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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND V. MAHADEOKAR
"ी "स"धाथ" नौ"टयाल, "या"यक सद"य एवं "ी मकरंद वसंत महादेवकर, लेखा सद"य के सम"। ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं / "नधा"रण वष" /Assessment Year : 2017-18 The Panchmahals Dist. Co- The ITO op.Bank Ltd. बनाम/ Ward-3(1)(2), Prabha Road Vadodara v/s. Dahod Highway Godhra – 389 001 (Gujarat) "थायी लेखा सं./PAN: AAAJT 0268 P (अपीलाथ"/ Appellant) ("" यथ"/ Respondent) Assessee by : Shri Mehul K. Patel, AR Revenue by : Shri Kamlesh Makwana, CIT-DR सुनवाई क" तार"ख/Date of Hearing : 25/07/2024 घोषणा क" तार"ख /Date of Pronouncement: 31/07/2024 आदेश/O R D E R
PER SHRI MAKARAND V. MAHADEOKAR, AM:
This appeal is filed by the Assessee as against the order dated 14/08/2023 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld.CIT(A)” in short] arising out of the assessment order dated 29/12/2019 passed by the Assessing Officer (AO) under section 143(3) of the Income The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 2 Tax Act, 1961 (hereinafter referred to as "the Act") relevant to the Assessment Year (AY) 2017-18. Facts of the case:
The assessee is a District Central Co-operative Bank engaged in the banking business. The assessee filed its return of income for the A.Y. 2017- 18 on 30-10-2017 declaring income of Rs.NIL. The case was selected for complete scrutiny under CASS for the reason of expenses claimed to interest payment to interest earned exempt income and investment in share appearing in balance-sheet and showing lower income in return of income. The notices u/s.143(2) and 142(1) of the Act were issued and duly replied by the assessee. The AO observed that there were instances of cash deposits in the branches of the bank. Total deposits in cash in 33 branches of the bank were Rs.47,20,70,000/- during demonetization period, i.e. from 9-11-2016 to 31-12-2016. The AO added all such cash deposits to the income of the assessee u/s.69A of the Act. While doing so, he concluded that the assessee failed to disclose these deposits under Point No. 13A and B of the return of income. He also concluded that the assessee failed to explain the source of such receipts even after giving an opportunity during the course of assessment proceedings. He also noted that the assessee failed to provide details like PANs, names, addresses and confirmations of parties along with creditworthiness.
The assessee preferred an appeal before the Ld.CIT(A) against the order passed by the AO. During the appellate proceedings, the Ld.CIT(A) called for the remand report from the AO relating to the submission made The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 by the assessee. The Ld.CIT(A)dismissed the appeal of the assessee stating that the assessee failed to provide translated copies of the documents. The Ld.CIT(A) also reproduced the remand report of the AO. In the remand report, the AO objected to admission of additional evidence under Rule 46A of the Income Tax Rules, 1963. The assessee in its rebuttal to remand report submitted that they have not submitted any new evidence, but still they provided all the details called by the AO. The AO called for details of cash deposits in their CCOD, Loan accounts, etc. with complete bifurcation of old notes and new notes. The assessee submitted necessary evidence in the form of KYC documents and registration certificates. The Ld.CIT(A) further stated that the addition made by AO is true and genuine and dismissed the appeal of the assessee.
Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us with following grounds: “(1) That on facts, and in law, the learned NFAC-CIT(A) has grievously erred in not admitting the additional evidences filed before it, even after calling for a Remand Report from the Assessing Officer and further erred in not considering the evidences filed, as called for learned NFAC-CIT(A) during the Video Conference Hearing held by NFAC- CIT (A, mentioned on page 22, para 6.2 of the order under appeal.
(2) That on facts and in law the learned NFAC-CIT (A) has grievously erred in making the addition of Rs. 47, 20,70,000/- u/s 69A of the Act in respect Cash deposited in bank accounts of customers (account holders) of appellant Bank.
(3) That on facts, and in law, the learned NFAC-CIT(A) has grievously erred in confirming the tax levied u/s 115BBE of the Act in respect of the said addition.
(4) That on facts, and in law, the learned NFAC-CIT(A) has grievously erred in confirming the levy of interest u/s 234B of the Act.
(5) The appellant craves leave to add, alter, amend any ground of appeal.” The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 4 On the grounds of appeal 5. The Ld.Authorised Representative (AR) of the assessee explained that the assessee is a District Co-op. Bank operating since 1955, having 46 branches and more than 2,50,000 accounts, viz. saving accounts, current accounts, term deposit accounts, OD accounts, recurring accounts, etc. He stated that the cash of customers deposited in their respective accounts has been deemed as income u/s.69A of the Act by the AO and has taxed u/s. 115BBE of the Act. He further stated that the requirement to report the cash deposit in return of income as observed by the AO is applicable only if the cash is belonging to the assessee and in the present case the cash is belonging to customers of the bank hence the observation of the AO is not correct.
