ACIT, Circle -9(1), Hyderabad V. M/s Citizen Cooperative Society, Hyderabad

ITA 1534/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1430 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAVINDRA SAI
• Keywords: Additional evidence
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1534/HYD/2012 : ASSESSMENT YEAR 2009-2010 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 9(1), TIRUPATI V/S M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD (PAN AAAAT 3952 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.RAVINDRA SAI CIT-DR RESPONDENT BY : SHRI D.L.NARASIMHA RAO DATE OF HEARING 24.01.2013 DATE OF PRONOUNCEMENT 01-02-2013 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) VI HYDERAB AD DATED 20.7.2012, FOR THE ASSESSMENT YEAR 2009-2010. 2. EFFECTIVE GRIEVANCE OF THE REVENUE IN THIS AP PEAL IS AGAISN5T THE ACTION OF THE CIT(A) IN DELETING THE ADDITION M ADE BY THE ASSESSING OFFICER UNDER S.68 OF THE INCOME-TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT FOR THE ASSESS MENT YEAR 2009- 10, THE ASSESSEE, ENGAGED IN THE BUSINESS OF BANKIN G, HAS FILED RETURN ADMITTING NIL INCOME, AFTER CLAIMING DEDUCTION UNDER S.80P OF TH E ACT AT RS.4,26,37,081. THOUGH THE RETURN WAS INITIALLY PRO CESSED UNDER S.143(1), THE CASE WAS TAKEN UP FOR SCRUTINY, AND I N THE SCRUTINY ASSESSMENT, THE ASSESSEE WAS REQUESTED TO FURNISH D EPOSITS REGISTER ALONG WITH FULL DETAILS OF THE DEPOSITORS, I.E. NAM E AND ADDRESSES, ETC. IN ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 2 ORDER TO VERITY THE GENUINENESS OF THE TRANSACTIONS . THERE ARE SOME CASH DEPOSITS ALSO. THE AUTHORISED REPRESENTATIVE FOR TH E ASSESSEE HAS FURNISHED SOME COMPUTERIZED SHEETS OF THE FIXED DEP OSIT ACCOUNTS, WHICH CONTAINED ONLY THE ACCOUNT NUMBER, MEMBERS NAME, O PENING BALANCE, DEBIT, CREDIT AND BALANCE AMOUNT, BUT NOT ADDRESSES OF THE DEPOSITORS, WHICH WERE NOT MADE AVAILABLE. OBSERVING THAT IN T HE ABSENCE OF THE ADDRESSES, IT IS NOT POSSIBLE TO VERIFY THE GENUINE NESS OF THE TRANSACTIONS, THE ASSESSING OFFICER HELD THAT DIFFERENCE BETWEEN THE CLOSING BALANCE AS ON 31.3.2009 OF RS.160,24,48,937 AND OPENING BALANC E AS ON 1.4.2008 OF RS.121,70,76,143, VIZ. RS.38,53,72,794 REPRESENT S THE INCOME OF THE ASSESSEE. HE ACCORDINGLY TREATED THE SAID DIFFEREN CE OF RS.38,53,72,794, REPRESENTING EFFECTIVELY THE DEPOSITS RECEIVED DURI NG THE PREVIOUS YEAR, AS THE INCOME OF THE ASSESSEE. HE ACCORDINGLY MADE AN ADDITION OF RS.38,53,72,794 UNDER S.68 OF THE ACT, WHILE COMPLE TING THE ASSESSMENT ON A TOTAL INCOME OF RS.42,80,89,880, VIDE ASSESSME NT ORDER DATED 19.12.2011 PASSED UNDER S.143(3) OF THE ACT. 4. ON APPEAL, THE CIT(A) DELETED THE SAID ADDITION , FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YE ARS 2006-07 AND 2007- 08 IN ITA NOS.1556 TO 1159/HYD/2009, WHEREBY THE TR IBUNAL, VIDE ITS ORDER DATED 26.6.2010 DELETED THE PENALTIES LEVIED UNDER S.271D AND UNDER S.271E OF THE ACT UNDER SIMILAR CIRCUMSTANCES , BASED ON THE ADDITION MADE UNDER S.68 OF THE ACT. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US THAT THE FACTS INVOLVED IN THE YEAR UNDER APPEAL AR E SIMILAR TO THE ONES ALREADY CONSIDERED BY THE TRIBUNAL IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEARS 2007-08 AN 2008-09 IN ITA NOS.1003 -1004/HYD/2011, IN ITS ORDER DATED 2.7.2012. ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 3 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEV ER SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE HAS NOT FURN ISHED THE ADDRESSES OF THE PARTIES/DEPOSITORS AND THE PERSONS WHO ARE EXA MINED ON OATH, DO NOT HAVE ANY IDEA OF WHAT THE SOCIETY IS DOING AND WHY IT IS DOING. HE SUBMITTED THAT THE ASSESSEE INTRODUCED MONEY UNDER THE FACADE OF THE DEPOSITORS, AND WHEN THE ADDRESSES OF THE DEPOSITOR S ARE CALLED FOR, THE GENERAL MANAGER OF THE ASSESSEE COMPANY HAS MERELY STATED THAT FACTS STATED IN ASSESSMENT YEARS 2008-09 APPLY. 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. ADMITTEDLY, THE ISSUE RELATING TO THE ADDI TION UNDER S.68 CAME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ITA NOS.1 003-1004/HYD/11, FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, WHEREIN, THE TRIBUNAL VIDE ITS ORDER DATED 2.7.2012, OBSERVED AS FOLLOWS(FROM PAGE 21 THEREOF)- 11. IT IS SEEN FROM ORDER OF THE TRIBUNAL B BENCH HYDERABAD IN ITA NO. 1156-1159/HYD/ 09 DATED 26.02.2010 IN ASSES SEE OWN CASE WHILE DECIDING THE ISSUE FOR LEVY OF PENALTY U /S 271D AND 271E AND IT HAD AN OCCASION TO GO INTO THE FACTS WI TH REFERENCE TO THE DEPOSITS MADE BY THE MEMBERS OF THE SOCIETY. TH E ITAT OBSERVED THAT THE ASSESSEE IS MAINTAINED PROPER BOO KS OF ACCOUNTS PERTAINING TO ACCEPTING DEPOSITS FROM ITS MEMBERS AND ADVANCING LOANS. THEREFORE WE ARE OF THE OPINION TH AT THERE CANNOT BE ANY UNEXPLAINED DEPOSITS WITHIN THE MEANING OF S ECTION 68 OF THE INCOME TAX ACT, 196, IF THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER ITS DEPOSITORS IDENTITY BY FURNISHING PROOF OF ADDRESS, PROOF OF IDENTITY AND PAN NUMBERS. 12. IT IS FURTHER OBSERVED THAT THE MEMBERSHIP OF THE SOCIETY IS HUGE AND THE NUMBER OF MEMBERS OF THE SOCIETY IS AB OUT 63,000. THE SOCIETY HAS COMPUTERIZED ITS OPERATIONS AND ALL THE BUSINESS OF THE SOCIETY IS AVAILABLE IN THE COMPUTER SOFTWAR E. THE SOCIETY HAS COLLECTED ALL THE INFORMATION FROM ITS DEPOSITS AS A NORMAL BANKING INSTITUTION AND COMPLIED THE KYC NORMS. IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO GO IN CHE CKING THE ADDRESS AND OTHER PROOF OF IDENTITY GIVEN BY THE DE POSITORS. WHAT IS REQUIRED TO BE DONE AS PER THE NORMAL BANKING SY STEM IS TO REPORT THE CONTROLLING AUTHORITIES IN CASE ANY SUSP ICIOUS TRANSACTIONS ARE REPORTED. THE PRESENT CASE THE ASS ESSEE HAS COMPLIED WITH ALL THE ELEMENTS AS A BANKING INSTITU TION THUS DISCHARGED ONUS OF PROOF OF IDENTITY OF THE DEPOSIT OR. THERE IS NO SINGLE INSTANCE FOUND OUT BY THE ASSESSING OFFICER THAT THE ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 4 ASSESSEE IS MAKING DELIBERATE ATTEMPT TO ACCOMMODAT E TAX DODGERS. IT IS SEEN FROM THE ASSESSMENT ORDER THAT OUT OF 30 DEPOSITORS EXAMINED BY THE ASSESSING OFFICER