ACIT-9(1), Hyderabad V. M/s.Citizen Co-operative Society Ltd., Hyderabad

ITA 1194/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77862 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Additional evidence
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1194/HYD/2013 ASSESSMENT YEAR 2009-10 THE ASST. CIT CIRCLE-9(1) HYDERABAD VS. M/S. CITIZEN CO-OPERATIVE SOCIETY LTD., HYDERABAD PAN: AAAAT3952F APPELLANT RESPONDENT APPELLANT BY: SRI D. SUDHAKAR RAO RESPONDENT BY: SRI S. RAMA RAO DATE OF HEARING: 01.04.2014 DATE OF PRONOUNCEMENT: 29.04.2014 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 23.05.2013 FOR AS SESSMENT YEAR 2009-10. 2. THE REVENUE RAISED THE FOLLOWING EFFECTIVE GROUNDS: 2. WHETHER THE LD. CIT(A) IS CORRECT IN LAW IN HOLDING THAT THE ASSESSEE HAS FOLLOWED THE KYC NORMS AND MAINTAINED SYSTEMATIC RECORD, WHEREAS THE ASSESSEE HAS NOT SUBMITTED THE REQUISITE DETAILS BEFORE THE AO, DURING THE COURSE OF SCRUTINY PROCEEDINGS. 3. WHETHER THE LD. CIT(A) IS CORRECT IN LAW IN HOLDING THAT THE SOCIETY IS EXCLUDED FROM THE PURVIEW OF SECTION 68 OF THE ACT, AS THE SOCIETY IS FOLLOWING KYC NORMS AS REQUIRED UNDER THE BANKING REGULATION ACT, AND ALSO IN VIEW OF ENORMITY OF THE 2 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ INFORMATION, WHERE AS THE SOCIETY HAS NOT OBTAINED LICENSE FOR RUNNING THE BANKING BUSINESS AND UNDER SUCH CIRCUMSTANCES THE SOCIETY CANNOT BE TREATED AS AN ASSESSEE ENGAGED IN THE BUSINESS OF BANKING. 4. BRIEF FACTS OF THE CASE ARE THAT FOR THE ASSESSMENT YEAR 2009- 10, THE ASSESSEE, ENGAGED IN THE BUSINESS OF BANKING, HAS FILED RETURN ADMITTING 'NIL' INCOME, AFTER CLAI MING DEDUCTION UNDER S.80P OF THE ACT AT RS.4,26,37,081. THOUGH THE RETURN WAS INITIALLY PROCESSED UNDER S.143(1), THE CASE WAS TAKEN UP FOR SCRUTINY, AND IN THE SCRUTINY ASSESSME NT, THE ASSESSEE WAS REQUESTED TO FURNISH DEPOSITS REGISTER ALONG WITH FULL DETAILS OF THE DEPOSITORS, I.E. NAME AND ADDRE SSES, ETC. IN ORDER TO VERITY THE GENUINENESS OF THE TRANSACTIONS . THERE ARE SOME CASH DEPOSITS ALSO. THE AUTHORISED REPRESENTAT IVE FOR THE ASSESSEE HAS FURNISHED SOME COMPUTERIZED SHEETS OF THE FIXED DEPOSIT ACCOUNTS, WHICH CONTAINED ONLY THE AC COUNT NUMBER, MEMBER'S NAME, OPENING BALANCE, DEBIT, CRED IT AND BALANCE AMOUNT, BUT NOT ADDRESSES OF THE DEPOSITORS , WHICH WERE NOT MADE AVAILABLE. OBSERVING THAT IN THE ABSE NCE OF THE ADDRESSES, IT IS NOT POSSIBLE TO VERIFY THE GENUINE NESS OF THE TRANSACTIONS, THE ASSESSING OFFICER HELD THAT DIFFE RENCE BETWEEN THE CLOSING BALANCE AS ON 31.3.2009 OF RS. 160,24,48,937 AND OPENING BALANCE AS ON 1.4.2008 OF RS. 121,70,76,143, VIZ., RS. 38,53,72,794 REPRESENTS TH E INCOME OF THE ASSESSEE. HE ACCORDINGLY TREATED THE SAID DIFFE RENCE OF RS. 38,53,72,794, REPRESENTING EFFECTIVELY THE DEPOSITS RECEIVED DURING THE PREVIOUS YEAR, AS THE INCOME OF THE ASSE SSEE. HE ACCORDINGLY MADE AN ADDITION OF RS. 38,53,72,794 UN DER S. 68 OF THE ACT, WHILE COMPLETING THE ASSESSMENT ON A TO TAL INCOME 3 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ OF RS. 42,80,89,880, VIDE ASSESSMENT ORDER DATED 19 .12.2011 PASSED UNDER S.143(3) OF THE ACT. 5. ON APPEAL, THE CIT(A) DELETED THE SAID ADDITION, FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2006-07 AND 2007- 08 IN ITA NOS. 1556 TO 1159/HYD/2009, WHEREBY THE TRIBUNAL, VIDE ITS ORDER DATED 26.6.2010 DELETED THE PENALTIES LEVIED UNDER S. 271 D AND UNDER S. 271E OF THE ACT UNDER SIMILAR CIRCUMSTANCE S, BASED ON THE ADDITION MADE UNDER S. 68 OF THE ACT. 6. THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL ON EARLIER OCCASION. THE TRIBUNAL OBSERVED THAT AS FA R AS THE YEAR UNDER APPEAL IS CONCERNED, THE CIT(A) HAS MERELY RE LIED ON THE ORDER OF THE TRIBUNAL DATED 26TH JUNE, 2010 IN ASSE SSEE'S OWN CASE FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 I N ITA NOS. 1156 TO 1159/HYD/2009, WHEREIN THE ISSUE RELATES TO DELETION OF PENALTIES LEVIED UNDER S. 271D AND 271E OF THE A CT, AND NOT WITH REGARD TO THE ADDITIONS MADE UNDER S. 68 OF TH E ACT, AND THE CIT(A) NOT JUSTIFIED IN STRAIGHT AWAY DELETING THE ADDITIONS BASED ON THE DECISION FOR THE OTHER YEARS NOTED ABO VE. SHE HAS NOT DONE THE EXERCISE WHICH THE CIT(A) HAS DONE FOR THE EARLIER YEARS, DISCUSSED IN THE EARLIER ORDER OF THE TRIBUN AL. AS SUCH, IT IS APPROPRIATE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE FOR THE YEAR UNDER APPEAL, TO SET ASIDE THE ORDER OF TH E CIT(A) AND REMIT THE MATER BACK TO THE FILE OF THE CIT(A), WHO SHALL BRING ON RECORD, THE FACTS RELATING TO THE ASSESSMENT YEA R UNDER CONSIDERATION. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS, INCLUDING THE NAMES AND ADDRESSES OF THE D EPOSITORS 4 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ WITH PAN NUMBER, AS PER THE KYC SCHEME, AS COLLECTE D BY THE ASSESSEE. THE CIT(A) SHALL THEREAFTER DECIDE THE MA TTER AFRESH IN ACCORDANCE WITH LAW AND ALSO KEEPING IN MAKING T HE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 20 07-08, AND OF COURSE, AFTER GIVING REASONABLE OPPORTUNITY OF H EARING TO THE ASSESSEE. 