SHRI RENUKAMATA MULTI-STATE CO-OPERATIVE URBAN SOCIETY LTD,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4(4), MUMBAI

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3. Addition under section 68 of the Act for aggregate cash deposits and credit transactions but excluding the remote deposits. 3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 4,21.34,504, estimated at the rate of 0.15 per cent of Rs 2,808.96 crores being the aggregate cash deposits and credit transactions but excluding the remote deposits of all the account holders in the appellant-society against the addition of Rs 8,488.80 crores made by the Assessing Officer. 3.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society, without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures. 3.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 without appreciating the facts of the case and hence, pray that the impugned disallowance of Rs 50,00,000 ought to be deleted.

7. Disallowance under section 40A(3) of Rs 1,39,81,267 7.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer under section 40A(3) aggregating Rs 1,39,81,267 being the rent expenses incurred during the year under reference. 7.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of rent expenses under section 40A(3) without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 1,39,81,267 is bad in law and ought to be deleted.

8. Disallowance of deduction under section 80P 8.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of deduction under section 80P claimed by the appellants. 8.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of deduction of under section 80P without appreciating the facts of the case and hence, pray that impugned disallowance is bad in law and ought to be deleted. The appellants crave leave to add to, alter or amend the aforestated grounds of appeal.‖

4. While the Revenue has raised the following grounds in its appeal for the assessment year 2016-17:-

―1. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs. 8488,80,03,877/- made by the Assessing Officer u/s 68 of the Income tax Act, 1961 on account of sum credited in the books of account as unexplained credit."

2. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs.479,63,98,048/- made by the Assessing Officer u/s 68 of the Income tax Act, 1961 on account of cash credited in the books of account for issue of at par cheque/DD, as unexplained credit."

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal

, if need be."

5. During the hearing, no material was placed on record in support of ground no.1 raised in assessee’s appeal. Accordingly, the same is dismissed.

6. In ground no.2, raised in assessee’s appeal, the assessee has challenged the direction of the Assessing Officer (“AO”) to get the accounts audited under section 142(2A) of the Act at the fag end of the assessment proceedings. From the perusal of the show cause notice dated 23/12/2019 issued by the AO for reference of the assessee’s case for Special Audit under section 142(2A) of the Act, we find that since during the search and survey action on the assessee, large scale operations of the assessee in multiple cities, involving 320 different accounts in the nationalized/co-operative banks, for seven years were found, the AO considered it appropriate that the accounts of the assessee for the assessment years 2012-13 to 2018-19 be audited as provided in section 142(2A) of the Act. In response to the aforesaid show cause notice, we find that the assessee vide its reply dated 24/12/2019 though agreed that the examination of money trail is a complex investigation, however submitted that there are no complexities in its accounts which will require Special Audit. The assessee further submitted that it has provided various details to the Department during the ongoing assessment proceedings and has been fully co- operating with the Department. Accordingly, vide its reply the assessee prayed that no Special Auditor should be appointed. We find that after taking note of the assessee’s submission, the AO passed the necessary directions on 27/12/2019 for audit of the accounts of the assessee under section 142(2A) of the Act. From the careful perusal of the aforesaid documents, forming part of Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 the paper book, we find no merits in the submission of the assessee that the direction to get the accounts audited under section 142(2A) of the Act is mere tactics to extend the period of limitation and we find the same to be necessary due to multiplicity of transactions and complexities involved in assessee’s accounts. Accordingly, ground no.2 raised in assessee’s appeal is dismissed.