ALL TH E DEPOSITORS ARE IDENTIFIED AND ACCEPTED THE DEPOSITS MADE BY THEM W ITH THE SOCIETY. THE DEPARTMENT EXAMINED THEM, ALL ARE DISC LOSED THE DEPOSITS IN THEIR INCOME TAX RETURNS. THERE IS NO E VIDENCE 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 HONBLE SUPREME COURT I N THE CASE OF CIT VS. P.K. NOORJAHAN REPORTED IN 237 ITR 576 WHER EIN IT WAS HELD THAT THE WORD MAY LEAVES IT TO THE DISCRETION OF THE ASSESSING OFFICER WHETHER AN ADDITION UNDER THE DEEMING PROVI SIONS COULD BE MADE OR NOT. IN EACH CASE THE ASSESSING OFFICER HAS TO ANALYZE THE CIRCUMSTANCES AND PROCEED TO APPLY THE PROVISIONS O F SECTION 68. 13. IT IS FURTHER OBSERVED THAT, IN THE PRESENT CAS E, THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS FOR ITS MEMBERS AND ITS AIN BUSINESS IT TO ACCEPT DEPOSITS FROM ITS MEMBERS AND LEND LOAN TO ITS MEMBERS. WHILE ACCEPTI NG THE DEPOSITS IT HAS COMPLIED THE REQUIREMENTS AS A BANK ING INSTITUTION BY COLLECTING DOCUMENTS SPECIFIED BY THE RBI IN KYC NORMS. IT IS NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO VERIF Y THE CORRECTNESS OF THE DETAILS GIVEN BY THE DEPOSITORS, VERIFYING T HE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE DEPOSI TOR. BUT CERTAINLY IT IS REQUIRED TO HAVE PROPER PROOF OF ID ENTITY OF THE DEPOSITOR. UNDOUBTEDLY THE ASSESSEE BEING CO-OPERAT IVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS BANK NEED NOT TO PROVE THE CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTION R ELATING TO ACCEPTANCE OF DEPOSITS, BUT IT SHOULD PROVE THE IDE NTITY OF DEPOSITOR BY FURNISHING THE PROPER PROOF OF ADDRESS AND IDENTITY TO THE SATISFACTION TO THE ASSESSING OFFICER, WHICH HA S BEEN COMPLIED WITH BY THE ASSESSEE. 14. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE AMR ITSAR BENCH IN THE CASE OF ACIT VS. CITIZEN URBAN COOPERATIVE BANK LTD. (120 ITD 513) (AMRITSAR). AFTER RECORDING THE ENTIRE FACTS I T 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 THE ACT AR E APPLICABLE AND WHETHER IT HAS RIGHTLY BEEN APPLIED TO THE ASSESSEE BANK? THE LEARNED CIT(A),WHILE DELETING TH E ADDITION MADE HAS OBSERVED THAT THE ASSESSEES CASE WAS SUBJECT TO RULES LAID DOWN UNDER THE BANKING REGULA TIONS ACT, AS ALSO THE REGULATIONS OF THE RBI; THAT ALL T HE BANKING OPERATIONS ARE UNDER AUDIT AND REPORT IN THIS REGAR D GOES TO THE RBI; THAT THEREFORE, THE CASE OF THE ASSESSEE B ANK COULD NOT BE PUT AT PAR WITH THE CASES OF OTHER PERSONS, SINCE THE BANK DOES NOT HAVE ANY CONTROL IN RESPECT OF THE AM OUNTS CREDITED IN ITS ACCOUNTS; THAT THE BANK IS TO MAINT AIN ACCOUNTS OF ITS CUSTOMERS, WHICH ACCOUNTS CAN BE OP ERATED ONLY BY THOSE CUSTOMERS AND THE BANK DOES NOT HAVE ANY CONTROL OVER THE MOUNTS IN THE ACCOUNTS. WHILE HOLD ING IN ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 5 FAVOUR OF THE ASSESSEE, THE LEARNED CIT(A) HAS DULY TAKEN INTO CONSIDERATION THE PROVISIONS UNDER S. 68 OF TH E ACT, WHICH ARE EXPLICIT. 