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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER SANDEEP SINGH KARHAIL, J.M.
The present appeals have been filed by the assessee challenging the separate impugned orders of even date 14/06/2022 passed u/s 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–48, Mumbai, [“learned CIT(A)”], for the assessment years 2014–15, 2015–16 and 2016–17.
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
In the interest of justice, the slight delay of 13 days in filing the present appeals by the assessee is condoned.
Since these appeals pertain to the same assessee and involve similar issues that arise out of a similar factual matrix, therefore, these appeals were heard together and are being decided by way of this consolidated order. With the consent of the parties, the appeal for the assessment year 2014-15 is taken up as a lead case and the decision rendered therein shall apply mutatis mutandis to the appeal for the assessment years 2015-16 and 2016-17 filed by the assessee.
ITA no.2149/Mum./2022 Assessee’s Appeal : A.Y. 2014–15
In its appeal, the assessee has raised the following grounds:–
“1. For that the Ld. CIT(A) ought to have held that re-assessment order dated 17.04.2021 framed u/s. 147 is void and nullity in the eyes of law as there are no recorded reasons to believe that the income chargeable to tax has escaped assessment. 2. Without prejudice to the ground no. 1, the Ld. CIT(A) ought to have held that the recorded reasons are invalid and improper and as such, the reassessment framed vide order dated 17.04.2021 is bad before the eyes of law. 3. For that the re-assessment order dated 17.04.2021 is vitiated in law inasmuch as there was absolutely no independent application of mind and no independent enquiry on the part of the A.O. in respect of the purported information allegedly received by him. 4. For that there was no sanction or the purported sanction u/s 151 was not in accordance with law, thus, vitiating the re-opening process. 5. (a) For that the Ld. CIT(A) erred in approving the order of the A.O. which was passed in gross violation of the principles of natural justice inasmuch as the purported adverse statements were never handed over to the assessee and excerpts from such statements were intentionally left blank in the assessment order.
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
(b) For that the Ld. CIT(A) failed to appreciate that none of the persons whose statements were relied upon had ever admitted that the assessee society was involved in accepting alleged dubious deposits. 6. (a) For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 92,55,34,000/- made by the A.O. holding the same as unexplained cash credits ignoring the fact that the said amount represented the amounts received by the society in the usual course of its business which is akin to the business of carrying on the business of banking. (b) For that on the facts and in the circumstances of the case, the Ld. CIT(A) ignored the fact that the rigour of section 68 was not applicable in the instant case. 7. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs.9,25,534/- made by the A.O. on account of alleged commission income, when the said income had been duly offered to tax by the assessee.”
The grievance of the assessee in the present appeal is against the invocation of proceeding u/s 147 of the Act as well as the confirmation of addition u/s 68 of the Act.
The brief facts of the case as emanating from the record, are: The assessee is a registered Co-operative Society under the Multi-State Co- operative Society Act, 2002. The assessee is engaged in the business of finance and is accepting deposits and lending loans to its members. The assessee has its registered office at Ahmednagar, Maharashtra, and eight (8) branches spread across the country. The core object of the society is to provide the credit facility to its members. For the year under consideration, the assessee filed its regular return of income u/s 139(1) of the Act on 17.10.2016 declaring a total income of Rs. Nil. During the search & seizure operation u/s 132 of the Act in the case of Shanti Trading and Venkatesh Multi-State Co- operative Society Ltd, the assessee was covered under the survey proceedings
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
u/s 133A of the Act. On the basis of the information unearthed during the survey proceedings on the assessee, proceedings u/s 147 of the Act were initiated, and notice u/s 148 of the Act was issued on 25.09.2019. During the survey proceedings u/s 133A of the Act, it was found that the assessee is facilitating dubious transactions by accepting huge cash deposits from suspicious entities and thereafter transferring most of those amounts to various other suspicious entities through RTGS/NEFT. It was further noticed that most of the transferee entities have not filed proper KYC documents while opening their account with the assessee and these KYC documents were also not verified properly. It was further found that during the relevant financial year, the members deposited a sum of Rs.101,40,18,759/- with the assessee, including a sum of Rs.92,53,34,000/- in the Nagpur Branch. It was further found that apart from the defective KYC documents, most of the entities/individuals were not traceable at their address and most of them were found to be non-filer of return of income. It was further found that most of the accounts remained operative for a limited period of time and cash deposits were immediately transferred out of their accounts. In view of the above, since the identity and creditworthiness of the depositors and the genuineness of the transaction were not proved, the Assessing Officer (“AO”) recorded the reasons to believe that income in the form of dubious huge cash deposits has escaped assessment. In response to the aforesaid notice issued u/s 148 of the Act, the assessee filed its return of income on 07.01.2020 declaring the total income at Rs. Nil. Thereafter, statutory notices u/s 143(2) as well as section 142(1) of the Act were issued and served upon the assessee. On the basis of details furnished by the assessee, during the assessment proceedings, it was Page | 4