7. CONSEQUENT TO THIS, THE CIT(A) ONCE AGAIN EXAMINED THE ISSUE RELATING TO SECTION 68 OF THE ACT AND OBSERVE D AS FOLLOWS: (A) THE ASSESSEE IS SOCIETY REGISTERED AND RECOGNISED B Y STATE GOVERNMENT. (B) THE SOCIETY IS ENGAGED IN THE ACTIVITY OF BANKING F OR IT'S MEMBERS, AS APPROVED BY RBI AND GOVERNED BY BANKING REGULATION ACT, 1949. (C) THE ASSESSEE SOCIETY WAS MAINTAINING SYSTEMATIC RECORD, AT THE TIME OF ACCEPTING THE DEPOSITS AS WE LL AS REFUNDING THE AMOUNTS TO THE MEMBER DEPOSITORS AND FOLLOWED KYC NORMS, WITH THE SOCIETY GOVERNED BY INSPECTIONS UNDERTAKEN BY THE CONCERNED REGULATORY AUTHORITIES. (D) THE ASSESSING OFFICER MERELY RELIED UPON THE FACTS OF THE CASE FOR AY 2008-09 AND NO ENQUIRIES WERE MADE OR DETAILS WERE CALLED FOR TO EXAMINE THE GENUINENESS OF THE CREDITWORTHINESS OF THE DEPOSITORS FOR THE YEAR AND THE ADDITION WAS MADE ON THE NET OF OPENING AND CLOSING BALANCES OF THE DEPOSITS FOR THE YEAR AND THE ADDITIONS WERE MADE BY FALLING ON THE FINDINGS AND OBSERVATIONS OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR NAMELY AY 2008-09 AND EARLIER YEARS. THERE IS NO CHANGE IN TH E ACTIVITIES AND PRACTICES FROM THE EARLIER YEAR AND THE AFFIDAVIT FILED IN THIS REGARD AND THE INFORMATION FILED INDICATE THE SAME, AS SUCH THE DECISIONS OF THE EAR LIER YEAR ARE APPLICABLE TO THE YEAR UNDER REFERENCE, ON SIMILAR SET OF FACTS. (E) REGARDING THE ENORMITY OF INFORMATION RELATED TO 5 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ 68000 AND ODD NUMBER OF MEMBERS OF SOCIETY AND LIMITATIONS IN MAINTAINING AND FURNISHING OF INFORMATION OF THE DEPOSITORS, THE HON'BLE ITAT, HYDERABAD HAS ALREADY MADE THE SPECIFIC OBSERVATIONS, IN ASSESSEE'S OWN CASE RELATED TO EARLIER YEARS, VIDE IT'S ORDER IN APPEAL BEARING IT A NO. 1200/HYD/2011, ITA NO. 1201/HYD/2011 AND ITA NO. 1049/HYD/2011, DATED 02.07.2012 AND ORDERED THE DELETION OF ADDITION U/S. 68 OF IT ACT, SAYING TO T HE EFFECT THAT THE ASSESSEE SOCIETY STRICTLY FOLLOWED KYC NORMS AND WHEN THE SOCIETY IS HAVING MEMBERS OF 68000, YOU CANNOT COME TO THE CONCLUSION THAT THE BANK DOES NOT HAVE FURNISHED IDENTITY AND PROOF OF DEPOSITORS BY VERIFYING FEW NUMBERS. 8. THE CIT(A) FURTHER OBSERVED THAT THE FACTS OF THE C ASE INDICATE AND PROVE THAT THE SOCIETY IS CARRYING ON THE BANKING ACTIVITY, AS PER BANKING REGULATIONS AND BY CAPTURI NG ALL THE REQUIRED INFORMATION IN THE PRESCRIBED FORMATS, WHI LE ACCEPTING THE DEPOSITS FROM ITS MEMBERS. EVEN IN A CASE WHERE SUCH INFORMATION IS NOT VERIFIABLE FOR THE REASONS OF ENORMITY OF INFORMATION, THE SOCIETY WAS EXCLUDED FROM THE P URVIEW OF SECTION 68, AS FAR AS THE DEPOSITS FROM MEMBERS ARE CONCERNED, AS THE ACCEPTANCE OF DEPOSITS BY ASSESSE E SOCIETY CANNOT BE EQUATED WITH OTHER KIND OF ASSESSES, IN W HOSE CASES NORMALLY THE DEPOSITS ARE ACCEPTED FROM THE PEOPLE CONNECTED WITH THE TERMS OF SEC. 131 OF NEGOTIABLE INSTRUMENT S ACT AND THE ASSESSEE SOCIETY IS NOT OBLIGED TO QUESTION THE SOURCE OF DEPOSITS MADE BY ITS MEMBER CUSTOMERS. THUS THE DE CISIONS OF TRIBUNAL AND THE FIRST APPELLATE AUTHORITY FOR E ARLIER ASSESSMENT YEARS, IN ASSESSEE'S OWN CASE HAS UPHELD THE ISSUE HOLDING THAT : 6 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ (A) THE ASSESSEE'S SOCIETY CANNOT BE EQUATED WITH OTHER ASSESSES WHO ARE IN THE LINE OF BANKING ACTIVITY AN D THAT THE SOCIETY'S ONUS IS DEEMED TO HAVE BEEN DISCHARGED WITH MAINTENANCE OF REGULATED AND SYSTEMATIC ACCOUNTING RECORD AND IT IS NOT CONCERNE D WITH THE CREDITWORTHINESS OF DEPOSITOR MEMBERS; (B) THE ASSESSEE SOCIETY IS NOT EXPECTED TO CAUSE INDEPENDENT ENQUIRIES ABOUT THE IDENTITY OF DEPOSITORS AND THEIR CREDITWORTHINESS, IN VIEW OF REGULATIONS AND INSPECTIONS BY THE AUTHORITIES CONCERNED. (C) FOR THE YEAR UNDER REFERENCE, THERE IS NO CHANGE IN FACTS, COMPARED TO EARLIER YEARS, IN WHOSE CASE THE DECISIONS OF THE HON'BLE ITAT, AS REGARD TO THE ADDITIONS U/S. 68 OF IT ACT ARE APPLICABLE. FURTHER , THE AO RELIED UPON THE DECISIONS OF HIS PREDECESSOR IN THE EARLIER YEARS AND AS SUCH, THE DECISION OF THE CIT(A) AND HON'BLE ITAT ARE APPLICABLE TO THE YEAR UNDER REFERENCE, WITH THE SAME SET OF FACTS AS APPLICABLE/RELATABLE TO EARLIER YEARS. NO FRESH FAC TS, WERE BROUGHT ON THE RECORD BY THE AO IN ASSESSMENT ORDER AND NO NEW SET OF FACTS EMERGED, BASED ON THE INFORMATION FURNISHED AND BROUGHT ON RECORD EITHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OR THE SET ASIDE APPELLATE PROCEEDINGS BEFORE CIT(A), AS REGARD TO THE METHODOLOGY IN ACCEPTING THE DEPOSITS BY THE SOCIETY FROM ITS MEMBER DEPOSITORS. WITH THE SET OF FACTS REMAINING THE SAME, THE DECISION OF IT AT SQUARELY APPLICABLE TO THE YEAR UNDER REFERENCE AND ADDITION U/S. 68 ARE NOT SUSTAINABLE, SINCE THE PROVISIONS OF SEC. 68 ARE HELD TO BE NOT APPLICABLE TO THE ASSESSEE SOCIETY. THUS, ON THE LIMITED ISSUE OF ADDITION U/S. 68, TO THE EXTENT OF RS. 38,53,72,794 /-, AS SET ASIDE BY HON'BLE ITAT STAND DECIDED IN FAVOU R OF THE ASSESSEE AND THE ADDITION STAND DELETED. THI S GROUND OF APPEAL IS TREATED AS ALLOWED. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 7 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD. THE LEARNED DR TRIED TO DISTINGUISH EAR LIER ORDER OF THE TRIBUNAL BY PLACING RELIANCE ON THE FOLLOWING J UDGEMENTS: (A) CIT VS. DEVI PRASAD VISWANATH PRASAD (72 ITR 19 4) (SC) : WE HAVE CAREFULLY GONE THROUGH THIS JUDGEMENT. THI S JUDGEMENT IS DELIVERED UNDER INDIAN INCOME-TAX ACT , 1922, WHEREIN THEIR LORDSHIPS HELD THAT THERE IS NO THING IN LAW WHICH PREVENTS THE ITO IN AN APPROPRIATE CAS E IN TAXING BOTH THE CASH CREDITS, THE SOURCE AND NATURE OF WHICH IS NOT SATISFACTORILY EXPLAINED, AND THE BUSI NESS INCOME ESTIMATED BY HIM U/S. 13, AFTER REJECTING BO OKS OF ACCOUNT OF THE ASSESSEE AS UNRELIABLE. BEING SO , THIS JUDGEMENT CANNOT BE APPLIED TO THE FACTS OF THE PRE SENT CASE. (B) SHANKAR INDUSTRIES VS. CIT (114 ITR 689) (CAL) & (C) C. KANT & CO. VS. CIT (126 ITR 63) (CAL): WHEREIN IT WAS HELD THAT IN RESPECT OF CASH CREDITS THE ASSESSEE SHOULD NOT ONLY PROVE IDENTITY OF CREDITOR S BUT ALSO CREDITWORTHINESS OF THE CREDITORS AND GENUINEN ESS OF THE TRANSACTIONS. ON THE PROPOSITION LAID DOWN BY THE CALCUTTA HIGH COURT, WE HAVE NO DISPUTE. 10. IN CASE OF CREDIT APPEARING IN BOOKS OF ACCOUNT, TH E ASSESSEE IS BOUND TO EXPLAIN IDENTITY OF THE PARTIE S, CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS. THESE ARE THE BASIC REQUIREMENTS OF PROVISIONS OF 8 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ SECTION 68 OF THE ACT. IN THE PRESENT CASE THE ASS ESSEE IS IN BANKING BUSINESS AND ASSESSEE HAS COMPLIED WITH KYC NORMS. THE TRIBUNAL IN ITS EARLIER ORDER IN ITA NO. 1003/H YD/ 2011 & ORS. IN ASSESSEES OWN CASE DATED 2.7.2012, AFTER E LABORATELY DISCUSSING THE ENTIRE FACTS AND CIRCUMSTANCES OF TH E CASE OBSERVED AS FOLLOWS: '8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. WE HAVE CONSIDERED THE ASSESSMENT ORDER, CIT(A) ORDER AND SUBMISSION OF BOTH THE PARTIES. THE ASSES SEE IS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO-OPERAT IVE SOCIETIES ACT. IT IS GOVERNED BY ITS BY -LAWS, RULE S AND REGULATIONS UNDER THE SUPERVISION AND CONTROL OF RE GISTRAR OF SOCIETIES. THE SOCIETY IS CARRYING ON THE BANKING B USINESS FOR ITS MEMBERS. IT IS OPERATING THROUGH 23 BRANCHES AN D EACH OF THE BRANCHES IS HEADED BY A BRANCH MANAGER AND OTHE R STAFF. THE SOCIETY IS CARRYING ON THE BANKING BUSINESS TO ITS OWN MEMBERS AND THE BUSINESS IS CARRIED ON WITH CERTAIN SET OF GUIDELINES AND PROCEDURES. AS PER THE BY - LAWS OF THE SOCIETY ONLY MEMBERS EITHER PERMANENT OR NOMINAL SH ALL TRANSACT IN THE SOCIETY. THE STAFF EMPLOYED IN THE BRANCH ACCEPTS THE CASH DEPOSITS ALONG WITH THE APPLICATIO N AT THE COUNTERS. THE STAFFS MAKES SURE THAT ALL THE COLUMN S OF THE APPLICATION ARE FILLED AND REQUISITE SUPPORTING DOC UMENTS I.E. PROOF OF ADDRESS, PROOF OF IDENTITY AND PHOTOGRAPHS OF THE APPLICANT AS STIPULATED BY RBI IN KYC (KNOW YOUR CUSTOMER) NORMS. TO REGULATE THE TRANSACTIONS THE S TAFF ACCEPTS THE CASH AT THE COUNTER AND ON VERIFICATION THE BRANCH MANAGER ISSUES THE CERTIFICATE. THE AMOUNT S O RECEIVED IS RECORDED IN THE CASH BOOK AS WELL AS DE POSIT REGISTER MAINTAINED FOR THIS PURPOSE. THE APPLICATI ON IS CONTAINING THE DETAILS OF NAME AND ADDRESS ALONG WI TH PROOF OF ADDRESS GIVEN AT THE TIME OF OPENING ACCOUNT. FR OM THE ABOVE FACTS IT IS PROVED THAT THE ASSESSES HAS PROV ED THE IDENTITY OF THE DEPOSITOR. PERTAINING TO THIS THE A SSESSING OFFICER DID NOT BRING ANY POSITIVE MATERIAL EVIDENC E TO SHOW THAT THERE IS CONTRAVENTION AND VIOLATION OF KYC NO RMS PRESCRIBED BY THE BANKING REGULATION ACT, WHILE OPE NING ACCOUNT WITH ANY BANKING INSTITUTION. MORE OVER IT IS THE DUTY OF THE ASSESSEE TO COLLECTED PROPER PROOF OF ADDRES S AT THE TIME OF OPENING ACCOUNTS. IT IS COMMON PRACTICE THA T ALL ARE HAVING PERMANENT ADDRESS PROOF WITH THEM. THE PERSO NS RESIDING IN RENTED HOUSE WILL CHANGE THE RESIDENCE FREQUENTLY AND NOT INFORMED BANK. SUCH BEING THE CASE, IT IS T HE DUTY OF THE DEPOSITOR TO INFORM THE CHANGE OF ADDRESS TO TH E BANK. IN SUCH CASES THE BANK WILL NOT HAVE PRESENT ADDRESS O F THE DEPOSITOR. THERE MAY BE FEW INSTANCES WHERE THE LET TERS SENT 9 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ BY THE AO RETURNED FOR THE REASON NO SUCH ADDRESS. WHEN THE SOCIETY IS HAVING MEMBERS OF 63,000, YOU CANNOT COM E TO A CONCLUSION THAT THE BANK DOES NOT HAVE FURNISHED ID ENTITY AND PROOF OF DEPOSITOR BY VERIFYING FEW NUMBERS. 