27. AS PER S. 68 OF THE ACT, WHERE ANY SUM IS FOUN D 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 EXPLANATION O FFERED 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 ITS BANKING ACTIVITIES, IS STRICTLY GOVERNED BY THE BANKING 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 WITHDRA WAL BY CHEQUE, DRAFT ORDER OR OTHERWISE. THUS, THE DEPOSIT S HELD BY THE ASSESSEE ARE ITS STOCK-IN-TRADE. THE AMOUNTS IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE BANK WERE NOT I N THE CONTROL OF THE ASSESSEE BANK. THEY ARE THE DEPOSITS IN THE SAVINGS ACCOUNTS OF THE CUSTOMERS OF THE ASSESSEE B ANK. TO THESE DEPOSITS, S. 68 OF THE ACT IS NOT ATTRACTED. IN THE CASES OF BANKING COMPANIES LIKE THE ASSESSEE, THE CUSTOME RS IDENTITY IS REQUIRED TO BE TAKEN BY THE BANK WITH P ROPER 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 ACCEPTANC E OF DEPOSITS CANNOT BE EQUATED WITH THAT OF THE BANK. I N THOSE CASES, NORMALLY, DEPOSITS ARE ACCEPTED FROM THE PEO PLE CONNECTED WITH OR KNOWN TO THE DEPOSITEES. IT IS IN ACCORDANCE WITH THE TERMS OF S. 131 OF THE NEGOTIAB LE INSTRUMENTS ACT THAT THIS REQUIREMENT IS THERE. AS SUCH, IF INTRODUCTION OF THE CUSTOMER HAD BEEN DULY TAKEN BY THE BANK, THE BANK WOULD NOT BE LIABLE IN CASE OF A FRA UD. MOREOVER, PERTINENTLY, IF THE CUSTOMER SEEKS TO OPE RATE 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 CUSTOMERS CAN RETAIN THE AMOUNT IN HIS SAVINGS BANK ACCOUNT WITH THE ASSESSEE BANK FOR ANY PERIOD. THE AMOUNT HAS TO BE REPAID BY THE BANK TO ITS CUSTOMERS IMMEDIATELY ON DEMAND. THESE FEATURES DISTINGUISH THE CASE OF THE BANK FROM OTHE R ORDINARY ASSESSEES. THEREFORE, THE PROVISIONS OF S. 68 OF THE ACT ARE NOT APPLICABLE TO THE BANK AS THEY ARE IN T HE CASES OF THE OTHER ASSESSEES. STILL FURTHER, UNDER S. 35 OF THE BANKING REGULATIONS ACT, 1949, A BANKING COMPANY IS SUBJECT TO PERIODICAL 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 RBI GUIDELINES, IN ORDER TO MAINTAIN CONFIDENTIALITY IN RESPECT OF ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 6 THE INFORMATION COLLECTED BY A BANK RELATING TO ITS CUSTOMERS, SUCH INFORMATION IS NOT TO BE DIVULGED T O OUTSIDERS. THERE IS NO SUCH OBLIGATION WITH OTHER A SSESSEES. 28. DESPITE THE RBI GUIDELINES PROVIDING MAINTENANC E OF SECRECY WITH REGARD TO THE INFORMATION REGARDING TH E CUSTOMERS OF THE BANK, THE ASSESSEE FURNISHED TO TH E AO WHATEVER INFORMATION IT HAD IN ITS POSSESSION. THE ADDRESSES OF THE ACCOUNT HOLDERS, AS MENTIONED IN THE BANK LE DGERS, AS ALSO THE ADDRESSES OF THE INTRODUCERS OF THE ACCOUN TS WERE FURNISHED TO THE AO. NOW IF THE ADDRESSES OF THE CU STOMERS OF THE ASSESSEE BANK WERE FOUND TO BE INCOMPLETE, T HIS CANNOT FORM THE BASIS FOR MAKING THE ADDITION IN QU ESTION. UNDISPUTEDLY, THE ASSESSEE BANK DID NOT VIOLATE ANY OF THE RELEVANT GUIDELINES OF THE RBI. IN THE MASTER CIRCU LAR OF THE RBI, (COPY AT P. 75 OF THE ASSESSEES PAPER BOOK), INTRODUCTION BY AN EXISTING ACCOUNT HOLDER BY THE B ANK HAS BEEN HELD TO BE ONE OF THE PROPER METHODS OF INTROD UCTION OF A CUSTOMER TO THE BANK FOR OPENING AN ACCOUNT. THE BANK WAS NOT REQUIRED TO GO FOR DETAILED VERIFICATION OF THE ADDRESSES/WHEREABOUTS OF ITS CUSTOMERS, THOUGH