DCIT, CIRCLE-3, THANE, THANE V. JAIMUNI SAHAKARI PATPEDHI MARYADIT, VASAI

ITA 990/MUM/2025

AI Insights

The case involves the DCIT, Circle-3, Thane as the appellant and Jaimuni Sahakari Patpedhi Maryadit as the respondent. The dispute centered on the assessment year 2017-18, where the revenue challenged the CIT(A)'s decision to delete additions made by the Assessing Officer (AO) regarding commission income and unexplained cash deposits during the demonetization period. The CIT(A) had allowed the deductions claimed by the assessee under section 80P, arguing that the income was derived from services provided to members, which are exempt from tax under the said section. The Tribunal examined the submissions and evidence presented, including circulars from MSEDCL permitting collection of bills in old currency notes during the demonetization period, and upheld the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312424 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: misc
• Other Referred Cases: Totgar Co-operative Society vs. Srisi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND DESAI; SACHIN
• Assessee Lawyers: KAVITHA KAUSHIK
• Keywords: Difference of opinion; Corroborative evidences; Unexplained cash credit; Onus to prove; Co-operative Credit Society
• Section: 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SMT. RENU JAUHRI (ACCOUNTANT MEMBER) I.T.A. No. 990/Mum/2025 Assessment Year: 2017 DCIT, Circle-3, Thane Ashar IT Park, 6th Floor, B Wing, Room No. 02, Wagle Industrial Estate, Thane(W), Maharashtra-400604 Vs. Jaimuni Sahakari Patpedhi Maryadit Samved Bhavan, Near ZP Mar, HTI School, Umrale, Nalasopara, Vasai Maharashtra-401203 PAN:AAAAJ2718B (Appellant) (Respondent) Appellant by Shri Anand Desai, Shri Sachin Lopes Respondent by Ms. Kavitha Kaushik, SR. D.R. Date of Hearing 09.04.2025 Date of Pronouncement 30.04.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the revenue arises out of order dated 29/11/2024 passed by NFAC, Delhi for assessment year 2017-18 on following grounds of appeal : 2 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit “1. On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 6,62,088/- without appreciating the fact that the assessee has earned commission income from MSEDCL and as such the same should have been offered for taxation under the head \"Income from other sources\" by the assessee. 2. On the facts and in the circumstances of the case, with regard to the addition of Rs.94,18,271/- u/s.69A, the Id.CIT(A) erred in fact by completely ignoring the fact that the assessee was not a specified entity to accept SBNs as per the prevailing RBI guidelines [RBI Amended Notification No.S.O.3408(E)(F.No.10/03/2016-FY.1 DATED 08/11/2016] during the demonetization period. 3. The order of the CIT(A) may be vacated & and that of Assessing Officer may be restored. 4. The appellant craves leave to add, amend, alter or delete any ground of appeal.” Brief facts of the case are as under: 2. The assessee filed its return of income for year under consideration on 30/10/2017, declaring total income at nil. After claiming deduction of Rs.2,17,08,211/- under chapter VI A of the Act. The case was selected for scrutiny to verify cash deposits during demonetization period, against which deduction was under chapter VI A, was claimed by the assessee. 2.1 Accordingly notice u/s.143(2) and 142(1) was issued to the assessee, calling upon to furnish relevant details/documents. In response to the statutory notices, assessee furnished profit and loss account, balance sheet, audit report, details of the cash deposits during demonetization period, bye laws of the society and various other details as required by the Ld.AO. 2.2 The Ld.AO noted that, the assessee is a co-operative credit society rendering credit facilities to its members, established since 1985. The Ld.AO noted that, total members of the assessee 3 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit as on 31.03.2017 were 6410, and that, the assessee operates its activities from 5 different branches situated in the rural area of Vasai-Virar region. The assessee accepts deposit from its members and provides credit facilities to its members only under the concept of mutuality. The Ld.AO noted that, principal income of the assessee comprises of interest received on loans and advances given to its members, from the deposits taken from the members. Further the society invests the advance amount received from the members into other Co-operative Banks and earns interest income. The assessee submitted that, income earned by the society is claimed to be exempt from tax u/s 80(P) of IT Act, 1961. 