7. Since the issue arising in grounds no. 3-4 raised in assessee’s appeal, and ground no. 1-2 raised in Revenue’s appeal pertains to addition under section 68 of the Act on account of cash deposits and credit transactions, therefore, these grounds are considered together.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 daily collection account, and FDR account. As per the assessee, in order to open and operate any of the above accounts, a person has to first become a member of the society, either ordinary or nominal. Further, the main source of income is interest on loans advanced to its members.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 03/12/2019 noted that there is non-compliance in maintaining proper KYC documents, non-compliance in collecting KYC details from the depositors, irregularities found in account opening forms of society, and non-compliance of Rule 114B in respect of cash deposits. Accordingly, the assessee was asked to show cause as to why the total cash deposited in its books should not be considered and taxed as unexplained cash credit under section 68 of the Act. In response thereto, the assessee filed its detailed submission before the AO. During the assessment proceedings, the AO also directed a Special Audit under section 142(2A) of the Act in the case of the assessee.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 identity, genuineness, and creditworthiness of the persons who claimed to have deposited cash/cheques in the assessee society. Such kind of deposits were quantified by the AO at Rs.89,68,44,01,925/- and it was added to the total income of the assessee under section 68 of the Act as unexplained cash credit.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 considering various factors as noted in paragraph 7.1(7.43) of its order, the learned CIT(A) held that there is culpability on the part of the assessee but nothing to warrant addition under section 68 of the entire transactions. By taking into consideration the commission charged by the assessee for collecting the cash deposit in its home branch and the commission charged for demand draft/at-par cheques, the learned CIT(A) came to the conclusion that it would be reasonable to estimate the income of the assessee @ 0.15% of such deposits for which no such commission has been charged. As regards the demand draft/at-par cheques, since the assessee has already recognised income @ 0.05%, the learned CIT(A) computed the income @0.10%. As far as the failure to comply with the membership requirements, violation of byelaws, etc., the learned CIT(A) came to the conclusion that they do not impinge on the taxation aspect per se. As a result, the learned CIT(A) granted partial relief to the assessee. Being aggrieved, both the assessee as well as the Revenue is in appeal before us.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 Further, on perusal of the KYC documents, and the documents pertaining to account opening, found during the course of search, the AO noted that the assessee has not collected the PAN of the depositor or Form 60 in certain cases. It is further evident from the record that during the assessment proceedings on perusal of the materials found during the course of the search, the AO issued show cause notice to the assessee after noting that there is non-compliance in maintaining proper KYC documents, non-compliance in collecting KYC details from the depositors, irregularities found in account opening forms of society, and non-compliance of Rule 114B in respect of cash deposits. After considering the submissions of the assessee, the AO held that the assessee could not substantiate the veracity of the cash depositors, and made the addition under section 68 of the Act on the basis that the assessee has failed to prove the identity and creditworthiness of the depositors, and genuineness of the transaction.

13. However, it is evident from the record that the assessee furnished various documents/evidence in response to the discrepancies pointed out by the AO during the assessment proceedings. The question is whether the discrepancies noticed in the documentation will attract section 68 of the Act or not. The provisions of section 68 are attracted when the assessee is not able to discharge the primary burden placed on its shoulders to prove cash credits in terms of section 68, which is a legal fiction introduced by the Legislature in order to curb practice of introducing unaccounted income in the form of cash credits such as loans, gifts, advances etc. The undisputed fact remains that the assessee is a credit co-operative society. It is formed for the purpose of Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 transacting credit business with its members, i.e., it is entitled to collect deposits from its members and advance loans to its members. The learned AR submitted that, under section 45K of the Reserve Bank of India Act, 1934, the assessee has been considered as Non-Banking Institution and its activities are monitored by the RBI. The assessee, being a co-operative society, is managed by the board selected out of its own members and such board is subjected to change every fiscal period. Hence no one can be considered to be exclusive owner of the co-operative society. Therefore, personal benefit vis-a-vis the assessee would be absent in the transactions undertaken by the assessee.

14. In the instant case, the assessee has received the money in the normal course of its business, i.e. by way of deposits from its members or by way of repayment of loans by its members, etc. Further, it is not disputed that the assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into its bank account. It is worth noting that no material evidence was found during the search or in the post search enquiry, which could lead to the conclusion that the money deposited by its members belongs to the assessee. In the statements of members as well as employees, i.e. cashier/branch manager, of the assessee recorded during the course of search and survey action, relied upon by the AO, there is nothing to show that the money has been used or siphoned off for the benefit of the assessee. Even in the post search enquiry, no material or evidence was found which could lead to the conclusion that the money deposited belongs to the assessee. Further, it is evident from assessee’s submissions noted in the assessment order that in respect of all the instances noted by the AO, wherein

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 discrepancies were found in maintaining the KYC documentation and account opening form, the assessee furnished duly filled documents during the assessment proceedings. Further, from the statements relied upon by the AO, it is clearly discernible that some members have deposited cash in their accounts maintained with the assessee in lieu of commission, and the members have even disclosed the name of the parties to whom the cash belong to. There is also no material available on the record to show that the cash was deposited by the member in its account at the insistence of the assessee. On the contrary, from the statements recorded during the search and survey, it is evident that the members have admitted that parties used to accompany them for every cash deposit and they would give the details of the person to whom the money was to be transferred, which was to be conveyed to the assessee. The fact that such a member did not maintain the record of such parties cannot lead to the conclusion that the cash deposit belongs to the assessee. Even if any account is found to be benami, it is for the Revenue to examine the account holder and find out the real beneficiary. In the absence of any such detail/verification/statement, cash deposited in the account cannot be treated to be that of the assessee. Since the transactions of accepting deposits have been undertaken with the members of the assessee society only, the identity of the depositors and the genuineness of transactions cannot be doubted. Since the assessee has received money from its members in the normal course of carrying on of its business, which consisted of accepting deposits from its members and lending money to them, the assessee may not be required to prove creditworthiness. We are of the considered view that the material/documents found during the course of search raise doubt or suspicion Page | 14

