THE GUDIVADA CO-OP URBAN BANK LIMITED,GUDIVADA vs. ASSITANT COMMISIONER OF INCOME TAX, VIJAYAWADA

We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. Admittedly, the assessee has accepted the cash in the form of SBNs during the demonetization period and has 6 deposited the same into the bank accounts of the assessee. There is merit in the argument of the Ld. AR where the Circular cited by the Ld. AR clearly states that only District Cooperative Central Banks (DCCB) are not allowed to extend the exchange facility against the SBNs from 14/11/2016. For the sake of clarity, we extract below the RBI Circular No. DCM(Plg) No. 1273/10, 27.00/2016-17, dated 14/1/2016.

“RBI/2016-17/130 DCM (Plg) No.1273/10.27.00/2016-17 November 14, 2016 The Chairman / Managing Director/Chief Executive Officer, Public Sector Banks / Private Sector Banks/ Foreign Banks/Regional RuralBanks / Urban Co-operative Banks / State Co-operative Banks/ District Central Cooperative Banks Dear Sir, Withdrawal of Legal Tender Character of existing ₹ 500/- and ₹ 1000/- Bank Notes – Applicability of the Scheme to DCCBs Please refer to our Circular No. DCM (Plg) No.1226/10.27.00/2016-17 dated November 08, 2016 on the captioned subject. It is clarified that District Central Cooperative Banks can allow their existing customers to withdraw money from their accounts upto ₹ 24,000/- per week upto November 24, 2016. However no exchange facility against the specified bank notes (₹ 500/- and ₹ 1000/-) or deposit of such notes should be entertained by them.

All banks are advised to permit withdrawal of cash by DCCBs from their accounts based on need. The cash withdrawal limit of ₹ 24,000/- per week is not applicable to withdrawal of cash by a DCCB from its account with any other bank. Yours faithfully, (P Vijaya Kumar) Chief General Manager”

As per the submissions of the Ld. AR, the Ld. AO has allowed the deposit of SBNs in the case of Gandhi Cooperative Urban Bank Limited by passing the order dated 19/12/2019. However, in the instant case, the Ld.AO has contradicted himself by considering the assessee as District Central Cooperative Bank (DCCB) and has not allowed the deposit of SBNs for the period 14/12/2016 to 30/12/2016. However, we find that in the instant case, the assessee being an Urban Cooperative Bank, which is not being covered by the above referred RBI Circular and hence acceptance of the cash in the form of SBNs cannot be considered as unexplained for addition U/s. 68 of the Act. We are therefore inclined to allow the grounds raised by the assessee.

In the result, appeal of the assessee is allowed.