5.1. He further stated that during the appellate proceedings, the Ld.CIT(A) called for the information and the assessee provided the same. The Ld.AR submitted the copies of all the notices along with the replies and details as asked for. He explained that the documents submitted to the Ld.CIT(A) and the AO were: - Bank accounts details of the assessee. - Branch-wise statement of cash deposits. - Month-wise cash deposits by customers from April 2015 to November 2015 and April 2016 to November 2016 (for comparison). - Statement of Specified Bank Notes (SBN) exchanged, received and deposited with other banks from 8-11-2016 to 16-11-2016. - KYC Details of customer three branch of the bank along with photocopies of the KYC documents which mainly include ADHAR cards, PAN and registration certificates under various laws. The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 5 5.2. The Ld.AR argued that the Ld.CIT(A)’s conclusion that the admission of any additional evidence at appellate stage is in contravention to the Rule made under 46A of the I.T. Rules is not correct as the AO in his remand report (last para no.6) stated that the additional evidence is in sync with the demand of the case and even after that objected to the admission. The Ld.AR further argued that the Ld.CIT(A) should have decided on the basis of material available on record as no infirmity was recorded by the AO in his remand report. He placed reliance on the decision of Mumbai Bench of ITAT in case of Shahrukh Khan Vs. Dy.CIT, Spl. Range 21 (ITA No. 202/MUM/2003 dated 20-7-2006) where the Tribunal held that once the additional evidence was entertained and a remand report was called for, the Commissioner(Appeals) could not subsequently refuse to admit it.
5.3. On the merits, the Ld.AR relied on the judgement of Hon’ble High Court of Gujarat in case of CIT Vs. Pragati Co-Op. Bank Ltd. and decision of Hydrabad Bench of ITAT in case of The Citizen Co-op. Society Ltd. Vs. Addl. Commissioner of Income Tax, Range – 9 (ITA No. 1003- 1004/HYD/2011 dated 2-7-2012).
On the other hand, the Ld.Departmental Representative (DR) relied on the orders of lower authorities. The Ld.DR stated that the intention of the revenue to inquire into the details of cash deposits by account holders and, therefore, non-receipt of information by the AO prevented Revenue to further inquire into the matter with concerned jurisdictional assessing officer of the depositors. In the rejoinder, the Ld.AR argued that the sufficient details were already provided to the AO. The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 6 7. We have heard both the parties and perused material available on record. The assessee is a District Central Co-operative Bank engaged in the business of banking, operating since 1955, with 46 branches and over 2,50,000 accounts. The AO noted cash deposits amounting to Rs.47,20,70,000/- in 33 branches during the demonetization period (09-11- 2016 to 31-12-2016) and added this amount to the assessee's income u/s.69A of the Act, concluding that the source of these deposits was unexplained. The assessee explained that the cash deposits were from customers in their respective accounts and provided necessary details including KYC documents, branch-wise cash deposit statements, month-wise cash deposit comparison, and specified bank notes details.
7.1. The Ld.CIT(A) dismissed the appeal citing the assessee’s failure to provide translated documents and upheld the AO’s addition, despite the assessee's submission of detailed evidence. The Ld.CIT(A)'s refusal to admit additional evidence, despite calling for a remand report, is against the principles of natural justice. Once the additional evidence is entertained and a remand report is called for, it should be considered in the final decision. This is supported by the Mumbai Bench of ITAT in Shahrukh Khan Vs. Dy.CIT(supra), wherein it was held that additional evidence must be considered if a remand report has been requested. This judgment highlights the procedural aspects of Rule 46A regarding the admission of additional evidence before the Ld.Commissioner(Appeals). It underscores the importance of recording reasons for admitting such evidence and ensuring that the AO is given an opportunity to examine it. The Tribunal’s decision reiterates that once additional evidence is entertained and a remand report is called for, the Ld.Commissioner(Appeals) cannot refuse to admit it. The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 7 Additionally, the discretionary powers of the Ld.Commissioner(Appeals) under sub-rule (4) allow for the admission of any evidence necessary for a just decision, beyond the specific conditions in sub-rule (1).
7.2. We have also reviewed the judicial pronouncements relied upon by the assessee. In the case of M/s. Citizen Co-operative Society vs. Department of Income Tax (supra), the primary issue concerned the addition made under Section 68 of the Act. The Tribunal upheld the Ld.CIT(A)'s decision to delete the addition under Section 68 of the Act, as the assessee had sufficiently demonstrated compliance with KYC norms, systematic record-keeping, and the genuineness of the transactions. This case reinforces the principle that adherence to regulatory norms and systematic record-keeping can effectively counter additions under Section 68 related to unexplained credits in the context of banking and financial institutions. In case of The Commissioner of Income Tax (appellant) vs. Pragati Co-operative Bank Ltd. (supra), the Hon’ble High Court held that the Tribunal did not err in confirming the Ld.CIT(A)’s order as the assessee had discharged the primary onus by providing an explanation, which was not found to be false, the AO's dissatisfaction with the explanation does not mandate treating the deposits as income.
7.3. In the present case, the cash deposits in question were made by the bank's customers into their respective accounts and not by the bank itself. The assessee provided sufficient evidence to substantiate the source of these deposits, including KYC details, branch-wise statements, and comparison of cash deposits across periods. Following the precedents set by the Hon’ble Gujarat High Court in Pragati Co-Op. Bank Ltd. and ITAT Hyderabad in The Panchmahals Dist. Co-op. Bank Ltd. vs. ITO Asst. Year : 2017-18 Citizen Co-operative Society Ltd., the addition made by the AO u/s.69A of the Act is not justified as the assessee had complied with necessary regulatory norms and provided sufficient evidence to explain the cash deposits.
7.4. The addition of Rs.47,20,70,000/- made by the AO is deleted. Since the primary addition under Section 69A of the Act is found to be unjustified, the consequential tax levied under Section 115BBE of the Act and the interest under Section 234B of the Act also stand invalidated.