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 only against the members in whose account the money was deposited. We further find that on the basis of the information found during the course of search and survey action at the assessee’s premises, proceedings under the Act have been initiated in certain cases against the members and addition have been made by the Revenue.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―7.43. While deciding so, the following factors are also taken into account: a. Unlike in the case of few other co-operative societies where intrusive action was undertaken by the Department, the appellant has made reasonable efforts to submit the details of depositors and other particulars. b. A search action was conducted in the case of the appellant. The AO has not pointed out any asset / evidence warranting the usage of thousands of crores of rupees by the appellant for itself. c. Vide letter dated 23.10.2019 before the AO, the appellant has submitted exhaustive details of customer particulars, statement of accounts etc. In specific, at para 5, it is noticed that appellant has submitted "Also the account opening form and KYC documents of all the customers of the society from Financial Year 2011-12 (AY 2012-13) to Financial year 2017-18 (AY 2018-19) are submitted in DVD / pendrive". d. The statements of the various parties (customers, directors and employees) do not indicate that the funds have been used by the appellant for its personal benefits or that of its related parties. While there are contents related to charging of commission, failure to follow KYC norms, splitting of cash deposits etc, the siphoning off of funds by the appellant is not one of them. e. The appellant has pointed out that subsequent to the search action, the Department has collected and disseminated the data as regards depositors to AOs for appropriate action. The appellant has contended that remedial action was taken in such cases and the deposits have already been brought to tax. Few such cases cited by the appellant are BhagabhaiKacharabhaiPatel (AY 2017-18), Mahesh HasanandKatariya (AY 2015-16, 2016-17), HemantKarangiya (AY 2015-16), MohdSaleemShaikh Akbar (AY 2016-17, 2017- 18), Vishal Arora (AY 2014-15) AmolMhetre (AY 2016-17), BhagchandThawani Vaibhav Mehta, PrabhakarMahajan, LajwantiThawani (various AYs) etc. A perusal of the assessment orders shows that information has been disseminated after the search action and the AOs have taken remedial action. e. The appellant undertakes activities similar te banking and a larger leeway has to be given as regards the ingredients of S.68 (of course, this depends on the facts of the case and it cannot be held as such in a blanket manner).‖

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 For the above said reasons, we hold that the provisions of section 68 will not get attracted in the facts and circumstances of the present case.

(a) In the case of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha (ITA No.646/Bang/2021 dated 18-02-2022), the Tribunal considered the issue as to whether the demonetised currencies collected from the members and deposited into the bank account of the assessee could be assessed as unexplained cash credit u/s 68 of the Act. The Tribunal decided this issue as under:-

―12. The last issue relates to addition made u/s 68 of the Act. The A.O. noticed that the assessee society has deposited "Specified bank notes" (demonetized notes) in the account maintained by it with CDCC Bank, Hosadurga as detailed below:- ............ When enquired about the sources for making the above deposits, the assessee submitted that they represent cash received by it from its members towards repayment of loan, Pigmy collection, etc. The A.O. noticed that the Government has announced demonetization on 8.11.2016, whereby then existing Rs.1000/- & Rs.500/- currency notes were declared not to be legal tender. The A.O. took the view that the assessee has collected the above said amount after 8.11.2016, which is not permitted. Accordingly, the A.O. took the view that the above said amount represents unexplained money of the assessee and assessed the same u/s 68 of the Act. The A.O. also charged income tax on the above said deposit as per provisions of section 115BBE of the Act. The Ld. CIT(A) also confirmed the same.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 deposited by its members towards repayment of loans, pigmy deposits, etc. Accordingly, he submitted that the assessee has discharged its responsibility u/s 68 of the Act. Further, the collections and deposits have been duly recorded in the books of account and hence, there is no reason to treat the same as unexplained money of assessee. The Ld. A.R. further submitted that merely because demonetized notes ceased to be legal tender, it does not mean that the amount collected by the assessee from its members would become unexplained money of the assessee. The Ld. A.R. also submitted that the Reserve Bank of India issued a series of notifications with regard to the deposit of demonetized notes from 8.11.2016 onwards. He submitted that the RBI, vide notification dated 14.11.2016, clarified that District Central Co-operative Banks can allow their existing customers to withdraw money from their accounts up to Rs.24,000/- per week. It further clarified that no exchange facility against demonetized notes or deposit of such notes should be entertained by them. In view of the above said notification, the assessee has stopped collecting the demonetized notes from 14.11.2016 onwards. Accordingly, the Ld. A.R. submitted that the above said deposits were collected by the assessee prior to 14.11.2016 and it cannot be considered as violation of any of the Provisions of the Act. Accordingly, he submitted that the A.O. was not justified in invoking the provisions of section 68 of the Act.