THIS POSITION HAS NOW CHANGED AND AT PRESENT THE REQUIRE MENT IN THIS REGARD CALLS FOR A MUCH MORE STRINGENT COMPLIA NCE. IN BAPULAL PREMCHAND VS. NATH BANK LTD. AIR 1946 BOM 4 83, AS POINTED OUT, IT HAS BEEN HELD, INTER ALIA, THAT THERE IS NO ABSOLUTE OBLIGATION ON A BANK TO MAKE INQUIRIES ABO UT A PROPOSED CUSTOMER, SO AS TO AVAIL OF THE PROTECTION UNDER S. 131 OF THE NEGOTIABLE INSTRUMENTS ACT. IN UNION OF INDIA VS. NATIONAL OVERSEAS & GRINDLAYS BANK LTD. (1978) 48 C OMP. CASES 277 (DEL) REFERRING TO THE BAPULAL PREMCHAND (SUPRA), IT WAS HELD THAT THE BANK COULD RELY ON THE INTRODU CTION OF ANY OLD CUSTOMER AND THAT IF THE BANK BONA FIDE ACT ED ON THE 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 SAVINGS BANK ACCOUNTS WHERE CHEQUE FACILITIES WERE NOT PROVIDED, RBI GUIDELINES (P. 76 OF THE ASSESSEES PAPER BOOK) PROVIDED EXEMPTION. THUS, IN RESPECT OF ACCOUNTS WITH ONLY CASH TRANSACTIONS, EV EN THE RULE OF PROPER INTRODUCTION DID NOT OPERATE STRICTL Y. ALL THIS SHOWS THAT THE ASSESSEE BANK DID NOT COMMIT ANY INFRINGEMENT IN TAKING PROPER INTRODUCTION AND, THE REFORE, IT IS INCORRECT THAT THERE WAS ANY DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO ACCOMMODATE TAX DODGERS. 29. IN CIT VS. NAINITAL BANK LTD. (1965) 55 ITR 707 (SC), THE HONBLE SUPREME COURT, VIDE ITS ORDER DT. 25TH SEPT., 1964 (COPY AT P. 110 OF THE ASSESSEES PAPER BOOK), HELD THAT CASH IS STOCK-IN-TRADE OF A BANKING BUSINESS A ND THAT LOSS IN THE COURSE OF ITS BUSINESS BY WAY OF DACOIT Y IS DEDUCTIBLE AS A TRADING LOSS IN COMPUTING THE TOTA L INCOME OF THE BUSINESS. THIS STRENGTHENS THE ASSESSEES CO NTENTION ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 7 THAT THE DEPOSITS ACCEPTED BY IT WERE PART OF ITS T RADING ACTIVITY AND 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 WAS HE LD THAT THE PROVISIONS OF S. 68 OF THE IT ACT WOULD NOT APP LY TO THE CASE OF A BANKING COMPANY WORKING UNDER THE CONTROL OF THE RBI, PARTICULARLY WHEN THE DEPOSITS WERE NOT STATE D TO HAVE BEEN MADE EITHER BY THE DIRECTORS OF THE BANK OR BY ANY RELATIVE OF THE DIRECTORS. 31. IN SHRI MAHAVIR NAGARI SAHAKARI PAT SANSTHA LT D. VS. DY.CIT (2002) 74 TTJ (PUNE) 793 (COPY AT PP. 95 TO 104 OF THE ASSESSEES PAPER BOOK), IT WAS HELD THAT ADDITI ON COULD NOT BE MADE UNDER S. 68, EVEN THOUGH THE MINIMUM ON US OF PROVING THE IDENTITY OF DEPOSITORS HAD NOT BEEN DIS CHARGED BY THE ASSESSEE. 32. IN DY. CIT VS. SAHARA INDIA FI NANCIAL CORPN. LTD. (2003) 81 TTJ (LUCK) 389 : (2004) 2 SOT 733 (LUCK) (COPY AT PP. 105 TO 109 OF THE ASSESSEES PA PER BOOK), IT WAS HELD THAT THE DEPOSITS RECEIVED BY TH E ASSESSEE, WHICH WAS A NON-BANKING FINANCIAL INSTITU TION, RECOGNISED BY THE RBI, WERE NOT IN THE NATURE OF TA KING OF ANY LOAN OR DEPOSIT FOR THE PURPOSES OF ITS BUSINES S, THAT RATHER, IT WAS IN THE BUSINESS OF ACCEPTING DEPOSIT S AND THAT IN VIEW OF THE NATURE OF SUCH BUSINESS, THE SCRUTIN Y OF THE DEPOSITS COULD NOT BE THE SAME AS IN THE CASE OF AN ASSESSEE MAKING ENTRIES OF DEPOSITS ON ACCOUNT OF LOAN ETC. 33. IN CIT VS. STELLER INVESTMENT