INCOME TAX OFFICER, NON CORPORATE WARD 2(4), KOCHI, IS PRESS ROAD, KOCHI V. .NARAKAL SERVICE CO-OPERATIVE BANK LTD NO.E 91, NARAKAL, KOCHI

ITA 601/COCH/2023

AI Insights

The case involves the Narakal Service Co-operative Bank Ltd., which faced scrutiny from the Income Tax Department over large cash transactions amounting to Rs. 6,15,76,827 during FY 2013-14. The Assessing Officer (AO) reopened the assessment and made additions under sections 69A (unexplained cash credit) and 80P (disallowance of deduction) of the Income Tax Act. The CIT(A) partly allowed the appeal, deleting the addition under section 69A but sustaining the disallowance under section 80P. The Revenue appealed against the deletion of the addition under section 69A, which was upheld by the Tribunal based on the grounds that the assessee had provided sufficient evidence to substantiate the source of the deposits.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 37026 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Other Referred Cases: Pragati Co-operative Bank Ltd. vs. CIT, CIT V. Smt. P. K. Noorjahan, Citizen Co-operative Society Limited vs. Addl. CIT, Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. Commissioner of Income Tax, CIT v. Orissa Corporation (P) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMALJITH
• Assessee Lawyers: SANJIT KUMAR DAS
• Keywords: Corroborative evidences; Unexplained cash credit; TDS
• Section: 148; 143(3); 142(1); 143(2); 139(1); 194A; 13; 69A; 139; 80P