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
noted that the following entities have deposited huge cash in their account maintained with the assessee:-
1 Darshan Trading AGXPG2067N 1159, NIT Colony, 2013- 16,97,40,000 Co. (Prop. Prashant New Nandanwan 14 Arvind Gujjewar) Rd., Sitabuldi, Nagpur 4400012 2 Pratham AVVPK2196F 16-4, Cchhapre 2013- 56,26,44,000 Enterprises (Prop. Nagar Colony, 14 Shri Rajesh N Wing-1, Kamwani) Garobamadan, Nagpur 440008 3 Swayam BQPPK9528K P. N 49 2013- 19,31,50,000 Construction (Prop. JamdarwadiNaviM 14 Chandrashekhar P ngalwari, Kohad) MehandiBagh Rd., Nagpur 440069 Total 92,55,34,000
Since the identity and creditworthiness of the aforesaid depositors and genuineness of the transaction were not proved with sufficient documentary evidence, the assessee was asked to show cause as to why the cash deposited in its books be not considered and taxed as unexplained cash credit u/s 68 of the Act. In response thereto, the assessee submitted that it has obtained KYC documents from the account holders as per the guidelines issued by the RBI and these documents are sufficient to identify were concerned account holder. The assessee further submitted that the money deposited does not belong to the assessee in any form and the assessee is only acting as a mediator for processing the RTGS of customers by charging fees at the rate of 0.1% of the transaction value. The AO vide order dated 17.04.2021 passed u/s 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that the alleged members of the assessee society were mostly fictitious and non-existing entities because KYC claimed to have been collected by the society were incomplete/incorrect and non-verifiable. The AO further Page | 5
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
noted that the notices issued u/s 133(6) of the Act at the address provided by the assessee were also returned un-served by the postal authorities. Even the assessee was asked to produce the members in response to the summon issued u/s 131 of the Act but the assessee failed to produce any such members even though the onus lies on the assessee society to establish its claim. The AO further held that since the money deposited was from non- existing entities, therefore, the deposits become unaccounted, unexplained, and ill-gotten wealth of the assessee society. The AO held that these huge cash deposits fall outside the purview of normal banking business and hence such credits cannot be treated as normal business of the assessee. Thus, it was held that the cash deposited represents the assessee's own income. Accordingly, the entire deposit of Rs.92,55,34,000/- was considered as income of the assessee u/s 68 of the Act. Further, on the basis of the statement of the key persons of the assessee society, recorded u/s 131 of the Act, wherein it was admitted that commission at the rate of 0.1% was received for remitting the cash deposited through RTGS/NEFT to other accounts of different banks, the AO made an addition of Rs.9,25,534/- on account of commission income.
The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the invocation of proceedings u/s 147 of the Act as well as the additions made by the AO. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, on the basis of information/documents found during the survey proceedings u/s 133A of the Page | 6
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
Act on the assessee, proceedings u/s 147 of the Act were initiated, and notice u/s 148 of the Act was issued. It is the claim of the Revenue that during the aforesaid survey proceedings, it was found that the assessee society was facilitating dubious transactions by accepting huge cash deposits from suspicious/unidentified entities and thereafter transferred most of these amounts to various other suspicious entities through RTGS/NEFT in their accounts maintained with different banks. Further, apart from defective KYC documents, most of the entities/individual were not traceable at their address. Accordingly, on the basis of aforesaid information, proceedings u/s 147 of the Act were initiated. We are of the considered view that the said information constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee. In ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd, [2007] 291 ITR 500 (SC), the Hon’ble Supreme Court held that if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings u/s 147 of the Act can be validly initiated. In the present case, as noted above, on the basis of information/documents found during the survey proceedings u/s 133A of the Act, reassessment proceedings in the case of the assessee were initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. As a result, we find no infirmity in the reassessment proceedings initiated by the AO u/s 147 of the Act. Accordingly, grounds no.1-3 raised in assessee’s appeal are dismissed.