2.3 The Ld.AO also noted that, the assessee acts as commission agent for collection of MSEDCL (Maharashtra State Electricity) bills on monthly basis from its members at its branches as well as, provides lockers facilities to its members wherein it collects fixed amount on yearly basis. 2.3.1. The assessee submitted that, towards the collection of MSEDCL bills, the assessee has dedicated counters towards collection of money along with dedicated computer and printer system which has operating software system of MSEDCL department for collection work. It was submitted that, the staff dedicated to said job looked after the collection works, issuing payment receipts, daily reporting, tallying the cash on day end and deposit the cash on daily basis in Cooperative bank from where daily RTGS were to be done for transfer of collection made on daily basis. 4 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit 2.3.2. The assessee also submitted that, it took cash insurance policy towards handling of the cash collected on daily basis and transport of the same from assessee’s branches to the Co- operative society branches nearby assessee’s branch. 2.4 The Ld.AO noted that, the assessee deposited cash amounting to Rs.2,18,61,909/- during demonetization period in its accounts maintained with Bassien Catholic Co-operative Bank, TDC Bank and Vasai Vikas Sahakari Bank etc., as follows: “Rs. 3,00,000/- in Vasai Vikas Sahakari Bank Rs. 10,28,500/- in TDCC Bank, Nirmal Branch Rs. 22,67,000/- in TDCC Bank, Vatar Branch, Rs. 13,50,000/- in TDCC Bank, Umrale Branch” 2.5 Further, on perusal of the confirmation from various branches of the assessee the Ld.AO noted that, assessee had cash balance of Rs.40,02,329/- as under: “Rs. 8,94,000/- Nirmal Branch Rs 8,31,500/- Umrale Branch Rs. 9,24,500/- Bolinj Branch Rs. 5,28,500/- Umbergothan” 2.6 The Ld.AO thus was of the opinion that the assessee had excess amount of SBN cash during demonetisation in comparison to the cash balance as on 08/11/2016, amounting to Rs.94,18,271/-. The Ld.AO thus made addition in the hands of the assessee u/s.69A as unexplained money by observing that onus to prove gennuiness of the transaction in cast on the assessee along with the source of such credits, which could not be fulfilled. 5 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit 2.7 The Ld.AO further observed that, the assessee earned interest income amounting to Rs.5,58,31,049/- and dividend income amounting to Rs.3,67,78,600/- from the investment Co- operative Bank. 2.8 It was also noted that, assessee also earned commission and interest income amounting to Rs.7,80,487/- from Maharashtra State Electricity Board and Rs.57,200/- from locker rent activity. The Ld.AO thus observed that the assessee earned income from other than business activity from society amounting to Rs.8,37,637/-. Assessee was thus called upon to furnish details in respect of the above amount that was claimed as deduction u/s. 80P of the Act by the assessee. 3. The assessee in response submitted that, it does not carry out any other business other than providing credit facilities to its members and therefore the income declared in the return for the year under consideration is eligible for deduction u/s.80P(2)(a)(i) of the act the bifurcation of deduction claimed by the assessee was submitted as under: ““Gross earning by way of Commission from five MSEDC bill collection counters Rs. 7,51,092/- Less: Expenses [As per Schedule] Rs. 7,01,739/- Thus the Net surplus [Profit] is Rs. 49,353/-. These earning are eligible for deduction u/s 80P (2) (c).” 4.1 The assessee submitted that, net profit as per profit and loss account of Rs.1,69,31,362/- is eligible for deduction u/s.80P(2)(c), contribution received from members were eligible u/s.80P(2)(a) and interest/dividend earned from investment of members contribution was eligible u/s.80P(2)(d) of the Act. 6 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit 4.1.1. The Ld.AO after considering the submissions of the assessee disallowed following exemptions in the hands of the assessee : “Add: Interest and dividends from investment with Co-operative banks (As per Para 5.4 & 10) Rs. 97,65,066 Add: Commission income and interest income from other than business activity (as per Para 5.3) Rs. 6,62,088/-” 4.2 The Ld.AO, placing reliance on the decision of Hon’ble Karnataka High Court in case of Totgar Co-operative Society vs. Srisi reported in 2017 disallowed above claim of assessee u/s.80P. Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A). 