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Facts
The assessee, a co-operative society, deposited a substantial amount of cash (Rs. 16,63,500) into its bank account during the demonetization period. The Assessing Officer (AO) proposed to tax this amount under sections 69A and 115BBE of the Income Tax Act, treating it as unexplained cash deposit. The assessee provided details of 43 depositors, claiming the funds belonged to its members.
Held
The Tribunal noted that the assessee, as a co-operative society, had accepted cash deposits from its members. While the AO added Rs. 14,32,000 to the income under section 69A and taxed it under section 115BBE, the Tribunal remitted the issue of verification of cash deposit details back to the AO. Regarding the deduction u/s 80P, the Tribunal held that it is not allowable without filing a return of income, citing relevant High Court judgments.
Key Issues
Whether the cash deposits made during demonetization are unexplained income? Whether the assessee is eligible for deduction u/s 80P without filing a return of income?
Sections Cited
69A, 115BBE, 80P(2)(a)(i), 139, 142(1), 133(6), 144A, 68, 80P, 80A(5), 80AC
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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI LAXMI PRASAD SAHU
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the order dated 26.12.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18 on the following grounds:-
“1. That the order of the Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case. 2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not providing the opportunity of being heard through video conference even though the appellant had sought for the same.
3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in upholding that the appellant cannot transact in demonetized notes since provisions of Income tax do not provide for addition u/s 69A of the Act for such transactions.
4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the appellant had not submitted any documentary evidence such as source of SBN from members of the society.
5. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in stating that the submissions made by the appellant is baseless without any justification even though the appellant had provided detailed submissions before the learned authority.
6. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming that the co-operative society had not been authorized by the government to receive the specific bank notes during the demonetization period.
7. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in stating that the appellant has failed to prove the fact that the cash deposited during demonetization period are of normal business receipts and therefore represents undisclosed income.
8. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in making any addition u/s 69A of the Act for violation under some other statute.
9. That the learned assessing officer erred in law and on facts in levying tax u/s 115BBE of the Act even though the said section came into effect only from 15.12.2016 and therefore, erred in law and on facts in invoking section 115BBE for the deposits made prior to 15.12.2016.
10. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the addition of Rs.8,15,604/- as income even though the appellant is a Co- operative Society and entitled for deduction u/s. 80P(2)(a)(i) of the Act. Each Of the above grounds is without prejudice to one another, the appellant craves the leave of Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or otherwise modify all or any of the grounds of appeal
either before or at the time of hearing of this appeal.”
2. The brief facts of the case are that it was noticed that assessee has deposited substantial amount of cash into its bank account No.108400301000009 with Vijaya Bank, Hiriyur during the demonetization period of Rs.16,63,500. Notice was issued u/s. 142(1) requiring assessee to file return of income on or before 21.02.2018. However, assessee did not file the return. Information was called for u/s. 133(6) of the Act and the bank furnished the same. Subsequently a letter was issued to the assessee on 19.08.2019 proposing to tax the amount deposited during the demonetization period by invoking provisions of section 69A and taxing u/s. 115BBE of the Act. The assessee furnished reply on 24.09.2019 and also submitted Income & Expenditure Statement, Profit & Loss account and details of amount deposited in Vijaya Bank during the demonetization period. Directions u/s. 144A was sought from the Range Head and accordingly it was directed that net profit to be adopted at Rs.8,15,604 and Rs.14,32,000 brought to tax as unexplained cash deposit u/s. 69A and taxed u/s. 115BBE of the Act. The AO also referred to Notification issued by Govt. of India F.10/3/2016/Cy.I dated 08.11.2016 and RBI withdrawn legal tender character of old notes in the denomination of Rs.500 and Rs.1,000 w.e.f. 8.11.2016 through Specified Bank Notes (deposit of confiscated notes) Rules, 2016. The AO also gave final opportunity to the assessee which was also not complied by the assessee. The AO completed assessment u/s. 144 of the Act and assessed income at Rs.22,47,604.
Aggrieved from the order of the AO, the assessee filed appeal before the CIT(Appeals). The CIT(Appeals) dismissed the appeal of the assessee. Against this, the assessee filed appeal before the ITAT.
The ld. AR reiterated submissions of the lower authorities and submitted that during the assessment proceedings details of cash deposit like Member-ID, Account type, Member name, Date of deposit, Amount, Mobile No., Aadhar No. and PAN were submitted of 43 depositors from 09.11.2016 to 15.112016. He submitted that the amounts deposited belong to the members and complete details were submitted, therefore the assessee discharged the liability cast u/s. 68 of the Act. Therefore, both the authorities were not justified in disallowing the cash deposits during the demonetization period. The AO did not ask further details. If he had any doubt, he should have issued notice further. The CIT(Appeals) has relied on the order in dated 14.8.2023 and confirmed the addition. He further submitted that deduction u/s. 80P(2)(a)(i) should also be given to the assessee because it is a co-operative society and dealing with its members only. There is no requirement to file income tax return for claiming deduction u/s. 80P(2)(a)(i) and in respect of this argument he relied on the judgment of Prathamika Krishi Pattina Sahakara Sangha Ltd. [2022] 142 taxmann.com 405 (Bang. Trib.).
The ld. DR relied on the order of lower authorities and submitted that the assessee has not filed its return of income and cash was accepted during the demonetization period and it has violated the direction of Govt. of India and Notification issued time to time by RBI also. He also relied on the Supreme Court judgment in the case of Smt. Srilekha Bannerjee v. CIT reported in 194 AIR 697. The same has been quoted in the CIT(Appeals)’s order. He requested that since the assessee had filed details of cash deposit during the demonetization period which is placed at PB page 1, this requires verification. He further 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.
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.
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.”
The details submitted by the assessee was not doubted by the AO. Since in this case the ld. DR submitted that this requires verification, we remit this issue to the AO for verification of the details of cash deposits submitted by the assessee and decide as per law following the above coordinate Bench decision in (supra). The assessee is directed to furnish all the details and substantiate its case without seeking any unnecessary adjournment for early disposal of the case.
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.
There is yet another aspect of the matter. The requirement of making the claim for deduction in a return of income filed by the assessee can be seen as a statutory pre-condition for claiming the benefit of deduction under the IT Act. It is trite that a provision for deduction or exemption under a taxing Statute has to be strictly construed against the assessee and in favour of the Revenue. Thus viewed, a failure on the part of an assessee to comply with the pre-condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts.”
Respectfully following the above judgment, we hold that the assessee is not eligible for deduction u/s. 80P of the Act.
During the course of hearing, the ld. AR relied on the coordinate Bench decision in the case of Prathamika Krishi Pattina Sahakara Sangha Ltd. (supra) dated 13.06.2022 which will not support the case of the assessee because the Hon’ble Kerala High Court, which is a higher forum, in a later judgment dated 14.03.2023 has dealt with this issue as noted above. Therefore the issue raised by the assessee regarding deduction u/s. 80P is dismissed.
In the result, the appeal by the assessee is partly allowed for statistical purposes.
Pronounced in the open court on this 27th day of March, 2024, as per Rule 34 of the Income Tax (Appellate Tribunal) Rule 1963.