any stretch of imagination. d) In the present case, it is not disputed that the appellant is a Co-operative Credit Society which works mainly in the field of agriculture and its business includes accepting deposits from its members and also giving credit to its members which is subsequently repaid by them. The cash/money deposited by its members is further deposited by the Society in its bank account. Verification of the detailed list of depositors and withdrawals list duly supported with concerned transaction receipts on sample basis vis- a-vis the entries recorded in its Cash book and the corresponding cash deposit & withdrawal entries reflected in the bank statement substantiates the appellant's claim in this regard. The appellant has stated that the concerned details were also filed by it before the AO, however the AO did not take cognisance thereof. Thus, in the facts of the present case, the nature and source of the cash deposits of Rs. 2,00,000 and cash withdrawals of Rs. 1,14,44,000 is found duly explained. The appellant who is a Co-operative Society cannot be considered to be the owner of the money as such, which only belongs to its members and same is retained by the assessee as its custodian.
4 In view of the above discussion, I am of the opinion that the AO was not justified in treating the cash deposits of Rs. 2,00,000/- as unexplained ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. money u/s 69A and cash withdrawals of Rs. 1,14,44,000/- as unexplained expenditure u/s 69C of the Act. Hence, the addition of Rs. 1,16,44,000/- made by the AO in the impugned assessment order dated 07.03.2023 is hereby directed to be deleted. Consequently, this ground of appeal raised by the appellant is allowed.
In the result, the appeal filed by the appellant is allowed.”
A sum of ₹2 Lakh was deposited in the bank account. The Ld. AO has relied upon the case of Sasi Enterprises (supra) for making the addition. The Ld. AO added a sum of ₹1,16,44,000/- as unexplained being a sum of ₹2 Lakh as cash deposits in the current account u/s 69A of the Act and ₹1,14,44,000/- cash withdrawn which was also added u/s 69C of the Act.
A query was raised by the Bench to the Ld. DR as to how the cash withdrawn can be treated as unexplained expenditure u/s 69C of the Act for which the Ld. DR relied upon the assessment order.
We have considered the facts of the case, the submissions made and the documents filed and have also gone through the order of the Ld. CIT(A) who has analysed the facts of the case. Both the deposits as well as the withdrawals from the bank account were duly reflected in the books of account for which explanation has been filed before the Ld. CIT(A) which is plausible. There is no justification for adding the withdrawals made from the bank account as unexplained expenditure u/s 69C of the Act as the section pertains to unexplained expenditure and the withdrawals by no stretch of imagination can be treated as unexplained expenditure. The Ld. CIT(A) has given ample reasons for giving relief to the assessee, which is a cooperative Society. We are in agreement with the order of the Ld. CIT(A) and find no reason to interfere with his findings whose findings are confirmed and all the grounds of appeal raised by the revenue are hereby dismissed. ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 24th February, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 24.02.2026 Bidhan (Sr. P.S.) ITA No.: 1222/KOL/2024 Assessment Year: 2018-19 Chaitanyapur Samabay Krishi Unnayan Samity Ltd. Copy of the order forwarded to:
Income Tax Officer, Midnapur.
Chaitanyapur Samabay Krishi Unnayan Samity Ltd., Chaitanyapur, Kesedal, Ghatal, Paschim Medinipur, Paschim Medinipur, West Bengal, 721201. 3. CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order