4. The Ld.CIT(A) deleted the addition made by the Ld.AO by observing as under : “7.2 During the appellate proceedings, the appellant stated that the Commission income earned by the Appellant society towards collection from MSEDCL bills is service rendered by the society to its members and customers. The expenses incurred towards said collections of MSEDCL bills such as salary of employees, electricity charges, cash insurance, printing charges, computer and printer system maintenance, etc are directly attributed to the income and the details of which have been provided on records. Further the Locker rent charges collected from members are received towards services given to members for providing locker space in credit society’s branches to keep the valuables throughout the year. Nominal charges are taken from the members. Incomes are duly reported in Annual Report. The Accounts are separately audited by the Ministry of Co-operation Maharashtra State. There is not intentional mis-statement or mis-reporting of information, it just amounts to difference of opinion or understanding of presented information which has led to wrong interpretation. The surplus arising from the said transactions, details of which have been submitted on records in course of assessment proceeding is below Rs.50,000/- which qualifies for the claim of deduction u/s 80(P)(2)(C). Section 80(P)(2)(C) of Income Tax Act 1961 read as “In the case of a co- operative society 7 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities sospecified), so much of its profits and gains attributable to such activities asdoes not exceed,- (i) where such co-operative society is a consumers’ co-operative society, one hundred thousand rupees; and (ii) in any other case, fifty thousand rupees.” From the above it can deduce that the surplus arising from MSEDCL commission and locker rent is eligible for claim of deduction u/s 80(P)(2)(C) and thereby non- taxableupto the limit of Rs.50,000 as per provisions of the Act. 7.3 I have examined the facts of the case and the submissions made by the appellant on the above issue. The appellant explained that the commission income earned by the appellant society from the collection of MSEDCL bills represents a service rendered by the society to its members and customers. The expenses incurred towards the said collection of MSEDCL bills, such as employee salaries, electricity charges, cash insurance, printing charges, and maintenance of computer and printer systems, are directly attributable to this income, and the details have been provided on record. I agree with the appellant's explanation. Accordingly, the Assessing Officer is directed to delete the addition of Rs. 6,62,088 under the head 'Income from Other Sources. Hence, Ground No. 2 is allowed. …………………….. 8.3 I have thoroughly examined the submission of the appellant and the facts of the case concerning the addition of unexplained money under Section 69A, amounting to Rs. 94,18,271/-. The appellant explained that the money received in demonetized currency during the demonetization period was related to the collection of payments for bills (from customers and members) on behalf of MSEDCL. The appellant is an authorized collection agent for MSEDCL and was permitted to collect cash in Specified Bank Notes (SBNs) as per the notifications/circulars issued by MSEDCL (a Government of Maharashtra undertaking) dated 10.11.2016, 15.11.2016, and 25.11.2016, which allowed the collection of bills in old currency until 15th December 2016. In light of the facts and circumstances of the case, it is evident that the appellant was required to collect SBN currency as part of their business activity. The addition made by the Assessing Officer appears to be not justified and unwarranted considering the facts and circumstances of the case as submitted by the appellant with detailed reasoning. I agree with the appellant's explanation. Accordingly, the addition of Rs. 94,18,271/- is hereby deleted. Ground No. 3 of the appellant’s appeal is allowed.” 8 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit Aggrieved by the order of the Ld.CIT(A) revenue is in appeal before this Tribunal. 5. The Ld.DR relied on the order passed by the Ld.AO, where as the Ld.AR relied on the submissions advance by the assessee before the first appellate authority as well as the order passed by the Ld.CIT(A). We have perused the submissions advance by both sides in the light of record placed before us. 6. Ground No.1 raised by the revenue is on account of commission income and other income of the society allowed as deduction u/s.80P(2)(c) and u/s.80P(2)(d) of the Act. It is noted that, the commission income earned by the assessee is towards collection from MSEDCL bills, service rendered by the assessee to its members and customers. The Ld.CIT(A) noted that, the expenses incurred towards the collection of bills of MSEDCL, such as salary of employees, electricity charges, cash insurance, printing charges, computer and painter system maintenance etc. were directly attributable to the income and was verified by the Ld.CIT(A). 