SHRI. DEVAL PATTAN PATTIN SAHAKARA SANGH NIYAMIT,ILKAL vs. INCOME TAX OFFICER, WARD-1 & TPS , BAGALKOT

The brief facts of the case are that the assessee is a co- operative credit society registered under the Karnataka State Co-

Aggrieved by the assessment completed u/s. 143(3) of the IT Act,1961 vide order dated 16.12.2019, the assessee preferred an appeal before the Ld.CIT(A)/NFAC.

The Ld.CIT(A) dismissed the appeal by relying on the decision of Coordinate Bench of this Tribunal in case of Bhavana Co- operative Credit Society vs. ITO in ITA No. 739/Bang/2021 in which the ITAT held that each and every deposit during the demonetisation period would not fall under the category of unaccounted cash however the burden is on the assessee to establish the genuineness of the deposit to fall outside the scope of unaccounted cash. According to the Ld. CIT(A), although the Appellant provided the details about the identity of the members but has failed to prove the cash balances held by each of the members concerned on the demonetisation date i.e the Appellant failed to provide the genuineness of the transactions and accordingly the Ld.CIT(A) held that section 68 of the Act is applicable and the Ld.AO has rightly made the addition of Rs.32,47,869/- u/s. 68 of the IT Act, 1961.

Aggrieved by the order of the Ld.CIT(A), the assessee has filed the present appeal before this Tribunal.

The assessee has filed a paper book comprising of 25 pages enclosing therein the copies of the 2 decisions reported in ITA No. 646/Bang/2021 and ITA No. 329/Bang/2023 along with details of cash deposits made by the members during the demonetisation period.

Therefore the solitary issue that is raised before us whether the Ld. CIT(A) is justified in confirming the addition U/s 68 when the Ld AO has categorically admitted that the Assessee have provided the nature & source of the transaction.

Before us, the Ld.AR vehemently submitted that the assessee has produced all the details of the members from whom the cash has been received in the form of deposits or towards repayment of loan in the normal course of business and deposited into the bank account. Further, the AR of the Assessee submitted that the Appellant had accepted the demonetized currency notes innocently only for one week i.e. From 08/11/2016 to 13/11/2016 & thereafter stopped receiving the demonetized notes after receiving information from District Central Co- operative Bank, Bagalkot. The Ld.AR also drawn our attention to para 7 on page 5 of the Assessment order in which the Ld. AO observed that the assessee has provided the proof to show that it was members’ money and therefore the Ld.AO should not have made an addition of Rs. 32,56,000/- u/s. 68 as unexplained cash credit as the Assessee liability to explain the nature & source of money had been discharged.

The Ld.DR supported the orders of the income tax authorities below.

We have heard the rival submissions and perused the material on record. During the demonetization period, a sum of

Before us, the Ld.AR of the assessee produced the details of the cash deposits made by the members during the demonetisation period which are claimed to have also been produced before the Authorities below during the course of hearings. ( Pages 17 to 25 of the Paper Book )

In the present case the relevant provisions applicable to the factual findings is Section 68 of the I. Tax Act,1961. Section 68 of the I. Tax Act,1961 provides that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer satisfactory, the sum so credited may be charged to income tax as the income of the assessee for that previous year. Therefore as per the provisions of section 68 of the Act, in order to establish the receipts / credits as unexplained cash credit, the following ingredients must be satisfied:- i) Any sum must be found credited in the books of A/c ii) Either Assessee Offers no explanation or explanation offered in the opinion of the Assessing Officer is not satisfactory with regard to

We are of the opinion that in the Present case the cash deposits received by the assessee during the demonetisation period had been recorded in the books of Account. In fact the Assessing Officer has observed in Para-3 of the Assessment Order that the Assessee has maintained regular books of account and the same are duly audited and also furnished during the course of the Assessment Proceedings. In fact it is the view of the Assessing Officer that since the notes were banned, the demonetised currency cannot be treated as a movable asset as claimed by the Assessee by treating the old banned currency with value & Accordingly the value entered into the books of Accounts has to be treated as ZERO against each entry of such old notes taken. We are unable to understand the rationale in the above view taken by the Ld. Assessing Officer. We noticed that on the one hand the Ld. AO is of the view that the demonetised currency value entered in the books of A/c has to be treated as ZERO & on the other hand for making addition U/s 68 of the I. Tax Act, 1961, the same demonetised currency acquired the Value of Rs.32,56,000/-

Further, the Assessee has produced all the details of the cash deposits made by the members during the demonetisation period before the Lower Authorities stating to be received either in the form of deposits or towards repayment of loan in the usual course of the business. Therefore we are of the view that the

We are of the opinion that the Assessee had offered an explanation. The Explanation was also not found to be false. In any case, we notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 08/11/2016. The Assessee has explained that it has stopped