9. IT IS FURTHER OBSERVED THAT THE SOCIETY HAS OPEN ED A SB ACCOUNT WHEREVER IT HAS ACCEPTED DEPOSIT FROM ITS M EMBERS TO CREDIT INTEREST PERIODICALLY. THERE IS FACILITY FOR THE DEPOSITOR TO WITHDRAW INTEREST. THERE IS NO DISPUTE WITH REGARD TO PAYMENT OF INTEREST. THE CUSTOMERS HAVE R EGULARLY WITHDRAWN THE AMOUNT FROM THEIR SB ACCOUNTS WHICH A RE PROVED THAT THE AMOUNT DEPOSITED BELONGS TO THE DEP OSITOR AND NOT BELONGS TO THE ASSESSEE. 10. THE SOCIETY HAS MAINTAINED SYSTEMATIC RECORDS A ND BOOKS OF ACCOUNTS FOR ITS BUSINESS. IT HAS ACCEPTED ALL T HE DOCUMENTS AS REQUIRED UNDER KYC NORMS. IT HAS ISSUE D A PROPER DEPOSIT CERTIFICATE AND CREDITED THE INTERES T AS WELL AS THE MATURITY PROCEEDS DIRECTLY CREDITED ITS DEPOSIT OR SAVINGS BANK ACCOUNT. IN NO OCCASION IT HAS DIRECTLY PAID T HE DEPOSITS DIRECTLY TO THE DEPOSITOR. IN THE PRESENT CASE THE ASSESSEE SOCIETY IS SUBJECTED TO RULES LAID DOWN BY MULTI-ST ATE CO- OPERATIVE SOCIETY ACT AND RULES. THE SOCIETY BOOKS OF ACCOUNTS ARE SUBJECTED TO AUDIT BY THE REGULATORY B ODIES EVERY YEAR. THEREFORE, THE ASSESSEE CANNOT BE EQUAT ED WITH OTHER NORMAL BUSINESS CONCERNS. SINCE THE ASSESSEE HAS NO CONTROL OVER THE DEPOSITS AS IT IS THE PROPERTY OF THE DEPOSITORS AND THE SOCIETY REQUIRED TO PAY ON DEMAN D. THE CUSTOMERS USUALLY GO THE BANK FOR MAKING DEPOSIT TO EARN BETTER INTEREST. THE CUSTOMERS WILL GO THE BANKS WH ERE THEY GET MORE INTEREST. THERE IS NO DISPUTE IN THESE ASS ESSMENT YEARS THE ASSESSEE HAS BEEN CARRYING OUT THE BANKIN G BUSINESS. WHETHER OR NOT THE BUSINESS IS CARRIED OU T WITH OR WITHOUT PERMISSION, IT IS BOUND BY THE BANKING REGU LATIONS ACT, 1949. THE DEPOSITS AND LOANS ARE JUST BUYING A ND SELLING ACTIVITY FOR THE ASSESSEE. THE AMOUNTS MAINTAINED A T THE CUSTOMERS ACCOUNT IS NOT IN THE CONTROL OF THE SOCI ETY AS IT IS REQUIRED TO PAY THE DEPOSITS ON DEMAND. IN THE PRES ENT CASE WHAT IS REQUIRED TO BE DONE BEFORE ACCEPTING THE DE POSIT IS TO TAKE PROPER PROOF OF ADDRESS, IDENTITY, PHOTOGRAPH AND INTRODUCTION FOR OPENING AND ACCEPTING THE DEPOSITS . ONCE THE ASSESSEE COMPLIED WITH THE REQUIREMENT IT IS NO T THE ASSESSEE SOCIETY DUTY TO QUESTION ABOUT THE SOURCE OF DEPOSITOR AND IT IS NOT ITS DUTY TO SEEK ANY OTHER PARTICULARS. ONLY THE REQUIREMENT IS, TO REPORT TO THE CONTROLLI NG AUTHORITIES WHEREVER SUSPICIOUS TRANSACTIONS ARE RE PORTED OR DOUBT ABOUT THE ANTI MONEY LAUNDERING ACT. THEREFOR E THESE FEATURES DISTINGUISH THE CASE OF THE ASSESSEE FROM OTHER NORMAL ASSESSEE. FURTHER THE ASSESSEE HAS TO MAINTA IN THE CONFIDENTIALITY IN RESPECT OF INFORMATION COLLECTED FROM ITS CUSTOMERS, SUCH INFORMATION CANNOT BE DIVULGED TO O UTSIDERS. THERE IS NO FINDINGS FROM THE ASSESSING OFFICER THA T THE ASSESSEE VIOLATED THE REGULATORY AUTHORITIES. USUAL LY THE 10 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ BANKS ARE NOT REQUIRED TO GO FOR VERIFYING THE CORR ECTNESS OF THE DETAILS FURNISHED BY THE DEPOSITOR AND SOURCES OF THE AMOUNT DEPOSITS. THE DEPOSITS ACCEPTED AND REPAID I S PART OF THE ASSESSEE BUSINESS, IF IT PUT HARD RULES AND CON DITIONS ITS BUSINESS MAY NOT BE AS USUAL. THEREFORE IT CANNOT B E SAID THAT IT HAS VIOLATED THE PROVISIONS AND DID COMMIT ANY INFRINGEMENT OR IT IS INCORRECT TO SAY THAT THERE W AS ANY DELIBERATE ATTEMPT TO ACCOMMODATE BLOCK MONEY. THE SOCIETY IS ACTED IN BON FIDE MANNER AND COMPLIED WITH THE K YC NORMS AS PRESCRIBED FOR BANKING INSTITUTIONS AND DU E DILIGENCE. THEREFORE, IN OUR OPINION THE SOCIETY DI SCHARGED THE ONUS OF PROOF IN RESPECT OF IDENTITY AND GENUIN ENESS OF THE TRANSACTIONS AS FOR AS A BANKING IS CONCERNED. THE FACTS OF THE CASE ARE SIMILAR TO THAT OF ITAT PUNE BENCH IN THE CASE OF SRI MAHAVIR NILGARI SAHAKARI PAT SANSTHA LTD VS. DCIT REPORTED IN 74 TTJ 793 AND THE DECISION OF THE HON' BLE GUJARATH HIGH COURT IN THE CASE OF CIT VS. PRAGATHI CO- OPERATIVE BANK LTD., REPORTED IN 278 ITR 170. THERE FORE THE ONUS ON THE ASSESSEE TO PROVE THE CREDIT IS LIMITED TO THE MAINTENANCE OF SYSTEMATIC RECORDS COMPLY THE KYC NO RMS. IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO VE RIFY THE CREDIT WORTHINESS OF THE DEPOSITOR. THEREFORE, WE H OLD THAT THE ASSESSEE DISCHARGED THE ONUS CASTE ON HIM IN TH IS REGARD. 11. IT IS SEEN FROM ORDER OF THE TRIBUNAL B BENCH H YDERABAD IN ITA NO. 1156-1159/HYD/ 09 DATED 26.02.2010 IN AS SESSEE OWN CASE WHILE DECIDING THE ISSUE FOR LEVY OF PENAL TY U/S 271D AND 271E AND IT HAD AN OCCASION TO GO INTO THE FACTS WITH REFERENCE TO THE DEPOSITS MADE BY THE MEMBERS OF THE SOCIETY. THE ITAT OBSERVED THAT THE ASSESSEE IS MAI NTAINED PROPER BOOKS OF ACCOUNTS PERTAINING TO ACCEPTING DE POSITS FROM ITS MEMBERS AND ADVANCING LOANS. THEREFORE WE ARE OF THE OPINION THAT THERE CANNOT BE ANY UNEXPLAINED DE POSITS WITHIN THE MEANING OF SECTION 68 OF THE INCOME TAX ACT, 196, IF THE ASSESSEE PROVES TO THE SATISFACTION OF THE A SSESSING OFFICER ITS DEPOSITORS IDENTITY BY FURNISHING PROOF OF ADDRESS, PROOF OF IDENTITY AND PAN NUMBERS. 