―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 Page | 18

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 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 accordingly treated it as income u/s.

(c) The Ahmedabad bench of Tribunal has expressed an identical view in the case of Shri Umiya Co-operative Credit Society Ltd vs. ITO (ITA No.277/Ahd/2022 dated 18-07-2024 by following the decisions rendered by the co-ordinate benches in the following cases:- (i) ITO vs. C D Patani Nagari Sahakari Pat Sanstha (ITA No.727/PUN/2022 dated 28-03-2023. (ii) Merchants Credit Co-op Society Ltd vs. ITO (ITA No.329/Bang/2023 dated 24.08.2023. (iii) Saidatar Co-operative Credit Society Ltd vs. ITO (ITA No.1613/M/21 dated 05-09-2022.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 the commission charged by the assessee for cash deposits in remote branches. In this regard, it is pertinent to note that once there is no material/evidence on record to show usage of money by the assessee for itself or siphoning off the same for its benefit, then by applying the real income theory only the income from the activities of the assessee as a co-operative society can be brought to tax, which undisputedly has already been declared by the assessee. Further, we find that both lower authorities failed to appreciate that once the account holders are known, deposits are required to be explained by them as the amount has been deposited in the name of the account holders only and transaction is in their account. Further, it is pertinent to note that the demand draft or at par cheques are also issued at the instructions of the member and the amount is debited/credited from/to the member’s account. From the statement of Chairman of the assessee society, placed on record, we find that there is nothing to show that the amount deposited in the accounts maintained with the assessee belongs to the assessee. We also find no basis in computation of the commission in the hands of the assessee, as the percentage of commission considered by the learned CIT(A) for making the addition is in respect of the cash deposited in remote branches, and for the issuance of demand draft/at par cheques, which in any case is charged by any bank for rendering these kind of services. There is also no allegation or material that the assessee charged any other commission from its members. On one hand, the learned CIT(A) has accepted that the assessee may have few genuine depositors, while on the other hand, computed commission @0.15% on the total cash deposits at non-remote branch. Therefore, we find

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 that the addition made by the learned CIT(A) is also not based on any justifiable basis.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

Financial Year Amount 2011-12 40,50,000 2012-13 75,00,000 2013-14 2,00,00,000 2014-15 1,00,00,000 2015-16 50,00,000 2016-17 1,00,00,000 2017-18 40,00,000

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 financial institution, and NBFC. Since the assessee is not covered within the definition of the aforesaid entity, therefore is not entitled to claim deduction under section 36(1)(viia) of the Act. Accordingly, the AO disallowed the provision for standard assets claimed by the assessee. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the assessee does not fall in any of the categories to which section 36(1)(viia) of the Act applies.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 that co-operative bank, primary agricultural credit society, primary co- operative agricultural and rural development bank shall have the meaning as assigned to them in the Explanation to section 80P(4) of the Act. Further, NBFC shall have the meaning as assigned to it in section 45-I(f) of the Reserve Bank of India Act, 1935.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 submitted that the prior period expenses are of routine nature for the purpose of the activities of the society and therefore, the same are fully allowable. The AO vide order passed under section 143(3) read with section 153A of the Act did not agree with the submissions of the assessee and held that it is a settled law that the expenses can be allowed for the period to which they pertain. The AO further held that since the assessee is following accrual method of accounting, the expenses could be allowed only for the period for which it pertains and not the period during which they are paid. Accordingly, the AO disallowed the prior period expenses debited to the profit and loss account. The learned CIT(A), vide impugned order, granted partial relief to the assessee and held that the expenses pertaining to the assessment years under appeal (i.e. assessment years 2012-13 to 2018-19) shall be allowed, however, where the expense pertains to the assessment year which is not in appeal, such expense shall stand disallowed.