Judgement Text

"ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH: COCHIN BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 599-601/Coch/2023 Assessment Year: 2014-15, 2015-16 & 2016-17 ITO Non Corp Ward-2(4) Kochi Vs. Narakal Service Co-operative Bank Ltd. E91, St. Marys Church Road, Narakal Ernakulam 682505 Kerala PAN NO : AAAAN3554F APPELLANT RESPONDENT Appellant by : Shri. Amaljith, CA Respondent by : Shri. Sanjit Kumar Das, CIT DR Date of Hearing : 05.12.2024 Date of Pronouncement : 26.12.2024 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: These appeals at the instance of the Revenue is directed against the order of ld. CIT(A) / NFAC all dated 21.06.2023 passed for the AY 2014-15, 2015-16 and 2016-17. Since common issues are raised in these appeals, they are clubbed together, heard together and disposed of by a consolidated order for the sake of convenience and brevity. We now take up the appeal for AY 2014-15 in ITA No. 599/COCH/2023 for adjudication, the findings of which will mutatis mutandis apply to all the appeals clubbed. 2. The Revenue has raised the following common grounds of appeal in all these Asst. years except change in figures :- ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 2 of 9 ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 3 of 9 3. Brief facts of the case are that the assessee being a non filer of return is a service co-operative bank registered under the Co- operative societies Act and functioning under the regulation of state co-operative department. The business activity of the assessee is accepting and lending deposits and loan to its members. All the business activities are strictly as per the guidelines of the department. The accounts of the assessee are subjected to audit by the co-operative department as per the Societies Act. All the deposits made by the assessee as claimed are out of the funds received from the members of the assessee, the majority of which are farmers and fisherman community of that area. As per the information gathered from the ITBA system, as the assessee has entered huge transactions amounting to Rs. 6,15,76,827/- during the FY 2013-14 relevant to AY 2014-15, the assessment was reopened by issue of notice u/s. 148 of the Act. In response to notice u/s. 148 and 142(1) of the Act, the assessee filed the return of income along with the audited statement of accounts. Subsequently, notice u/s. 143(2) of the Act was also issued and the assessee responded to the notices and filed its reply. The AO completed the assessment u/s. 143(3) r.w.s. 147 r.w.s. 144B of the Act by making the following additions: i) Deduction claimed u/s. 80P amounting to Rs. 77,98,039/- was disallowed as the assessee did not file his return u/s. 139 (1) of the Act. Hence, the AO was of the opinion that as prescribed by section 80A(5), the benefit of deduction cannot be allowed to the assessee. ii) Unexplained cash credit u/s. 69A of the Act amounting to Rs. 6,15,40,000/- on the ground that the details of cash deposits submitted is incomplete on account of absence of few PAN, incomplete addresses etc. Further, assessee has not ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 4 of 9 provided any documentary evidence to prove that the names mentioned in the list have actually deposited the amount of cash and lastly, the AO was of the view that the credit worthiness of the person who have made such large cash deposits has also not been established. iii) Interest income as per TDS returns amounting to Rs. 3,68,270/- on the ground that TDS of Rs. 36,827/- has been deducted but the corresponding income has not been shown. Accordingly, as per the TDS return, Rs. 36,270/- was added back to return of income as interest income u/s. 194A of the Act. 4. Aggrieved by the assessment order u/s 147 of the Act read with section 144B of the Act dated 30.03.2022, the assessee preferred an appeal before the ld. CIT(A) / NFAC. On going through the Form 35, we found that the assessee has raised the grounds relating to unexplained cash credits under 69A of the Act only. 5. The ld. CIT(A) / NFAC however partly allowed the appeal of the assessee by deleting the addition of Rs. 6,15,76,827/- made by the AO as unexplained cash credit u/s. 69A of the Act by relying on the judgment of Hon’ble High Court of Gujarat in the case of Pragati Co-operative Bank Ltd. vs. CIT reported in 149 Taxmann 149. Further ld. CIT(A) / NFAC also relied upon the judgment of Hon’ble Supreme Court (SC) in the case of CIT V. Smt. P. K. Noorjahan (1999) 155 CTR (SC) 509/(1999) 237 ITR 570 (SC) as well as decision of ITAT Hyderabad in the Citizen Co-operative Society Limited vs. Addl. CIT in ITA No. 1003, 1004 / Hyd / 2011 on similar facts. ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 5 of 9 5.1 Further with regard to disallowance of deduction claimed u/s. 80P amounting to Rs. 77,98,039/-, the ld. CIT(A)/NFAC held that taking into account the prevailing judicial position on the allowability of the deduction u/s. 80P of the Act to co-operative society, the filing of a valid ROI u/s. 139(1) of the Act is prerequisite for the claim under the said section. Since the fact of the case of the assessee society are similar to the judgment of jurisdictional High Court in the case of Nileshwar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. Commissioner of Income Tax in ITA No. 120 of 2019, the ld. CIT(A)/NFAC sustained the action of AO in disallowing the deduction u/s. 80P of the Act. 6. Aggrieved by the order of the ld. CIT(A)/NFAC in deleting the unexplained cash credit u/s. 69A of the Act, the revenue has filed the present appeal before this Tribunal in all these appeals. 