12. IT IS FURTHER OBSERVED THAT THE MEMBERSHIP OF T HE SOCIETY IS HUGE AND THE NUMBER OF MEMBERS OF THE SOCIETY IS ABOUT 63,000. THE SOCIETY HAS COMPUTERIZED ITS OPERATIONS AND ALL THE BUSINESS OF THE SOCIETY IS AVAILABLE IN THE COM PUTER SOFTWARE. THE SOCIETY HAS COLLECTED ALL THE INFORMA TION FROM ITS DEPOSITS AS A NORMAL BANKING INSTITUTION AND CO MPLIED THE KYC NORMS. IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO GO IN CHECKING THE ADDRESS AND OTHER PROOF OF IDENT ITY GIVEN BY THE DEPOSITORS. WHAT IS REQUIRED TO BE DONE AS P ER THE NORMAL BANKING SYSTEM IS TO REPORT THE CONTROLLING AUTHORITIES IN CASE ANY SUSPICIOUS TRANSACTIONS ARE REPORTED. THE PRESENT CASE THE ASSESSEE HAS COMPLIED WITH ALL THE ELEMENTS AS A BANKING INSTITUTION THUS DISCHARGED O NUS OF PROOF OF IDENTITY OF THE DEPOSITOR. THERE IS NO SIN GLE INSTANCE FOUND OUT BY THE ASSESSING OFFICER THAT THE ASSESSE E IS MAKING 11 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ DELIBERATE ATTEMPT TO ACCOMMODATE TAX DODGERS. IT I S SEEN FROM THE ASSESSMENT ORDER THAT OUT OF 30 DEPOSITORS EXAMINED BY THE ASSESSING OFFICER ALL THE DEPOSITORS ARE IDE NTIFIED AND ACCEPTED THE DEPOSITS MADE BY THEM WITH THE SOCIETY . THE DEPARTMENT EXAMINED THEM, ALL ARE DISCLOSED THE DEP OSITS IN THEIR INCOME TAX RETURNS. THERE IS NO EVIDENCE WITH THE ASSESSING OFFICER THAT, THE DEPOSITS MADE BY THE DE POSITORS REPRESENT THE INCOME OF THE SOCIETY. IN THIS REGARD THE REFERENCE IS MADE TO THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF CIT VS. P.K. NOORJAHAN REPORTE D IN 237 ITR 576 WHEREIN IT WAS HELD THAT THE WORD MAY LEAVE S IT TO THE DISCRETION OF THE ASSESSING OFFICER WHETHER AN ADDITION UNDER THE DEEMING PROVISIONS COULD BE MADE OR NOT. IN EACH CASE THE ASSESSING OFFICER HAS TO ANALYZE THE CIRCU MSTANCES AND PROCEED TO APPLY THE PROVISIONS OF SECTION 68. 13. IT IS FURTHER OBSERVED THAT, IN THE PRESENT CAS E, THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON BANK ING BUSINESS FOR ITS MEMBERS AND ITS MAIN BUSINESS IT T O ACCEPT DEPOSITS FROM ITS MEMBERS AND LEND LOAN TO ITS MEMB ERS. WHILE ACCEPTING THE DEPOSITS IT HAS COMPLIED THE REQUIREMENTS AS A BANKING INSTITUTION BY COLLECTING DOCUMENTS SPECIFIED BY THE RBI IN KYC NORMS. IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO VERIFY TH E CORRECTNESS OF THE DETAILS GIVEN BY THE DEPOSITORS, VERIFYING THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTH INESS OF THE DEPOSITOR. BUT CERTAINLY IT IS REQUIRED TO HAVE PROPER PROOF OF IDENTITY OF THE DEPOSITOR. UNDOUBTEDLY THE ASSESSEE BEING CO-OPERATIVE SOCIETY PROVIDING CREDIT FACILIT IES TO ITS BANK NEED NOT TO PROVE THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION RELATING TO ACCEPTAN CE OF DEPOSITS, BUT IT SHOULD PROVE THE IDENTITY OF DEPOS ITOR BY FURNISHING THE PROPER PROOF OF ADDRESS AND IDENTITY TO THE SATISFACTION TO THE ASSESSING OFFICER, WHICH HAS BE EN COMPLIED WITH BY THE ASSESSEE. 14. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE AMR ITSAR BENCH IN THE CASE OF ACIT VS. CITIZEN URBAN COOPERA TIVE BANK LTD. (120 ITD 513) (AMRITSAR). AFTER RECORDING THE ENTIRE FACTS IT WAS HELD AS FOLLOWS: '26. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE FACTS ARE NOT IN DISPUTE. T HE ISSUE IS AS TO WHETHER THE PROVISIONS OF S. 68 OF T HE ACT ARE APPLICABLE AND WHETHER IT HAS RIGHTLY BEEN APPL IED TO THE ASSESSEE BANK ? THE LEARNED CIT(A), WHILE DELETING THE ADDITION MADE HAS OBSERVED THAT THE ASSESSEE'S CASE WAS SUBJECT TO RULES LAID DOWN UNDE R THE BANKING REGULATIONS ACT, AS ALSO THE REGULATION S OF THE RBI; THAT ALL THE BANKING OPERATIONS ARE UNDER AUDIT AND REPORT IN THIS REGARD GOES TO THE RBI; THAT THEREFORE, THE CASE OF THE ASSESSEE BANK COULD NOT BE 12 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ PUT AT PAR WITH THE CASES OF OTHER PERSONS, SINCE T HE BANK DOES NOT HAVE ANY CONTROL IN RESPECT OF THE AMOUNTS CREDITED IN ITS ACCOUNTS; THAT THE BANK IS TO MAINTAIN ACCOUNTS OF ITS CUSTOMERS, WHICH ACCOUNTS CAN BE OPERATED ONLY BY THOSE CUSTOMERS AND THE BAN K DOES NOT HAVE ANY CONTROL OVER THE MOUNTS IN THE ACCOUNTS. WHILE HOLDING IN FAVOUR OF THE ASSESSEE, THE LEARNED CIT(A) HAS DULY TAKEN INTO CONSIDERATION TH E PROVISIONS UNDER S. 68 OF THE ACT, WHICH ARE EXPLIC IT. 27. AS PER S. 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATIO N ABOUT THE NATURE AND SOURCE THEREOF, OR THE EXPLANA TION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE BUSINESS OF THE ASSESSEE BANK IS TO CARRY ON BANKING TRANSACTIONS. THE BANK, FOR ALL IT S BANKING ACTIVITIES, IS STRICTLY GOVERNED BY THE BAN KING REGULATIONS ACT, 1949. THE SAID ACT DEFINES A BANKI NG COMPANY AS A COMPANY WHICH TRANSACTS THE BUSINESS O F BANKING. 