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
As regards ground no. 4, raised in assessee’s appeal, no material has been brought on record by the assessee to show that requisite sanction u/s 151 of the Act was not in accordance with the law. Thus, ground no. 4, raised in assessee’s appeal is dismissed.
On merits, during the hearing, the learned Authorised Representative (“learned AR”) filed an application seeking admission of additional evidence duly supported by an affidavit of the Chairman of the assessee society. It is the claim of the assessee that the cash deposited in the accounts maintained by it does not belong to the assessee and the same belongs to the depositors in whose account the said cash was deposited. The learned AR by referring to the documents annexed along with the aforesaid application submitted that the income tax proceedings have already been initiated in the case of three depositors, i.e. Mr. Rajesh Nirmalkumar Kamwani, Mr. Chandshekhar PanditRao Kohad, and Mr. Prashant Arvind Gujjewar, in respect of the cash deposited by these individuals in the accounts maintained with the assessee society. The learned AR further submitted that in this regard notice u/s 133(6) of the Act has also been issued to the assessee in respect of assessment proceedings in the case of aforesaid individuals. The learned AR also referred to the acknowledgment of submission filed by the assessee in response to the notice u/s 133(6) of the Act. The learned AR further referred to the assessment order passed in the case of Mr. Rajesh Nirmalkumar Kamwani, whereby an amount of Rs.56,26,44,000/- deposited in the account maintained with the assessee society has been added in his hand u/s 69 of the Act as unexplained investment. Thus, it was submitted that since the assessment
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
proceedings in the case of aforesaid individuals have already been initiated in respect of cash deposited by them in their accounts maintained with the assessee, therefore, the same amount cannot be added again to the hands of the assessee since the cash deposited does not belong to the assessee. The learned AR further agreed that the assessee will furnish all the details of the assessment in the hands of cash depositors before the AO.
We find that information/documents now furnished by the assessee by way of additional evidence are developments subsequent to the assessment in the hand of the assessee. Further, we find that these documents were also not available before the learned CIT(A) during the appellate proceedings. Accordingly, we deem it appropriate to restore the issue of additions in the hands of the assessee to the file of the jurisdictional AO for de novo adjudication, as per law, after consideration of the information/documents furnished by the assessee before us as additional evidence. The assessee is directed to furnish all the information in respect of cash depositors, to the satisfaction of the AO, for complete adjudication of this issue. Needless to mention no order shall be passed without affording reasonable opportunity of being heard to the assessee and the assessee be granted the opportunity to respond to any information/documents relied upon by the AO. Accordingly, the findings in the impugned order pertaining to addition u/s 68 of the Act as well as addition on account of commission income are set aside and grounds no. 5- 7, raised in assessee’s appeal are allowed for statistical purposes.
In the result, the appeal by the assessee for the assessment year 2014- 15 is partly allowed for statistical purposes. Page | 9
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
ITA no.2138/Mum./2022 and ITA no.2150/Mum./2022 Assessee’s Appeal: A.Ys. 2015–16 and 2016-17
Since in the appeal for the assessment years 2015-16 and 2016-17, the assessee has raised similar grounds and both parties have made similar submissions as were made in the appeal for the assessment year 2014-15, therefore, our findings/conclusions/directions as rendered in assessee’s appeal for the assessment year 2014-15 shall apply mutatis mutandis to the assessee’s appeal for the assessment years 2015-16 and 2016-17.
In the result, the appeal by the assessee for the assessment years 2015- 16 and 2016-17 are partly allowed for statistical purposes.
To sum up, all appeals by the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 13/05/2024
Sd/- Sd/- OM PRAKASH KANT SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13/05/2024 Vijay Pal Singh, (Sr. PS) Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order
Assistant Registrar ITAT, Mumbai
Mangaldeep Multistate Urban Co–operative Society Ltd. ITA no.2149/Mum./2022, ITA no.2138/Mum./2022, ITA no.2150/Mum./2022
Date Initial 1. Dictated on .05.2024 Sr.PS 2. Draft placed before author .05.2024 Sr.PS 3. Draft proposed & placed – – JM/AM before the second member 4. Draft discussed / approved – – JM/AM by Second Member 5. Approved Draft comes to .05.2024 Sr.PS the Sr.PS/PS 6. Date of pronouncement .05.2024 Sr.PS 7. File sent to the Bench Clerk .05.2024 Sr.PS 8. Date on which file goes to the Head Clerk 9. Date of dispatch of Order