―(e) We find that the liability in respect of work/services rendered in earlier years was crystallized only on receipt of the bill in the current assessment year. Moreover, the method adopted by the respondent assessees has been accepted by the revenue for the earlier assessment year and also while accounting for the income earned in respect of the work done in earlier years. In the Page | 25

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 circumstances, the Revenue is required to adopt consistent approach and allow the expenditure which was crystallized during the assessment year under consideration as done in the earlier years. This finding of fact has not been shown to be perverse. In view of the above, we see no reason to entertain Question B as the does not raise any substantial question of law as it is essentially a finding of fact arrived at by two authorities concurrently.‖

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 accounts of the members maintained with the assessee’s society cannot be considered to be payment by account payee cheque/demand draft or for that matter regular banking channels. Accordingly, the AO disallowed the expenditure under section 40A(3) of the Act. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and upheld the addition on account of rental expenses under section 40A(3) of the Act.

―76. Sub-section (3) of new section 40A makes a provision for the disallowance of expenditure incurred in businesses and professions for which payment is made in an amount exceeding Rs. 2,500, otherwise than by a crossed cheque drawn on a bank or a crossed bank draft. This provision will apply in respect of payments made after a date to be notified by Government, being a date not later than 31-3-1969. This provision is designed to counter evasion of tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the Department as to the identity of the payee and the reasonableness of the payment.‖ (Emphasis supplied) 35. Thus, it is evident that the provisions of section 40A(3) of the Act were introduced to counter evasion of tax by way of claiming expenditure which is incurred in cash, wherein the identity of the payee and reasonableness of the payment is unclear. However, in the present case, it is undisputed that the assessee is a credit co-operative society and received the money in the normal Page | 28

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 course of its business, i.e. through repayment of loans by its members or deposits by its members, etc. The landlord of the premises has also opened and maintained a savings/current account with the assessee. Thus, while carrying on the ordinary business of receiving deposits from its members, the assessee has also credited rental payments into the accounts of the landlord members maintained with assessee society, since the activities of the assessee were akin to banking activities, but restricted to its members only. Therefore, in the present case, there cannot be any dispute regarding the identity of payee, i.e. the landlord members. Further, it is also not disputed that the payment was made on account of rent as per the rent agreement. There is also no allegation that the assessee has not deducted applicable TDS while crediting the rental payment to the account of the landlord members. Considering the fact that the activities of the assessee are akin to banking activities; and the landlords have opened savings/current accounts with the assessee, we are of the considered view that the rent payments so credited to the accounts of the landlords do not violate the objective of introducing section 40A(3) of the Act. Therefore, the disallowance of rental payment under section 40A(3) of the Act is directed to be deleted. As a result, ground no.7 raised in assessee’s appeal is allowed.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 observed that the assessee has not admitted members in compliance with the provisions of its bye-laws and has earned income from providing services to non-members, i.e. by issue of “at par cheques” in lieu of cash. It was further noticed that persons/entities, who are not ordinary members, have also operated accounts in the assessee society. Accordingly, the assessee was asked to explain as to why the claim of deduction under section 80P of the Act be not disallowed. In response thereto, the assessee submitted that the society deals with the account holders, who are members and all the transactions are carried out by the members of the society. It was further submitted that all the co-operative societies other than those coming under the control of RBI are eligible for deduction under section 80P(2)(a) of the Act and a co-operative society carrying on banking activities with its members is not a co-operative bank licensed by the RBI. The assessee denied that it has provided any services to the non-members and the examples given by the AO in the show cause notice pertains to services rendered on the instructions of the members. Thus, it was submitted that the assessee is eligible for deduction under section 80P of the Act. The AO vide order passed under section 143(3) read with section 153A of the Act did not agree with the submissions of the assessee and held that section 80P of the Act applies only to societies who transact exclusively with its members and in the present case the assessee has transacted with non-members. Accordingly, the AO took support of the decision rendered by the Hon’ble Supreme Court in Citizen Co-operative Society Ltd v/s ACIT, [2017] 397 ITR 1 (SC) and rejected the claim of the assessee for deduction under section 80P of the Act. The learned CIT(A), vide

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 impugned order, dismissed the ground raised by the assessee and upheld the disallowance of deduction claimed under section 80P of the Act.

