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Facts
The assessee, Goreshwar Gramin Multistate Cooperative Credit Society Ltd., filed appeals against assessment orders for AY 2016-17. The appeals involved additions made by the Assessing Officer (AO) and confirmed by the Commissioner of Income-tax (Appeals) regarding unexplained deposits, cash deposits, and commission income.
Held
The Tribunal held that the addition related to deposits from members (Grounds 2-6 in ITA No. 473/Mum/2022) was partially sustained, with a direction to the AO to re-examine the case for certain members. The addition for commission income (Ground 7 in ITA No. 473/Mum/2022) was deleted as it was already accounted for in the assessee's books. The additions in ITA No. 2145/Mum/2022 were largely set aside to the AO for fresh inquiry.
Key Issues
Whether the additions made by the AO and confirmed by the CIT(A) for unexplained deposits, cash deposits, and commission income were justified. Whether the assessment and reassessment proceedings were valid.
Sections Cited
Section 147, Section 143(3), Section 68, Section 80P, Section 133A, Section 131, Section 133(6), Section 226(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAHUL CHAUDHARY, JM
is filed by Goreshwar Gramin Multistate Co-operative Credit society Ltd., [ Assessee/ Appellant] against the appellate order passed by learned Commissioner of Income-tax (Appeals)-48, Mumbai,[ the ld CIT (A)] for A.Y. 2016-17, wherein the appeal preferred by the assessee against the assessment order dated 15th April, 2021, passed by the Asst. Commissioner of
CIT (A)-48, Mumbai dated 30th June, 2022, for A.Y. 2016-17, wherein the appeal filed by the assessee against the assessment order dated 15th April, 2021, passed by the learned Assessing Officer under Section 147 of the Income- tax Act, 1961 (the Act), was dismissed.
Both the appeals pertain to the same assessment year for different proceedings, one against regular assessment proceedings and another against reassessment proceedings.
In assessee has raised following ground of appeal:-
“1. The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the learned Assessing Officer in assessing the total income at ₹25,58,92,800/- as against loss of ₹47,84,871/- declared by the Appellant in the return of income.
2. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition on account o deposits accepted from its members of ₹14,33,45,343/- under section 68 of the Income Tax Act 1961 (the Act), without appreciating that the appellant had offered an explanation about
3. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹14,33,45,343/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members.
4. the learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹11,43,70,335/- on account of cash deposited in its own bank account, without appreciating that it was deposited in the normal course of business out of the deposits received from its members.
5. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in not appreciating that the learned Assessing Officer had failed to give due credence to the additional evidence submitted by the appellant during the remand proceedings.
6. Without prejudice to the above grounds, the learned Commissioner of Income-tax (Appeals) erred in not appreciating that once addition on account of deposits accepted from its members is sustained, addition on account of cash deposits in own bank accounts is not warranted.
7. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹29,61,985/- computed as a percentage
8. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in relying on the statement of the managing director of the appellant recorded under Section 131 of the Act without providing a copy thereof to the appellant, thereby grossly violating the principle of natural justice.
The appellant craves leave to add alter or amend any of the grounds of appeal at any time before or at the time of hearing.
In , the assessee has raised following ground of appeal:-
“1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the learned assessing officer in assessing the total income at Rs. 164,49,95,110/- as against loss of Rs. 47,84,871/- declared by the Appellant in the return of income.
2. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the additions of Rs. 164,49,95,110/- without appreciating that the re-assessment under section 147 was made without even considering that original assessment under section 143(3) of the Act was already made and there was no new information on record justifying the re- opening of assessment.
4. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 164,33,51,753/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members.
5. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 16,43,352/- computed as a percentage of cash deposits accepted from members at Hyderabad branch, without appreciating that the commission charged by the appellant during its normal course of business was already included in its returned income.
6. The learned commissioner of Income Tax (Appeals) erred in facts and in law in relying on the statement of the managing director of the appellant recorded under section 131 of the Act without providing a copy thereof to the appellant, thereby grossly violating the principle of natural justice. ”
Brief facts of the case shows that assessee is an association of person, Multi state credit cooperative society, engaged in providing banking services
ii. The assessee was also specifically asked that it has made a cash deposit in the ICICI bank amounting to ₹4,27,55,550/- and in Mahanagar co-operative Bank amounting to ₹7,16,14,785/-. As no details were forthcoming, the learned Assessing Officer made the addition of ₹11,43,70,335/- as unexplained credits.
Accordingly, the assessment order was passed under Section 143(3) of the Act on 6th November, 2018, determining the total income of the assessee at ₹25,58,92,800/-.
Assessee aggrieved with that order preferred the appeal before the learned CIT (A). The assessee furnished additional evidences which were sent to the learned Assessing Officer for his comments, the learned Assessing Officer furnished remand report, wherein the complete list of deposits along with details of the KYC were stated to be not submitted.
During the course of assessment proceedings, the learned Assessing Officer found that in the KYC records of such cash depositors, neither the name, PAN, nature of business were mentioned completely and proof of identity was also not available completely. Thus, it was impossible to make any enquiry with the depositors. At various places whereas the PANs are mentioned, same were also different from KYC form, mobile no stated are inactive. Whatever address have in those account opening form summons under Section 131 of the Act were issued, same were returned with remark to Postal Authority as not known. The inspector sent could not trace the depositors. During the post search proceedings, the learned Assessing Officer found bankers from which NEFT or RTGS was made and who are the persons in whose favour the amount was sent. On examination of the statement of those entities where the funds are found to be transferred some of them are remitted directly as foreign remittances. The learned Assessing Officer stated that this is the complete modus operendi and connivance of the bank, assessee for tax evasion, summons u/s 131 were issued to the Sharad Kakde,
Therefore, the assessee is in appeal before us.
Assessee has submitted four paper books containing huge volume of documents. The claim of the assessee is that assessee is a banker and fraud has been committed by the Hyderabad Bench employees and in case of a bank addition under Section 68 of the Act cannot be made for the reason that whatever documents provided by the account holders are already given. It is the claim that assessee has given name and address of the member or the person which is provided at the time of opening of the bank accounts and therefore, no addition in the hands of the assessee could have been made. The assessee also submitted that in case of Mr. Nandalal Joshi who have deposited cash with the bank has already been assessed on the amount of cash deposited by the learned Assessing Officer wherein sum of ₹288 crores is outstanding tax for which the assessee has received notice under Section 226(3) of the Act. It is also the claim that when the person who has deposited the cash with the Hyderabad Branch has
During the course of hearing, the assessee has raised additional ground that if any addition is made to the total income of the assessee, whole of such income is eligible for deduction under Section 80P(2)(a) of the Act.
The learned Departmental Representative supported the orders of the lower authorities. He submitted that assessee is one of the Multi State Co-operative Bank wherein huge cash is deposited at Hyderabad Branch in very few numbers of days. This cash was deposited only with the AXIS bank and from there the money was transferred to the different account and such accounts where the money deposited was also closed after the money transferred to different account. He further submitted that some of the money has gone to foreign countries. This shows that the assessee is one of the parties where the huge tax evasion has been made. He further submitted that when the bank has not maintained
The learned Departmental Representative further submitted that even before the ITAT no evidence are produced and therefore, no infirmity can be found in the orders of the lower authorities.
During the hearing, the assessee was asked to submit the annual financial statements of the assessee and details of the directors of co-operative society as well as the details of depositors who deposited more than 2.5 lacs in the bank account in cash. The assessee submitted such detail as per paper book no. E.
We have carefully considered the rival contentions and perused the orders of the lower authorities.
We first take up ITA number 473/M/2022 for assessment year 2016 – 17 against the original assessment proceedings.
At this stage the argument of the learned authorised representative cannot be accepted that in case of a bank no addition under section 68 of the act can be
Ground number 7 is with respect to the addition of ₹ 2,961,985/– computed as a percentage of total deposit accepted from the members during the year as undisclosed commission income earned by assessee. Facts shows that during the course of
On hearing the parties, we find that this addition cannot be made in the hands of the assessee because assessee has earned this commission income and has shown it into its profit and loss account. It is not the case of the learned AO or the learned CIT – A this commission income has not been credited in the books of assessee. The statement of the managing director and the chairman of the bank clearly shows that they have earned this commission income in the books of society. Accordingly we direct the learned assessing officer to delete the addition of ₹ 2,961,985/–.
Ground number 8 is with respect to the statement of the managing director of the assessee recorded under section 131 of the act which was not provided to the assessee. This is with respect to ground number seven of the appeal. As the ground number seven of the appeal has already been allowed in favour of the assessee, ground number 8 becomes infructuous and hence dismissed.
Accordingly ITA number 473/M/2022 for assessment year 2016 – 17 is partly allowed as indicated above.
Now we come to the appeal in ITA number 2145/M/2022. Ground number 1 of the appeal is general in nature, no arguments were advanced, therefore, same is dismissed.
Ground number 2 – 4 of the appeal is with respect to the addition of ₹ 1,643,351,753/– on account of the cash deposited by 10 members of the society during a short span and the details furnished by the assessee of KYC norms is inadequate or incorrect.
The fact shows that assessee opened a branch at Hyderabad by passing a resolution on 25th May, 2014. In that branch huge cash deposited of ₹ 164 crores and RTGS or NEFT was made to the different bank accounts. The name of 10 persons were
Ground number 5 – 6 related to the addition of ₹ 1,643,352/– as commission income earned on the above transaction has already been recorded by the assessee in its books of account, same cannot be added in the hands of the assessee. Learned AO is directed to delete the same. Accordingly, ground number 5 and 6 of the appeal are allowed.
In the result, ITA number 2145/M/2022 filed by the assessee is allowed for statistical purpose.
Accordingly, both the above appeals are allowed for statistical purposes.
Order pronounced in the open court on 28.02.2024.