7.1 It is further noted that, the locker rent charges collected from the members were received towards services given to its members for providing locker space in credit society branches throughout the year. Nominal charges were taken from the members which were duly reported in audit report. The Ld.CIT(A) noted that, the accounts of the assessee separately audited by the Ministry Of Corporation, Maharashtra State, and there is no intentional misstatement or misreporting of information. The Ld.CIT(A) thus, allowed the claim of assessee u/s.80P(2)(c) after 9 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit verifying all the relevant documents and details in respect of the deduction claimed. 7. Ground no.2 raised by the revenue is in relation to SBN cash deposit during demonetization period. The Ld.CIT(A) deleted the addition, after analysing the following facts, categorically established by the Ld.AR before this Tribunal also. The relevant extract of the factual observation of Ld.CIT(A) and findings are as under:- ““The Appellant regularly deals into cash transactions in process of conduct of its business being provision of credit facilities to its members, accountholders to the bill payers for collection on behalf of MSEDCL which is supported by agreements, etc. These amounts are regularly deposited into bank accounts of the Society with Co-operative banks. The major portion of cash is collected in the process of MSEDCL bills collections from members at the society branches. On regular basis this cash is deposited in bank accounts held at various Cooperative banks. The quantum of such collection falls into the bracket of Rs. 1.30 to 2.00 crores out of which the cash collections from MSEDCL bills itself is Rs. 1.10 to 1.70 crores. We would like to draw your attention to the Assessment order wherein the Learned Assessing Officer has considered the Cash deposited on accounts of Specified bank notes (SBNs) in various bank accounts of Co-operative banks during the period of demonetization period amounting to Rs. 94,18,271 as unexplained money. Its a prima facie mistake apparent from records which shows that the amount of addition of total cash in odd figures i.e. if the deposit in SBNs are in the notes of 500 or 1000 how can the figure derived by Learned Assessing officer amounts to 94,18,271 if it concern’s SBN’s. We fails to understand the AO’s reasoning that how can the cash collected by Society branches from its various transactions with the accountholders/ members towards various services and facilities received by them from the Society be considered as unexplained money. The society has the records for the collections of such cash as in MSEDCL report for cash collected towards bill collections, vouchers for cash deposit and withdrawals from branches by its members/accountholders made in cash by society from its members throughout the year. Further the Society has received confirmations for all the bank accounts wherein they had deposited the cash pertaining to SBNs notes and other currencies notes and coins. We would like to furnish the summary of cash collections in various bank 10 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit accounts during the demonization period along with the types of currency deposit whether SBNs or other types from 10.11.2016 till 31.12.2016:- Name of Bank and Branch Total cash deposited in bank Deposit made By way of SBNs Deposit made in other currencies notes and coins Vasai Vikas Sakahari Bank Ltd, Umrale Branch 12,48,000 12,48,000 0 Thane District Central Cooperative Bank,Vatar Branch 23,17,000 22,67,000 50,000 Bassein Catholic Cooperative bank, Umrale Branch 99,82,921 48,09,000 51,73,921 Vasai Vikas Sakahari Bank Ltd, Bolinj Branch 3,00,000 O 3,00,000 Thane District Central Cooperative Bank , Nirmal Branch 10,28,500 10,28,500 0 Grand Total 1,48,76,421 93,52,500 55,23,921 As it can be seen that the total cash deposited in SBNs during the demonization period is Rs.93,52,500 out of total cash deposited in bank accounts of various bank accounts as mentioned above. The same facts are confirmed by the respective banks with their confirmation letters. Further we would like to submit that as at 08.11.2016 the bank balances at various branches of the Appellant society are as follows which also includes the cash collected towards MSEDCL bill collections:- Name of Bank and Branch Balance SBNs Other currency Umrale Branch 9,89,815 7,38,000 2,51,815 Nirmal Branch 12,14,738 10,58,000 1,56,738 Achole Branch 13,16,594 11,64,000 1,52,594 Bolinj Branch 11,58,945 10,67,500 91,445 Umbergoathan Branch 6,40,701 5,94,500 46,201 Grand Total 53,20,793 46,22,000 6,98,793 Here we would