SHREE JAGADGURU MOUNESHWAR PATTIN SAHAKARI SANGH NIYAMIT KERUR,BAGALKOT, KARNATAKA vs. INCOME TAX OFFICER, WARD 1, BAGALKOT

Per Laxmi Prasad Sahu, Accountant Member

Though proof may be provided by the assessee to show that it was members money, the members ought to have deposited the same into their bank accounts to make the old notes count as allowed by RBI. Ordinary public (members of society) were only allowed to use old notes in SBNs in exceptional circumstances for payment to Central/State Govt. School / college fee, utility bills, medicines, milk, fuel & LPG as per directions of Govt. of India. They were allowed to deposit currency accumulated upto 07.11.2016 into their bank accounts to convert into legal tender. Other than these exceptions, such notes had no value. Hence the AO accepted that assessee’s deposits were only Rs.18,46,500 and treated it as unexplained cash credit u/s.68 and taxed it u/s. 115BBE of the Act.

7. The ld AR reiterated the submissions made before the revenue authorities and filed paperbook pages 1 to 88. The ld. AR submitted that assessee accepts cash from members only on 10th to 13th & 14th Nov. 2016 and the said amount was deposited in the loan account of members. After the directions issued by RBI, accepting cash in SBNs from members was completely stopped. He also referred to pages 13 to 16 of PB showing details of datewise cash accepted by the assessee from its members with Aadhar, election card for proof of members and denomination of currency. These details were furnished before the FAA and the assessee discharged its liability cast u/s. 68 for proving the cash credit and therefore addition should not be made in the hands of assessee.

10. Regarding deduction u/s. 80P, the ld. DR relied on the order of lower authorities and submitted that assessee is not eligible for deduction u/s. 80P(2)(a)(i) because assessee has not filed return of income and relied on for AY 2017-18 dated 02.01.2024 in which the coordinate Bench has followed the Hon’ble Kerala High Court judgment in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT [2023] 152 taxmann.com 347 (Kerala) in which it has been held that if the assessee did not comply the provision for filing return of income, then assessee is not eligible for deduction u/s. 80P of the Act.

“ 6. Considering the rival submissions, we noted that the assessee is a co-operative society and accepted cash from members during the demonetization period which was deposited in Vijaya Bank, Hiriyur Branch out of which Rs.14,32,000 has been added by AO u/s. 69A and taxed u/s. 115BBE of the Act. We note that that during the course of assessment proceedings, the assessee did not file return of income after receiving notice as well as u/s. 139 or 142(1). The assessee had submitted details of cash depositors which is placed at page 1 of PB. It is clear from the details that the assessee has accepted cash from 43 members. A similar issue has been decided by the coordinate Bench in for AY 2017-18 dated 24.08.2023 in which it has been held as under:- “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 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.

the details and substantiate its case without seeking any unnecessary adjournment for early disposal of the case.” 12. Following the above decision, we remit this issue in the above terms to the AO.

“ 8. The ld. AR submitted that deduction u/s. 80P should not be denied to the assessee on the business profit earned during the year. In this regard, we noted that the assessee did not file return of income u/s. 139 as well as after opportunity given by the AO. We do not find any substance in the submissions of the ld. AR and we hold that without filling return of income the deduction u/s 80P is not to be allowed to the assessee as held by the co- ordinate bench in ITA No.969/Bang/2023. The relevant part is as under:- “9. It is clear from the above section that for claiming deduction under Chapter VIA under the head, “Deductions to be made in computing total income”, which covers section 80P also, the assessee has to file return of income. However, the assessee did not file return of income at all and therefore the assessee is not eligible for deduction u/s. 80P of the Act. The Hon’ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT [2023] 152 taxmann.com 347 (Kerala) has held as under:-

“11. On a consideration of the rival submissions and on a perusal of the statutory provisions, we find that a reading of section 80A(5) and Section 80AC of the IT Act as they stood prior to 1-4-2018, when the latter provision was amended by Finance Act 2018, would reveal that the statutory scheme under the IT Act was to admit only such claims for deduction under section 80P of the IT Act as were made by the assessee in a return of income filed by him. That return can be under sections 139(1), 139(4), 142(1) or section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under section 80A(5), the claim for deduction under section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under any of the above provisions. The amendment to Section 80AC with effect from 1-4-2018, however, mandated that for an assessee to get a deduction under section 80P of the IT Act, he had to furnish a return of his income for such assessment year on or before the due date specified in section 139(1) of the IT Act. In other words, after 1-4- 2018, even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under section 80P of the IT Act only if it is made in a return recognised as such under the IT Act, and after 1-4-2018, only if that return is one filed within the time prescribed under section 139(1) of the Act. As the return in these cases, for the assessment years 2009-10 and 2010-11, were admittedly filed after the dates prescribed under sections 139(1) and 139(4) or in the notices issued under section 142(1) and section 148, the returns were indeed non-est and could not have been acted upon by the Assessing Officer even though they were filed before the completion of the assessment.

9. Respectfully following the above judgment, we hold that the assessee is not eligible for deduction u/s. 80P of the Act.