'BANKING' IS DESCRIBED AS ACCEPTING, FOR T HE PURPOSE OF LENDING OR INVESTMENT OF MONEY, DUE FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWAL BY CHEQUE, DRAFT ORDER OR OTHERWISE. THU S, THE DEPOSITS HELD BY THE ASSESSEE ARE ITS STOCK-IN- TRADE. THE AMOUNTS IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE BANK WERE NOT IN THE CONTROL OF THE ASSESS EE BANK. THEY ARE THE DEPOSITS IN THE SAVINGS ACCOUNTS OF THE CUSTOMERS OF THE ASSESSEE BANK. TO THESE DEPOSI TS, S. 68 OF THE ACT IS NOT ATTRACTED. IN THE CASES OF BANKING COMPANIES LIKE THE ASSESSEE, THE CUSTOMER'S IDENTIT Y IS REQUIRED TO BE TAKEN BY THE BANK WITH PROPER INTRODUCTION, PHOTOGRAPHS AND ADDRESS, ETC. THIS IS SO, BECAUSE ANY PERSON FROM THE GENERAL PUBLIC CAN OPEN THE ACCOUNT WITH THE BANK. THE OTHER CASES OF ACCEPTANCE OF DEPOSITS CANNOT BE EQUATED WITH THAT OF THE BANK. IN THOSE CASES, NORMALLY, DEPOSITS ARE ACCEPTED FROM THE PEOPLE CONNECTED WITH OR KNOWN TO THE DEPOSITEES. IT IS IN ACCORDANCE WITH THE TERMS OF S. 131 OF THE NEGOTIABLE INSTRUMENTS ACT THAT THIS REQUIREMENT IS THERE. AS SUCH, IF INTRODUCTION OF T HE CUSTOMER HAD BEEN DULY TAKEN BY THE BANK, THE BANK WOULD NOT BE LIABLE IN CASE OF A FRAUD. MOREOVER, PERTINENTLY, IF THE CUSTOMER SEEKS TO OPERATE THE ACCOUNT WITH CASH ONLY, THE BANK CAN OPEN AN ACCOUN T WITHOUT INTRODUCTION AND WITHOUT PROPER IDENTIFICAT ION. FURTHER, THE BANK IS NOT OBLIGED TO QUESTION THE SO URCE OF DEPOSITS MADE BY ITS CUSTOMERS. ALSO, THE CUSTOM ERS CAN RETAIN THE AMOUNT IN HIS SAVINGS BANK ACCOUNT W ITH THE ASSESSEE BANK FOR ANY PERIOD. THE AMOUNT HAS TO BE REPAID BY THE BANK TO ITS CUSTOMERS IMMEDIATELY ON 13 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ DEMAND. THESE FEATURES DISTINGUISH THE CASE OF THE BANK FROM OTHER ORDINARY ASSESSEES. THEREFORE, THE PROVISIONS OF S. 68 OF THE ACT ARE NOT APPLICABLE T O THE BANK AS THEY ARE IN THE CASES OF THE OTHER ASSESSEE S. STILL FURTHER, UNDER S. 35 OF THE BANKING REGULATIO NS ACT, 1949, A BANKING COMPANY IS SUBJECT TO PERIODIC AL INSPECTIONS AND AUDIT BY THE RBI AND IN CASE ANY DEFAULT IS FOUND, THE BANK IS LIABLE FOR HEAVY MONE TARY PENALTY, BESIDES CANCELLATION OF ITS LICENSE. THIS IS NOT THE CASE WITH OTHER ASSESSEES. A BANK, UNDER THE RB I GUIDELINES, IN ORDER TO MAINTAIN CONFIDENTIALITY IN RESPECT OF THE INFORMATION COLLECTED BY A BANK RELA TING TO ITS CUSTOMERS, SUCH INFORMATION IS NOT TO BE DIV ULGED TO OUTSIDERS. THERE IS NO SUCH OBLIGATION WITH OTHE R ASSESSEES. 28. DESPITE THE RBI GUIDELINES PROVIDING MAINTENANC E OF SECRECY WITH REGARD TO THE INFORMATION REGARDING THE CUSTOMERS OF THE BANK, THE ASSESSEE FURNISHED TO TH E AO WHATEVER INFORMATION IT HAD IN ITS POSSESSION. T HE ADDRESSES OF THE ACCOUNT HOLDERS, AS MENTIONED IN T HE BANK LEDGERS, AS ALSO THE ADDRESSES OF THE INTRODUC ERS OF THE ACCOUNTS WERE FURNISHED TO THE AO. NOW IF TH E ADDRESSES OF THE CUSTOMERS OF THE ASSESSEE BANK WER E FOUND TO BE INCOMPLETE, THIS CANNOT FORM THE BASIS FOR MAKING THE ADDITION IN QUESTION. UNDISPUTEDLY, THE ASSESSEE BANK DID NOT VIOLATE ANY OF THE RELEVANT GUIDELINES OF THE RBI. IN THE MASTER CIRCULAR OF TH E RBI, (COPY AT P. 75 OF THE ASSESSEE'S PAPER BOOK), INTRODUCTION BY AN EXISTING ACCOUNT HOLDER BY THE B ANK HAS BEEN HELD TO BE ONE OF THE PROPER METHODS OF INTRODUCTION OF A CUSTOMER TO THE BANK FOR OPENING AN ACCOUNT. THE BANK WAS NOT REQUIRED TO GO FOR DETAIL ED VERIFICATION OF THE ADDRESSES/WHEREABOUTS OF ITS CUSTOMERS, THOUGH THIS POSITION HAS NOW CHANGED AND AT PRESENT THE REQUIREMENT IN THIS REGARD CALLS FOR A MUCH MORE STRINGENT COMPLIANCE. IN BAPULAL PREMCHAND VS. NATH BANK LTD. AIR 1946 BOM 483, AS POINTED OUT, IT HAS BEEN HELD, INTER ALIA, THAT THE RE IS NO ABSOLUTE OBLIGATION ON A BANK TO MAKE INQUIRIES ABO UT A PROPOSED CUSTOMER, SO AS TO AVAIL OF THE PROTECTI ON UNDER S. 131 OF THE NEGOTIABLE INSTRUMENTS ACT. IN UNION OF INDIA VS. NATIONAL OVERSEAS & GRINDLAYS BANK LTD. (1978) 48 COMP. CASES 277 (DEL) REFERRING TO THE BAPULAL PREMCHAND (SUPRA), IT WAS HELD THAT THE BANK COULD RELY ON THE INTRODUCTION OF ANY OLD CUSTOMER AND THAT IF THE BANK BONA FIDE ACTED ON TH E REFERENCE OF A CUSTOMER, IT CAN AVAIL OF THE PROTEC TION UNDER S. 131 OF THE NEGOTIABLE INSTRUMENTS ACT. SO FAR AS REGARDS NON-OBTAINING OF PHOTOGRAPHS OF THE ACCOUNT HOLDERS, IT IS TRUE THAT THE SAME WERE NOT OBTAINED IN THE NORMAL COURSE. PERTINENTLY, IN SAVI NGS BANK ACCOUNTS WHERE CHEQUE FACILITIES WERE NOT 14 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ PROVIDED, RBI GUIDELINES (P. 76 OF THE ASSESSEE'S P APER BOOK) PROVIDED EXEMPTION. THUS, IN RESPECT OF ACCOUNTS WITH ONLY CASH TRANSACTIONS, EVEN THE RULE OF PROPER INTRODUCTION DID NOT OPERATE STRICTLY. ALL T HIS SHOWS THAT THE ASSESSEE BANK DID NOT COMMIT ANY INFRINGEMENT IN TAKING PROPER INTRODUCTION AND, THEREFORE, IT IS INCORRECT THAT THERE WAS ANY DELIB ERATE ATTEMPT ON THE PART OF THE ASSESSEE TO ACCOMMODATE TAX DODGERS. 29. IN CIT VS. NAINITAL BANK LTD. (1965) 55 ITR 707 (SC), THE HON'BLE SUPREME COURT, VIDE ITS ORDER DT. 25TH SEPT., 1964 (COPY AT P. 110 OF THE ASSESSEE'S PAPER BOOK), HELD THAT CASH IS STOCK-IN- TRADE OF A BANKI NG BUSINESS AND THAT LOSS IN THE COURSE OF ITS BUSINES S BY WAY OF DACOITY IS DEDUCTIBLE AS A TRADING LOSS IN COMPUTING THE TOTAL INCOME OF THE BUSINESS. THIS STRENGTHENS THE ASSESSEE'S CONTENTION THAT THE DEPO SITS ACCEPTED BY IT WERE PART OF ITS TRADING ACTIVITY AN D THAT ITS CLIENTS WERE ITS CUSTOMERS. 30. IN CIT VS. PRAGATI CO-OPERATIVE BANK LTD. (2005 ) 197 CTR (GUJ) 505 : (2005) 278 ITR 170 (GUJ), IT WA S HELD THAT THE PROVISIONS OF S. 68 OF THE IT ACT WOU LD NOT APPLY TO THE CASE OF A BANKING COMPANY WORKING UNDER THE CONTROL OF THE RBI, PARTICULARLY WHEN THE DEPOSITS WERE NOT STATED TO HAVE BEEN MADE EITHER B Y THE DIRECTORS OF THE BANK OR BY ANY RELATIVE OF THE DIRECTORS. 31. IN SHRI MAHAVIR NAGARI SAHAKARI PAT SANSTHA LTD . VS. DY. CIT (2002) 74 TTJ (PUNE) 793 (COPY AT PP. 9 5 TO 104 OF THE ASSESSEE'S PAPER BOOK), IT WAS HELD T HAT ADDITION COULD NOT BE MADE UNDER S. 68, EVEN THOUGH THE MINIMUM ONUS OF PROVING THE IDENTITY OF DEPOSITORS HAD NOT BEEN DISCHARGED BY THE ASSESSEE. 32. IN DY. CIT VS. SAHARA INDIA FINANCIAL CORPN. LT D. (2003) 81 TTJ (LUCK) 389 : (2004) 2 SOT 733 (LUCK) (COPY AT PP. 105 TO 109 OF THE ASSESSEE'S PAPER BOO K), IT WAS HELD THAT THE DEPOSITS RECEIVED BY THE ASSES SEE, WHICH WAS A NON-BANKING FINANCIAL INSTITUTION, RECOGNISED BY THE RBI, WERE NOT IN THE NATURE OF TA KING OF ANY LOAN OR DEPOSIT FOR THE PURPOSES OF ITS BUSI NESS, THAT RATHER, IT WAS IN THE BUSINESS OF ACCEPTING DE POSITS AND THAT IN VIEW OF THE NATURE OF SUCH BUSINESS, TH E SCRUTINY OF THE DEPOSITS COULD NOT BE THE SAME AS I N THE CASE OF AN ASSESSEE MAKING ENTRIES OF DEPOSITS ON ACCOUNT OF LOAN ETC. 33. IN CIT VS. STELLER INVESTMENT LTD. (1991) 99 CT R (DEL) 40 : (1991) 192 ITR 287 (DEL), IT WAS HELD TH AT 15 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ EVEN IF THE SUBSCRIBER TO CAPITAL WAS NOT GENUINE, THE AMOUNT OF SHARE CAPITAL COULD NOT, UNDER ANY CIRCUMSTANCE, BE REGARDED AS THE UNDISCLOSED INCOME OF THE COMPANY. THIS DECISION WAS UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STELLE R INVESTMENT LTD. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). 34. FURTHER, EVEN ON MERITS, THE ADDITION WAS UNCAL LED FOR. CONCERNING ACCOUNT NOS. 8211, 8212 AND 8213, THE INTRODUCER WAS SHRI VIJAY SETHI, THE DECEASED MANAGING DIRECTOR OF THE ASSESSEE BANK ITSELF. THE ORIGINAL INVESTMENTS WERE MADE IN RMRD ACCOUNTS OR SAVINGS BANK ACCOUNTS WITH THE MITHAPUR BRANCH OF THE ASSESSEE. THESE INVESTMENTS WERE MADE WAY BACK IN 1992. IT WAS ONLY ON MATURITY THAT THEY WERE TRANSFERRED TO THE ACCOUNTS UNDER CONSIDERATION. IT HAS RIGHTLY BEEN CONTENDED THAT THE ORIGIN OF THESE AMO UNTS FALLING IN THE EARLIER YEARS, WHICH FACT HAS ALSO B EEN ADMITTED BY THE AO, THEY COULD NOT BE BROUGHT TO TA X IN THE YEAR UNDER APPEAL, IN THE HANDS OF THE ASSES SEE. THE LEARNED CIT(A) THUS RIGHTLY DELETED THE ADDITIO N IN THIS REGARD. 35. THE INTRODUCER OF ACCOUNT NOS. 954, 955 AND 956 WAS SHRI PARMOD SHARMA, ACCOUNTANT OF THE ASSESSEE BANK. HE APPEARED BEFORE THE AO IN RESPONSE TO SUMMONS UNDER S. 131 OF THE ACT. HE ADMITTED KNOWING THE ACCOUNT HOLDERS PERSONALLY. THE ONUS WITH REGARD TO THESE ACCOUNTS THUS STOOD AMPLY DISCHARGED. 36. S. SWARAN SINGH WAS THE ACCOUNT HOLDER OF ACCOU NT NO. 1108. HE WAS ONE OF THE DIRECTORS OF THE BANK A ND SO HE NEEDED NO INDEPENDENT INTRODUCTION TO OPEN HI S ACCOUNT WITH THE ASSESSEE FIRM. HIS INDEPENDENT EXISTENCE ALSO STANDS PROVED BY THE ENTRIES THROUGH CLEARING IN HIS ACCOUNT. 37. SHRI PAWAN SHARMA WAS THE INTRODUCER TO ACCOUNT NO. 1658. HIS STATEMENT WAS RECORDED BY THE AO UNDER S. 131 OF THE ACT. HE ALSO CONFIRMED KNOWING THE ACCOUNT HOLDER. 38. SMT. HARSIMRANJIT KAUR, PROP. M/S H.S. GAS SERVICE OWNED UP ACCOUNT NO. 8268 OF SHRI J.P. SING H, WHICH FACT WAS GOT CONFIRMED BY THE LEARNED CIT(A) THROUGH THE AO ASSESSING THE SAID LADY. 39. THE ABOVE FACTS WERE DULY TAKEN INTO CONSIDERAT ION BY THE LEARNED CIT(A) WHILE ADMITTING THE APPEAL. W E 16 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ DO NOT FIND ANYTHING ERRONEOUS WITH THE ORDER OF TH E LEARNED CIT(A). 40. NOT ONLY THIS, IN PURSUANCE TO THE DIRECTIONS I SSUED BY THE LEARNED CIT(A), THE ASSESSEE LOCATED FURTHER DETAILS/ADDRESSES OF ACCOUNT HOLDERS. THESE DETAILS WERE FURNISHED TO THE AO VIDE LETTER DT. 4TH OCT., 2005. A COPY OF THIS LETTER HAD BEEN PLACED AT PP. 90- 91 OF THE ASSESSEE'S PAPER BOOK. THIS ALSO BOOSTS THE STA ND TAKEN BY THE ASSESSEE. 41. IN VIEW OF THE ABOVE, WE FIND OURSELVES TO BE I N AGREEMENT WITH THE OBSERVATIONS RECORDED BY THE LEARNED CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE. THE GRIEVANCE OF THE DEPARTMENT IN THIS REGARD IS FOUND TO CARRY NO FORCE WHATSOEVER AND IS , AS SUCH, REJECTED. 