“(19) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ;‖

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 bye-laws, persons who have been admitted as member without compliance of bye-laws or in violation of bye-laws, persons who have been claimed to be nominal members, the lower authorities have denied the deduction claimed under section 80P of the Act by the assessee. We find that as per section 26 of the Multi-State Co-operative Societies Act, 2002, multi-state co-operative society may admit a person as a nominal member, if provided in its bye-laws. The provisions of section 26 of the Multi-State Co-operative Societies Act, 2002, reads as follows:-

―26. Nominal or associate member of society.—A multi-State co-operative society may, if provided in its bye-laws, admit a person as nominal or associate member: Provided that no such nominal or associate member shall have any interest in the management thereof including right to vote, elect as a director of the board or participate in the general body meetings. Provided further that nominal or associate member can be issued non-voting shares which may not confer any interest in the management of the multi-State co-operative society including right to vote, to be elected as a director of the board or participate in the general body meetings: Provided also that in case of multi-State co-operative bank, such shares shall be issued in accordance with the instructions issued by the Reserve Bank from time to time.‖

(a) There are ordinary members and nominal members. (b) Ordinary members need to subscribe to at least a value of 3 shares. (c) As per clause 5 of the bye-laws, nominal members must pay a fee of Rs. 100 but most importantly the nominal members would not be allowed to subscribe to the share capital of the assessee, are not eligible to take/have any interest in the management of the society, are not eligible to vote or contest in any election as director of the Board and cannot also participate in the general body meeting of the assessee society. Page | 32

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―25. So far so good. However, it is significant to point out that the main reason for disentitling the appellant from getting the deduction provided under Section 80P of the Act is not sub-section (4) thereof. What has been noticed by the Assessing Officer, after discussing in detail the activities of the appellant, is that the activities of the appellant are in violations of the provisions of the MACSA under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that the depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative Page | 33

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 society. It is also found that the appellant is engaged in the activity of granting loans to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Co-operative Societies Act. Moreover, it is a co-operative credit society which is not entitled to deduction under Section 80P(2)(a)(i) of the Act.‖ (emphasis supplied)

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―66. Restriction on loans.—(1) A multi-State co-operative society, other than a co-operative bank, shall not make a loan to a member on the security of his share or on the security of a non-member. (2) Notwithstanding anything contained in sub-section (1), a multi-State co- operative society may make a loan to a depositor on the security of his deposit.‖

―46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, 'nominal members' are 'members' as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions' Federation Ltd. v. CIT [1997] 11 SCC 287 referred to section 80P of the IT Act and then held: "8. The expression "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression Page | 35

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

"members" in Section 80-P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;"" Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i).‖

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―33. ......Once it is clear that the co-operative society in question is providing credit facilities to its members, the fact that it is providing credit facilities to non-members does not disentitle the society in question from availing of the deduction. The distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted.‖

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―The following grounds of appeal are independent of, and without prejudice to one another-

1. It is submitted that in the facts and the circumstances of the case, and in law, the approval granted under section 153D by the competent authority is mechanical and without application of mind.

2. It is submitted that in the facts and the circumstances of the case, and in law, the Assessing Officer erred in issuing a notice dated 27.12.2019 directing the appellants to get the accounts audited under section 142(2A) at the fag end of the assessment proceedings which were getting barred by limitation on 31.12.2019 and without disposing of the objections raised by the appellants. Thus, the aforesaid direction of the Assessing Officer to get the accounts audited under section 142(2A) is nothing but mere tactics to extend the period of limitation which the Courts have held as bad in law.

3. Addition under section 68 of the Act for aggregate cash deposits and credit transactions but excluding the remote deposits. 3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 5,06,72,196, estimated at the rate of 0.15 per cent of Rs 3,378.14 crores being the aggregate cash deposits and credit transactions but excluding the remote deposits of all the account holders in the appellant-society against the addition of Rs 4,665.97 crores made by the Assessing Officer. 3.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society, without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures. 3.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act.

4. Addition under section 68 of the Act for aggregate demand draft/ at par cheque issued by the appellant-society Page | 38

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 4.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 35,13,384, estimated at the rate of 0.10 per cent of Rs 351.33 crores being the aggregate demand draft at par cheques issued by the appellant-society on receipt of cash from the account holders against the addition of Rs 351.33 crores made by the Assessing Officer. 4.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society, without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures. 4.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act 5. Disallowance of provision of standard asset Rs 1,00,00,000 5.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of provision of standard assets of Rs 1,00,00,000 5.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of provision of standard assets without appreciating the facts of the case pray that the impugned disallowance of Rs 1,00,00,000 ought to be deleted.