7. Before us, ld. CIT D.R., Shri. Sanjit Kumar Das vehemently submitted that as the assessee could not prove the genuineness and credit worthiness of the cash credits in its bank account which the assessee ought to have explained with supporting evidences, the deletion of addition made u/s 69A of the Act by the ld. CIT(A)/NFAC is unjustified & bad in law. Further, ld. DR submitted that the assessee did not furnish copy of the audit report audited by the registrar of the cooperative society at the time of assessment to prove that the assessee is a co-operative society. Further, it is submitted that ld. CIT(A)/NFAC ought to have considered that out of 213 depositors, identity of only 13 persons could be proved by the assessee and thus fails to fulfill the principles of mutuality. Lastly the ld. DR submitted that the fact of the case as relied upon by the ld. CIT(A)/NFAC in the case of Pragati Co-operative Bank Ltd. vs. CIT (supra) are distinguishable with the present facts. ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 6 of 9 8. The ld. A.R. on the other hand supported the orders of the ld. CIT(A)/NFAC and submitted that initial burden of providing details were submitted to the AO. During the course of assessment proceeding, the assessee submitted the details of 213 members along with their address to the AO. Further, quoting of PAN was not mandatory in the case of co-operative society / bank. Therefore, merely because some addresses of the members were incomplete and PAN of members were not provided, the AO is not justified in adding the same as unexplained cash credit u/s. 69A of the Act based on mere conjecture & surmises. 9. We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee is a co-operative society providing banking and related services to its members, the majority of which are farmers and fisherman community of that area. The AO held that the details of cash deposits submitted is incomplete on account of absence of few PAN, incomplete addresses etc. Further on the ground that the credit worthiness of the person who have made such large cash deposits has also not been established, AO added the same as unexplained money u/s. 69A of the Act. 9.1 Before proceeding further, it is appropriate to take a note of section 69A of the Act for the purpose of this case, which reads as under: “Section 69A. [ Unexplained money, etc. [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).] -Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 7 of 9 acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the ] [ Substituted by Act 18 of 1992, Section 35, for Explanation 3 (w.e.f. 1.4.1993).][Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for \" Income-tax Officer\" (w.e.f. 1.4.1988).][, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.] [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).]” 9.2 Thus, in order to levy tax u/s 69A of the Act, 3 conditions are needed to be satisfied by the AO namely:- a) The assessee is found to be the owner of any money, bullion, jewellery or valuable article. b) Such money, bullion, jewellery or valuable article is not recorded in the books of accounts, if any maintained by him for any source of income. c) The assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or valuable article or the explanation offered by him in the opinion of the AO satisfactorily. 9.3 In the present case, the assessee society is only custodian of the money of the members of the society. The assessee society cannot be treated as the owner of the money deposited in the bank accounts. Further, all these cash deposited in the bank account are of the members of the society only and was also duly recorded in the books of accounts of the society. Further the accounts of the assessee society are also subjected to audit by the co-operative department as per the Societies Act. It is not the case that the assessee society offers no explanation and source of acquisition of money. Therefore, we are of the considered opinion that the provision of Sec. 69A of the Act cannot be applied in the present case as the ingredient for applicability of sec. 69A of the Act is not fully satisfied. ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 8 of 9 9.4 The assessee society in this case had furnished all the details of 213 members available with them as provided by the members of the society but the AO disbelieved the same on account of absence of PAN and incomplete addresses of few members etc. and also on the ground that the credit worthiness of the members has also not been established. Therefore, we are of the opinion that assessee society has discharged the primary onus which was on it by offering explanation, and the said explanation has not found to be incorrect or false in any manner. The primary onus is on the tax payer to explain the source of the deposits but once this explanation is provided, the Revenue must establish that the explanation is false or sham. However, in the present case, the assessee society has duly explained the source of the cash deposits. The Revenue has not brought on record any evidence to suggest that the cash deposit were from unaccounted sources. The Hon’ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (159 ITR 78) held that it is the duty of the AO to substantiate his findings with appropriate evidence and not to rely on conjecture. As such, the explanation of the assessee society is reasonable and assessee has also furnished the details/data relating to the members/depositors to substantiate its claim. Merely because address of the few members are incomplete or PAN of Members are not furnished, the AO should not have drawn any adverse inference. 10. In these circumstances, we are of the view that AO has not made out a case calling for an addition u/s. 69A of the Act and we completely agree with the order of ld. CIT(A) / NFAC in deleting the additions made under unexplained cash credit u/s. 69A of the Act and accordingly we held that addition of Rs. 6,15,40,000/- is bad in law and deserve to be deleted. ITANo.599-601/Coch/2023 Narakal Service Co-Operative Bank Ltd., Ernakulam Page 9 of 9 In the result, all the appeals filed by the Revenue are dismissed. Order pronounced in the open court on 26th Dec, 2024 Sd/- (Prashant Maharishi) Vice President Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated: 26th Dec, 2024. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Cochin. "