42. APROPOS THE OBJECTION OF THE DEPARTMENT THAT TH E LEARNED CIT(A) ERRONEOUSLY ADMITTED ADDITIONAL DOCUMENTARY EVIDENCE WHEN BEFORE THE AO, THE ASSESSEE HAD DENIED PRODUCING THE BANK ACCOUNT HOLDERS ON THE PLEA THAT THIS WOULD ADVERSELY AFFEC T ITS BANKING BUSINESS. HERE ALSO, WE FIND NO CASE MADE O UT BY THE DEPARTMENT. 43. BEFORE THE LEARNED CIT(A), THE ASSESSEE, INTER ALIA, FILED COPIES OF ACCOUNTS OF VARIOUS ACCOUNT HOLDERS AND OTHER SUPPORTING DOCUMENTS, AS ADDITIONAL EVIDENCE. THE AO OBJECTED TO THE SAME. THE LEARNED CIT(A), HOWEVER, ALLOWED SUCH EVIDENCE TO BE PRODUCED AS ADDITIONAL EVIDENCE. IN THIS REGARD, THE ASSESSEE D ID NOT PRODUCE SUCH EVIDENCE BEFORE THE AO UNDER THE BONA FIDE BELIEF THAT IT WAS NOT OBLIGED TO DO SO, AS IT WOULD ADVERSELY AFFECT ITS BUSINESS. THE LEARNED CIT(A) FOUND THAT THE DOCUMENTS PRODUCED AS ADDITIONAL EVIDENCE WERE IN REGARD TO THE ADDITIONS MADE AND COULD NOT BE PRODUCED AT THE TIME OF ASSESSMENT PROCEEDINGS, IN THE BONA FIDE BELIEF WHICH WAS, AS AFORESAID, NURTURED BY THE ASSESSEE. 44. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LE ARNED CIT(A). IN THIS REGARD, IT HAS NOT BEEN MADE OUT TH AT THE PLEA OF THE ASSESSEE OF NOT BEING OBLIGED TO FI LE SUCH DOCUMENTS IN RESPECT OF ITS DEPOSITORS, WHO HA D BEEN INTRODUCED EITHER BY THE BANK'S OWN STAFF MEMBERS OR BY SOMEONE ALREADY HAVING A BANK ACCOUNT WITH THE ASSESSEE BANK, WAS MALA FIDE. 45. FURTHER, UNDISPUTEDLY, THE DOCUMENTS SO PRODUCE D WERE DIRECTLY RELATED TO THE ADDITIONS MADE. IN THI S 17 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ VIEW OF THE MATTER, THE DEPARTMENT'S GRIEVANCE IN T HIS REGARD ALSO STANDS REJECTED.' 15. FURTHER, THE TRIBUNAL, ASSESSEE'S IN ITS OWN CA SE VIDE ORDER DATED 26.02.2010 IN ITA NO. 1156 TO 1159/HYD/ 2009 FOR THE ASSESSMENT YEARS 2006-07 TO 2007-08 WHILE D ELETING THE PENALTY LEVIED U/S 271D & 271E HELD THAT MONEY RECEIVED BY ASSESSEE COOPERATIVES SOCIETY FROM ITS MEMBERS A ND THEIR RELATIVES BY WAY OF DEPOSITS AND THE SUMS REPAID TO THEM AS PART OF ITS BANKING ACTIVITIES CANNOT BE CONSIDERED AS 'LOAN' OR 'DEPOSIT' SO AS TO ATTRACT S. 269SS OR S. 269T A S THE ASSESSEE IS WORKING ON THE CONCEPT OF MUTUALITY AND ITS DIRECTOR OR MEMBER IS NOT COVERED BY THE EXPRESSION 'ANY OTHER PERSON' OCCURRING IN S. 269SS AND, THEREFORE, PENALTY UNDER S. 271D OR S. 271E IS NOT LEVIABLE, MORE SO, WHEN THE AO HAS ACCEPTED THE GENUINENESS OF SUCH DEPOSITS AN D THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE PROVIS IONS OF S. 269SS AND 269T ARE NOT APPLICABLE TO IT. 16. FURTHER, IT WAS HELD BY THE TRIBUNAL THAT THE S OCIETY IS DEALING LIKE A BANK WHILE ACCEPTING DEPOSITS FROM I TS MEMBERS. IF THE CARRYING ON BANKING BUSINESS IS NOT APPROVED BY THE RBI OR THE ASSESSEE IS NOT HAVING R EQUISITE LICENSE TO CARRY OUT THE BANKING BUSINESS, THE AUTH ORITIES COULD HAVE TAKEN ACTION AGAINST THE SOCIETY OR STOP THE SOCIETY ACTIVITY. ONCE THE ASSESSEE IS ALLOWED TO C ARRY ON THE BANKING BUSINESS, THEN THE ASSESSEE IS BOUND BY THE RELEVANT PROVISIONS OF THE BANKING REGULATIONS ACT. THE BANK FOR ALL ITS BANKING ACTIVITIES IS STRICTLY GOVERNED BY THE BANKING REGULATIONS ACT 1949. 17. BEING SO, IN OUR HUMBLE OPINION, AMOUNTS IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE ARE DEPOSITS OF THE CUST OMERS AND/OR NOT UNDER THE CONTROL OF THE ASSESSEE, AND T HEREFORE, PROVISIONS OF S.68 ARE NOT APPLICABLE TO THE BANK. FURTHER, SOCIETY/BANK NOT REQUIRED TO GO FOR DETAILED VERIFI CATION OF ADDRESS/WHEREABOUTS OF THE CUSTOMERS AND THEREFORE, ADDITION U/S 68 CANNOT BE MADE MERELY BECAUSE THE A DDRESS OF THE CUSTOMERS ARE INCOMPLETE. IN VIEW OF THIS, W E ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A) ON THIS I SSUE. HENCE, THIS GROUND RAISED BY THE REVENUE IN ALL ITS APPEALS IS DISMISSED.' 11. BEING SO, IN OUR OPINION, THE CASE LAW RELIED ON BY THE LEARNED DR IN THE CASE OF SHANKAR INDUSTRIES (CITED SUPRA) CANNOT BE APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. CONSIDERING THE EARLIER ORDER OF TH E TRIBUNAL (CITED SUPRA) IN ASSESSEES OWN CASE, WE ARE INCLIN ED TO CONFIRM 18 ITA NO. 1194/HYD/2013 M/S. CITIZEN CO-OPERATIVE SOCIETY LTD. ============================ THE ORDER OF THE CIT(A) WITH REGARD TO DELETION OF ADDITION U/S. 68 OF THE ACT ON THE DEPOSITS ACCEPTED BY THE ASSES SEE FROM PUBLIC. 12. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH APRIL, 2014 SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 29 TH APRIL, 2014 TPRAO COPY TO: 1. THE ASST. CIT, ROOM NO. 127, 1B, FIRST FLOOR, IT TO WERS, AC GUARDS, MASAB TANK, HYDERABAD. 2. M/S. THE CITIZEN CO-OPERATIVE SOCIETY LTD., 7-133/1 , HUDA COLONY, SAROOR NAGAR, HYDERABAD. 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIT-VI, HYDERABAD 5. THE DR, B BENCH, ITAT, HYDERABAD.