6. Disallowance of provision for gratuity Rs 3,50,000 6.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of provision of gratuity of Rs 3,50,000 6.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of provision of standard assets without appreciating the facts of the case and hence, the impugned disallowance of Rs 3,50,000 is bad in law and ought to be deleted 7. Disallowance of prior period expenses Rs 60,11,035 7.1. The CIT(A) erred in sustaining disallowance made by the Assessing Officer of prior period expenses of Rs 60,11,035 7.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of prior period expenses without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 60,11,035 is bad in law and ought to be deleted 8. Disallowance under section 40A(3) of Rs 2,37,52,201 8.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer under section 40A(3) aggregating Rs 2,37,52,201 being the rent expenses incurred during the year under reference. Page | 39

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 8.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of rent expenses under section 40A(3) without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 2,37,52,201 is bad in law and ought to be deleted.

9. Enhancement of income by the CIT(A) of Rs 1,17,890 9.1. The CIT(A) erred in enhancing the assessment by making disallowance of Rs 1,17,890, being miscellaneous expenses debited to profit and loss account for contravention of provisions of section 40A(3). 9.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) erred in making the impugned disallowance without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 1,17,890 is bad in law and ought to be deleted 10. Disallowance of deduction under section 80P 10.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of deduction under section 80P claimed by the appellants. 10.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of deduction of under section SOP without appreciating the facts of the case and hence, pray that impugned disallowance is bad in law and ought to be deleted. The appellants crave leave to add to, alter or amend the aforestated grounds of appeal.‖

52. While the Revenue has raised the following grounds in its appeal for the assessment year 2017-18:-

―1. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs. 4665,97,37,942/- made by the Assessing Officer u/s F 68 of the Income tax Act, 1961 on account of sum credited in the books of account as unexplained credit.

2. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs. 351,33,83,926/- made by the Assessing Officer u/s 68 of the Income tax Act, 1961 on account of cash credited in the books of account for issue of at par cheque/DD, as unexplained credit. "3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal, if need be."

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 decided in assessee’s appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. With similar directions, ground no.7 raised in assessee’s appeal is allowed for statistical purposes.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 disallowance be made for Rs. 1,70,890 for the assessment 2017-18 and Rs. 7,22,961 for the assessment year 2018-19. As per the assessee, it has passed the consolidated single entry for expenses paid to different parties in the books of accounts as per the details maintained for the expenses incurred for shifting of branches. Further, it is the plea of the assessee that if the individual expenses are considered as per separate voucher for each expenses, then the amount spent by the assessee in cash would be within the limit specified for cash payment of the expenses under the provisions of section 40A(3) of the Act. Accordingly, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo adjudication, as per law, with a direction to the assessee to furnish the breakup of the expenses paid as per separate voucher. As a result, ground no.9 raised in assessee’s appeal is allowed for statistical purposes.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

―The following grounds of appeal are independent of, and without prejudice to one another-

1. It is submitted that in the facts and the circumstances of the case, and in law, the Assessing Officer erred in issuing a notice dated 27.12.2019 directing the appellants to get the accounts audited under section 142(2A) at the fag end of the assessment proceedings which were getting barred by limitation on 31.12.2019 and without disposing of the objections raised by the appellants. Thus, the aforesaid direction of the Assessing Officer to get the accounts audited under section 142(2A) is nothing but mere tactics to extend the period of limitation which the Courts have held as bad in law.

2. Addition under section 68 of the Act for aggregate cash deposits and credit transactions but excluding the remote deposits 2.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 37,82,666, estimated at the rate of 0.15 per cent of Rs 252.17 crores being the aggregate cash deposits and credit transactions but excluding the remote deposits of all the account holders in the appellant-society against the addition of Rs 1,041.50 crores made by the Assessing Officer. 2.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society. without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures. 2.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act.

3. Addition under section 68 of the Act for aggregate demand draft/ at par cheque issued by the appellant-society 3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 13,21,839, estimated at the rate of 0.10 per cent of Rs 132.18 crores being the aggregate demand draft/ at par cheques issued by the appellant-society on receipt of cash from the account holders against the addition of Rs 132.18 crores made by the Assessing Officer. 3.2 The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society, without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 3.3. The impugned action of the CIT(A) in sustaining the addition on estination basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act 4. Disallowance of provision of standard asset Rs 40,00,000 4.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of provision of standard assets of Rs 40,00,000 4.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of provision of standard assets without appreciating the facts of the case pray that the impugned disallowance of Rs 40,00,000 ought to be deleted.

5. Disallowance of prior period expenses Rs 85,54,550 5.1. The CIT(A) erred in sustaining disallowance made by the Assessing Officer of prior period expenses of Rs 85,54,550 5.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of prior period expenses without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 85,54,550 is bad in law and ought to be deleted 6. Disallowance under section 40A(3) of Rs 1,45.10.385 6.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer under section 40A(3) aggregating Rs 1,45,10,385 being the rent expenses incurred during the year under reference. 6.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of rent expenses under section 40A(3) without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 1,45,10,385 is bad in law and ought to be deleted.

8. Addition under section 68 of Rs 48,16,43,092 8.1. The CIT(A) erred in sustaining the addition made by the Assessing Officer under section 68 of the Act aggregating Rs 48,16,43,092, being the unilateral action of the appellants in considering said amount as receivable from banks where appellant-society has maintained their bank accounts. Page | 46

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19

8.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the addition made by the Assessing Officer without appreciating the facts of the caseand hence, pray that impugned addition of Rs 48,16,43,092 is bad in law and ought to be deleted 8.3. The CIT(A) erred in sustaining the disallowance without providing sufficient of being heard and hence, pray that impugned addition of Rs 48,16,43,092 is bad in law and ought to be deleted 9. Disallowance of deduction under section 80P 9.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of deduction under section 80P claimed by the appellants. 9.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of deduction of under section 80P without appreciating the facts of the case and hence, pray that impugned disallowance is bad in law and ought to be deleted. The appellants crave leave to add to, alter or amend the aforestated grounds of appeal.‖

66. While the Revenue has raised the following grounds in its appeal for the assessment year 2018-19:-

―1. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs. 1041,50,34,572/- made by the Assessing Officer u/s 68 of the Income tax Act, 1961 on account of sum credited in the books of account as unexplained credit.

2. On the facts and in circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs. 132,18,39,024/- made by the Assessing Officer u/s 68 of the Income tax Act, 1961 on account of cash credited in the books of account for issue of at par cheque/DD, as unexplained credit.

3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal, if need be."

67. In ground no.1, raised in assessee’s appeal, the assessee has challenged the direction of the AO to get the accounts audited under section 142(2A) of the Act at the fag end of the assessment proceedings. Since a similar issue has already been decided in assessee’s appeal for the assessment year 2016-17,

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 therefore the findings/conclusions rendered therein shall apply mutatis mutandis. Accordingly, ground no.1 is dismissed.

68. The issue arising in grounds no.2-3 raised in assessee’s appeal, and ground no. 1-2 raised in Revenue’s appeal pertains to addition under section 68 of the Act on account of cash deposits and credit transactions. Since a similar issue has already been decided in assessee’s and Revenue’s appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, grounds no.2-3 raised in assessee’s appeal are allowed, while grounds no. 1-2 raised in Revenue’s appeal are dismissed.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 similar issue has already been decided in assessee’s appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, ground no.6 raised in assessee’s appeal is allowed.

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 only a unilateral claim which the banks have also not accepted till date. We find that the aforesaid documents referred by the learned AR were not considered by the lower authorities and the learned CIT(A) did not grant further opportunity to the assessee to furnish additional evidences in support of its claim. It is also not evident from the record that the lower authorities have examined the submission of the assessee that certain wrong entries have been reversed by the Axis Bank.

77. We may explain the legal principles governing this issue. In the ordinary course, the amounts illegally taken from the bank account of the assessee would be shown in the books of account as “Amount recoverable from Axis Bank” in the Assets side of Balance Sheet. When any part or whole of the amount is recovered from the bank, then the above said account would be credited. It is not understandable as to how the assessee has credited “Reserve account”. It is also not clear as to whether the assessee has claimed any deduction of the amount so illegally embezzled from the bank account. If that be the case, the recovery of part or whole of the amount would be taxable. On the contrary, if the assessee has not claimed any such deduction, then the recovery of part of whole of the amount is not taxable. However, we notice that the assessee has not clearly explained the nature of journal entries passed by it in the books of account, whether it has claimed any deduction of such embezzled amount etc. In the absence of any such details, we are also unable to express any concrete view on this matter.

78. Accordingly, in view of the facts and circumstances as noted in the foregoing paragraph, we deem it appropriate to restore this issue to the file of Page | 53

Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. Cross Appeals for A.Ys. 2016–17, 2017–18 & 2018–19 the jurisdictional AO for de novo adjudication, as per law and in terms of legal principles explained above, after examination of the details filed by the assessee. The assessee shall be at liberty to furnish further documents in support of its claim. The AO is also directed to call for any other information for complete adjudication of this issue. Needless to mention no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order on this issue is set aside and ground no.8 raised in assessee’s appeal is allowed for statistical purposes.