like to furnish that during the course of Assessment proceedings the details of Cash balances as on 08.11.2016 with the Achole branches of the society was not considered in the Total Cash balances of the Appellant Society as on 08.11.2016. The supporting evidence of the said Cash Balances as on 08.11.2016 is submitted 11 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit herewith for ready reference and perusal. We would like to submit that the composition of Bank balances as on 08.11.2016 comprise of Cash deposited in the mode of SBNs currency notes amounting to Rs.46,22,000 which includes SBNs collected from MSEDCL bill collection and cash deposited by the Members/Customers of the bank in various accounts of the society such as Savings, Recurring, Fixed Deposits and Loans Accounts and some of the Cash amounts kept by the Bank branches as petty cash for daily cash expenses and emergency funds. Further we would like to submit that Appellant has been a MSEDCL collections agent and was allowed to collect the cash in SBNs as per regular notification/Circulars issued by MSEDCL- (Government of Maharashtra undertaking company) wherein they were allowed to collect bills in old currency till 15th December 2019. Details of Circular are as follows:- 1.. Circular dated 10.11.2016 of MSEDCL wherein the cash collections towards bills was allowed till 11thNovember 2016. 2. Circular dated 15.11.2016 of MSEDCL wherein the cash collections towards bills was allowed till 24thNovember 2016. 3. Circular dated 25.11.2016 of MSEDCL wherein the cash collections towards bills was allowed till 15th December 2016 in denomination of 500 note only Accordingly the Appellant has adhered to the circulars and acted upon them in course of bill collections system of MSEDCL at its branches. Out of total bill collections at its branches amounting to Rs. 1,12,31,001 for the period 08.11.2016 till 06.12.2016, bill collections made in SBNs were to the tune of Rs. 47,30,500 which was as per the instructions in circulars/notifications issued by MSEDCL and the same currency in SBNs was deposited in bank accounts in co-operative banks. The Society had stopped collecting the SBNs currency notes after 06.12.2016 on its account. The same can be seen from the confirmations letters submitted by the banks on the records. Further with respect to the Cash collection of MSEDCL Bills the society is entitled to received a commission amount which has been accounted for and reported in the Return of Income. Also the Cash collections and deposits made in the bank accounts are accounted for and reported for in the books of accounts maintained at its branches. This explains that the cash deposits/collections are properly recorded and with evidence and duly, legal and authorized, hence it cannot be considered as unexplained credit” 8. The Ld.AR at the time of submissions emphasised on the circular and the press release issued by the Government of India 12 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit as well as MSEDCL placed at pages 120-125 of P.B. that supports the cash collection towards the bill carried out by the assessee. The Ld.AR also furnished the summary bank accounts of assessee placed at page 83 in which the cash deposited are correlated with the money deposited to the MSEDCL account at page 19-21 of the P.B. filed on 09/04/2025 along with the agreement entered into MSEDCL at page 126-203 of P.B. to render these services. It is noted that, the MSEDCL collection report from 08/11/2016 and 06/12/2016 placed at page 1-2 of P.B. filed on 09/04/2025 wherein reconciliation is drawn in respect of the cash deposited by the assessee also reflected in the bank account of MSEDCL account. In our opinion the assessee has established to the hilt doubt the cash collected and deposited during the demonetization as per the mandate of Govt. of Maharashtra during the demonetised period based on the agreement entered into with MSEDCL supported by circulars issued in respect of the that permitted assessee accept electricity bill in specified bank notes. 9. Based on the detailed analysis of both the issues by the Ld.CIT(A) and the satisfaction established by the Ld.AR before this Tribunal by relying on detailed documentary evidences furnished. We do not find any infirmity in the view adopted by the Ld.CIT(A) and the same is upheld in. Accordingly the ground no. 1&2 raised by the revenue stands dismissed. In the result the appeal filed by the revenue stands dismissed. 13 ITA No.990/Mum/2025; A.Y. 2017 Jaimuni Sahakari Patpedhi Maryadit Order pronounced in the open court on 30/04/2025 Sd/- Sd/- (RENU JAUHRI) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 30/04/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai "