PRATHAMIKA KRUSHI PATHINA SAHAKARI SANG NIYAMITA,BYAKOD VIJAYPUR vs. INCOME TAX OFFICER WARD -3 VIJAYAPUR, VIJAYPUR

At the outset, the appeal is time barred by 37 days and the assessee has filed affidavit explaining the delay that the accounts and tax matters of the society are handled by accountant who was on leave in second half of March and full month of April, 2024 and in the process the filing of appeal remained unattended. Soon after the accountant resumed office at the end of April, 2024, the society through tax consultant filed the appeal which led to delay. It is submitted that the delay is due to genuine cause and unintentional and condonation of delay is requested.

After hearing both the parties, it is observed that there are sufficient reasons for the delay and following the judgment of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471, delay in filing the appeal before the Tribunal is condoned.

Briefly stated the facts of the case are that the under operation clean money the department gathered information of assessees who had deposited substantial cash in bank accounts during the demonetisation period (9th November to 30th December, 2016). The AO noted that the assessee deposited cash of Rs.20,97,000 in his account with Union Bank of India, Sindagi Branch during demonetisation period in old currency notes of Rs.500 & Rs,1000. The assessee had not filed return of income for AY 2017-18 u/s. 139(1) or in response to notice u/s. 142(1) of the Act. On further notices, the assessee filed financial statements and other details but failed to file any other documents. Accordingly AO issued notice u/s. 144 for completing assessment u/s. 144, but the assessee did not respond. For want of proper explanation from assessee the entire amount of deposited was treated as unexplained money u/s. 69A of the Act and taxed u/s. 115BBE of the Act. The AO also issued notice u/s. 133(6) to the Dy. Registrar of Co-operative Societies, Sindagi and from the details obtained, he noticed that assessee had paid pygmy commission of Rs.2,43,289, interest of Rs.26,17,785 and audit fee of Rs.95,000, but no TDS was deduction as per provisions of the Act. Accordingly he made addition u/s. 40(a)(ia) of Rs.8,86,822 @ 30% of Rs.29,56,074, however the addition is mentioned as Rs.19,86,583. Accordingly the AO assessed income at Rs.40,83,580.

On appeal by the assessee, the ld. CIT(Appeals) noted that assessee has not complied the provision of section 249(4)(b) and as per sl.no.16 of Form 35 payment of appeal fee of Rs.1,000 only is made and at sl.no.9 of Form 35, the assessee has offered ‘Not Applicable’ comments. The CIT(A) therefore dismissed the appeal of assessee. Aggrieved, the assessee is in appeal before the ITAT.

The ld. AR submitted that assessee has no taxable income, therefore it did not file return of income. The cash deposited during the demonetisation period belongs to members of the society and assessee has not got any benefit from the deposits of members, it was liability or deposits of the members. Therefore it does not come under the purview of definition of income. He further submitted that assessee society is exempt from deducting tax at source u/s. 194A(3)(v) and pygmy commission also is not covered u/s. TDS provisions. He submitted that the assessee is eligible for deduction u/s. 80P(2)(a)(i) of the Act on the income received and requested that the matter may be sent back to the AO since the case was reopened by the AO.

On the other hand, the ld. DR relied on the order of lower authorities and submitted that assessee did not comply the provision of section 249(4)(b) and therefore the CIT(Appeals) has rightly dismissed the appeal of the assessee. He further submitted that in respect of deduction u/s. Chapter VIA the assessee is not eligible for deduction u/s. 80P because assessee did not file return of income in spite of various opportunities. Accordingly as per the judgment of Hon’ble Karnataka High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham vs CIT reported in [2023] 152 taxmann.com 347 (KERLA) assessee is not eligible for deduction u/s. 80P(2) of the Act. Further during the demonetisation period the assessee was not allowed to accept money in old currency notes which was banned. Therefore he submitted that the order of the lower authorities should be upheld.

Considering the rival submissions, we note that the CIT(Appeals) has dismissed the appeal of the assessee for non- compliance of section 249(4)(b) and ld. AR submitted that assessee has no taxable income and therefore did not file return of income. The assessee had PAN. This issue has been settled by the coordinate Bench of Tribunal in for AY 2018-19, order dated 20.02.2024 in the case of Shri. Shamanna Reddy vs. ITO which it has been held as under:-

In the present case, as mentioned earlier, we find assessee had not declared any admitted tax. On the facts of the instant case, assessee had claimed the receipt is for sale of agricultural land and not liable for capital gains. Since assessment has been completed under section 147 r.w.s. 144 of the Act, we are of the view that the matter needs to be examined afresh by the AO. Accordingly, the issues raised in this appeal are restored to the files of the AO. Assessee is directed to cooperate with the Revenue and shall not seek unnecessary adjournment in the matter. The AO is directed to afford reasonable opportunity of hearing to the assessee. It is ordered accordingly. 9. Respectfully following the above judgement, we hold that the CIT (A) should have been decided the issue on merits of the case.

We further note that assessee did not file return of income and deposited cash in old currency notes during the demonetisation period. During assessment proceedings, no documents like KYC and details of members of society like address, Aadhar, PAN, telephone, etc. and in which account cash was deposited by the members were furnished. Therefore, this case is remitted back to Assessing Officer for fresh consideration and assessee is directed to file the KYC details of members. Similar issue has been decided by the coordinate Bench of the Tribunal in in the case of Merchants Credit Co-operative Society Ltd., vs ITO order dated 24.08.2023 in which it has been held as under:-

There is no doubt that the assessee has satisfied the identity of the deposits, who are members of the society and genuineness of the transactions because the amounts have been deposited in the members accounts only. If the AO had any doubts that the assessee has not satisfied the ingredients of section 68, he could have asked further details from the assessee, but the AO has not done the same, which clearly shows that the assessee has discharged its duty to satisfy the requirement of section 68. We further note that the SBNs have been deposited in the members accounts, accordingly, the assessee did not get any extra benefit as observed by the AO in his order at para No. 06 which was treated as income us 69A of the Act. In view of this, the provisions of section 68 is not applicable in the present facts of the case and the AO without discussing in detail has made addition u/s. 68 which is not proper. Therefore the addition is deleted.”

Since in the cash at hand the assessee has not filed KYC during the course of assessment proceedings, therefore, we remit this issue back to the AO for fresh consideration in the light of the noted supra and decide the issue as per law.

We further noted that the assessing officer (AO) has made addition u/s 40(a)(ia) on payments made towards pigmy commission, interest and audit fee because the assessee did not comply the TDS provisions. Since the AO has completed the assessment u/s 144 of the Income Tax Act, considering the facts of the case and in the interest of justice, we are also remitting this issue back to the file of AO for fresh consideration. Needless to say that a reasonable opportunity of being heard is to be given to the assessee.

The assessee is directed to update its email id, communication address and other details and file necessary documents that would be essential and required for substantiating its case and for proper adjudication by the revenue authorities and cooperate with the proceedings for early disposal of the case.

In the result, the appeal of the assessee is allowed for statistical purposes.