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Facts
The assessee, a Co-operative Society, invested in fixed deposits and earned interest. During demonetization, it deposited Rs. 12,53,000 in old currency notes into its bank account but failed to file income tax returns for AY 2017-18. The Assessing Officer (AO) made an addition of Rs. 12,53,000 under Section 69A for unexplained money and Rs. 7,16,530 for interest income.
Held
The Tribunal noted that the assessee accepted old currency notes from customers but failed to provide details of their identity, creditworthiness, and capacity to deposit. The AO's addition under Section 69A was made because the assessee could not establish the source and nature of these credit entries. Consequently, the issue was remitted back to the AO for fresh consideration.
Key Issues
Whether the addition made under Section 69A for unexplained cash deposits during demonetization is sustainable without proper verification of source and identity of depositors.
Sections Cited
139(1), 139(4), 142(1), 144, 69A, 80P(2)(a)(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal and stay petition by assessee are directed against the order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in
ITA No.1125/Bang/2023 & SP No.43/Bang/2023 Primary Agricultural Credit Cooperative Society, Bijapur Page 2 of 5 short “The Act’) dated 20.10.2023 for the assessment year 2017-18. The revenue has raised following grounds of appeal:
The Hon'ble CIT(A) has erred in not appreciating the fact that the circular, to file the return of income after filing condonation before PCCIT has recently been issued by the CBDT.
The Hon'ble CIT(A) has erred in not appreciating the fact that the provisions of section 80AC will be applicable with effect from the A.Y.2018-19 not for the earlier years. 3. The Hon'ble CIT(A) has erred in not understanding the factual difference between our society case and Totagar's co-operative sales society case and consequently ended up in wrongly applying the decision of Hon'ble Supreme court to our society.
The Hon'ble CIT(A) has erred in not appreciating the fact that the e-filing portal through which the submissions be made is not capable of handling the documents to be uploaded and in the very first submission made it is specifically mentioning as KYC documents and extract of Cash book.
The learned Assessing Officer has erred in disallowing the statutorily given benefit u/s 80P (2) (a) (i).
The learned Assessing Officer has erred in not considering the documents submitted in support of cash deposits which are already verified by the NABARD officials.
The learned assessing officer has erred in invoking the provisions of section 69A of the act, On a reading of section 69A (supra), it is clear that the onus is upon the AO to find the assessee to be the owner of any money, bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article was not recorded in the books of account, if any, maintained by the assessee for any source of income. In these circumstances, the AO can resort to making an addition under section 69A of the Act only in respect of such monies / assets / articles or things which are not recorded in the assessee's books of account.
The learned assessing officer has erred in invoking the provisions of section 69A, even though the cash deposits are recorded in the books of account and are reportedly made on the receipt from members.
The learned assessing officer has erred in not understanding fact that addition under section 69A- of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee's books of account.
ITA No.1125/Bang/2023 & SP No.43/Bang/2023 Primary Agricultural Credit Cooperative Society, Bijapur Page 3 of 5 10. The appellant craves leave to amend, add, alter or delete any of the above grounds of appeal.
For these grounds & other grounds that may be urged at the time of hearing, your petitioner prays to allow the appeal.
Ground Nos.1, 10 & 11 are too general in nature, which does not require any adjudication. Ground Nos.2 to 5 were not pressed and accordingly dismissed as not pressed.
Ground Nos.6 to 9 are with regard to sustaining addition of Rs.12,53,000/- in SBN notes to bank accounts.
3.1 Brief facts of the case are that the assessee is a Co-operative Society and engaged in providing credit facilities to its members. Apart from these activities, the assessee made investments in fixed deposits, etc., and also derives interest income from these investments. On the basis of data analytics and information gathered during the phase of online verification under 'Operation Clean Money', the Income Tax Department gathered a list of assessees who have deposited substantial Cash in bank account(s) during the demonetization period, but did not file Income tax Returns for A Y 2017-18. The data reveals that the assessee had deposited Cash of Rs.12,53,000/- in old currency notes Rs.500 & Rs 1000 notes in its bank account maintained with Bijapur District Central Co-operative Bank, Chadachan during the demonetization period. However, the assessee didn't furnish any return of income u/s 139(1) of the Act. Accordingly, a notice u/s 142(1) of the Act was issued on 08.03.2018 calling the assessee to prepare a true and correct ROI in respect of which the assessee is assessable under the Act during the relevant A.Y.2017-18 but the assessee failed to furnish ROI for A.Y.2017-18 in response to this notice. As per the provisions of section 139(4) of the Act, the assessee has to file the ROI before the end of the relevant year or before the completion of the assessment, whichever is earlier. In the present case, the time for filing the return was over on 31/03/2018. Further, the assessee did not file the return
ITA No.1125/Bang/2023 & SP No.43/Bang/2023 Primary Agricultural Credit Cooperative Society, Bijapur Page 4 of 5 of income within the period of 30 days from the issue of notice u/s 142(1) dated 08.03.2018. During the proceedings u/s 142(1) of the Act, various notices were issued but the assessee failed to respond these notices. Therefore, the assessment Order u/s 144 of the Act in this case was passed on 12.12.2019 wherein taxable income was determined at Rs. 19,69,530/- by [making addition of Rs.12,53,000/- on a/c of Unexplained Money U/S 69A of the Act, 1961 and Rs.7,16,530/- on a/c of interest income on investment with bank. On appeal, ld. CIT(A) confirmed the same. Against this assessee is in appeal before us.
The ld. A.R. has submitted that said amount has been deposited to the assessee’s bank account from the SBN notes received from its customers and all the details of KYC has bee filed before the lower authorities and the addition cannot be made.
We have heard the rival submissions and perused the materials available on record. It is admitted fact that assessee has accepted the SBN notes of Rs.1000/- & Rs.500/- from outsiders or its customers or members, which the assessee prohibited to accept the same. However, that itself cannot be reason to sustain the addition. Once the assessee has accepted the SBN notes from its customers, members or account holders, assessee has to furnish the details of them proving their identity, creditworthiness and capacity of the person to deposit to assessee’s bank account and shall discharge the burden cast upon it. But no material was brought on record before us in this regard. It is also an admitted fact that as recorded by the ld. AO that assessee has failed to establish sources and nature of credit entries appearing in Bijapur District Central Co-operative Bank, Chadachana. Hence, the ld. AO made the addition. In our opinion, it is appropriate to remit the issue back to the file of ld. AO with the direction to assessee to furnish the full details proving the identity of parties, creditworthiness of them and genuineness of transactions. The ld. AO shall examine the same in the light of CBDT Instructions issued on 21.2.2017, 3.3.2017,
ITA No.1125/Bang/2023 & SP No.43/Bang/2023 Primary Agricultural Credit Cooperative Society, Bijapur Page 5 of 5 15.11.2017 & 9.8.2019. Accordingly, the issue is remitted to the file of ld. AO for fresh consideration after giving an opportunity of hearing to the assessee to decide accordingly.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Since we have remitted the appeal of the assessee to the file of ld. AO, the Stay Petition filed by the assessee became infructuous and dismissed.
In the result, appeal of the assessee is partly allowed for statistical purposes and stay petition filed by the assessee is dismissed. Order pronounced in the open court on 8th Jan, 2024
Sd/- Sd/- (George George K.) (Chandra Poojari) Vice President Accountant Member
Bangalore, Dated 8th Jan, 2024. VG/SPS
Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.