LTD. (1991) 99 CTR (DEL) 40 : (1991) 192 ITR 287 (DEL), IT WAS HELD THAT EVEN IF THE SUB SCRIBER TO CAPITAL WAS NOT GENUINE, THE AMOUNT OF SHARE CAPITA L COULD NOT, UNDER ANY CIRCUMSTANCE, BE REGARDED AS THE UNDISCLOSED INCOME OF THE COMPANY. THIS DECISION WA S UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STELLER 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 MANAG ING DIRECTOR OF THE ASSESSEE BANK ITSELF. THE ORIGINAL INVESTMENTS WERE MADE IN RMRD ACCOUNTS OR SAVINGS B ANK 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 T HE ORIGIN OF THESE AMOUNTS FALLING IN THE EARLIER YEARS, WHIC H FACT HAS ALSO BEEN ADMITTED BY THE AO, THEY COULD NOT BE BRO UGHT TO TAX IN THE YEAR UNDER APPEAL IN THE HANDS OF THE A SSESSEE. 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. ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 8 131 OF THE ACT. HE ADMITTED KNOWING THE ACCOUNT HOL DERS PERSONALLY. THE ONUS WITH REGARD TO THESE ACCOUNTS THUS STOOD AMPLY DISCHARGED. 36. S. SWARAN SINGH WAS THE ACCOUNT HOLDER OF ACCO UNT NO.1108. HE WAS ONE OF THE DIRECTORS OF THE BANK AN D SO HE NEEDED NO INDEPENDENT INTRODUCTION TO OPEN HIS ACCO UNT WITH THE ASSESSEE FIRM. HIS INDEPENDENT EXISTENCE A LSO STANDS PROVED BY THE ENTRIES THROUGH CLEARING IN HI S 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 ACCOU NT HOLDER. 38. SMT. HARSIMRANJIT KAUR, PROP. M/S H.S. GAS SERV ICE OWNED UP ACCOUNT NO. 8268 OF SHRI J.P. SINGH, 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. WE D O NOT FIND ANYTHING ERRONEOUS WITH THE ORDER OF THE LEARN ED 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 ASS ESSEES PAPER BOOK. THIS ALSO BOOSTS THE STAND TAKEN BY THE ASSESSEE. 41. IN VIEW OF THE ABOVE, WE FIND OURSELVES TO BE I N AGREEMENT WITH THE OBSERVATIONS RECORDED BY THE LEA RNED CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE. T HE GRIEVANCE OF THE DEPARTMENT IN THIS REGARD IS FOUN D 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 ASSESS EE HAD DENIED PRODUCING THE BANK ACCOUNT HOLDERS ON TH E PLEA THAT THIS WOULD ADVERSELY AFFECT ITS BANKING BUSINE SS. HERE ALSO, WE FIND NO CASE MADE OUT BY THE DEPARTMENT. 43. BEFORE THE LEARNED CIT(A), THE ASSESSEE, INTER ALIA, FILED COPIES OF ACCOUNTS OF VARIOUS ACCOUNT HOLDERS AND O THER SUPPORTING DOCUMENTS, AS ADDITIONAL EVIDENCE. THE A O OBJECTED TO THE SAME. THE LEARNED CIT(A), HOWEVER, ALLOWED SUCH EVIDENCE TO BE PRODUCED AS ADDITIONAL EVIDENCE . IN THIS REGARD, THE ASSESSEE DID NOT PRODUCE SUCH EVIDENCE BEFORE THE AO UNDER THE BONA FIDE BELIEF THAT IT WAS NOT O BLIGED TO ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 9 DO SO, AS IT WOULD ADVERSELY AFFECT ITS BUSINESS. THE LEARNED CIT(A) FOUND THAT THE DOCUMENTS PRODUCED AS ADDITIO NAL EVIDENCE WERE IN REGARD TO THE ADDITIONS MADE AND C OULD 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 FILE S UCH DOCUMENTS IN RESPECT OF ITS DEPOSITORS, WHO HAD BEE N INTRODUCED EITHER BY THE BANKS OWN STAFF MEMBERS O R BY SOMEONE ALREADY HAVING A BANK ACCOUNT WITH THE ASSE SSEE BANK, WAS MALA FIDE. 45. FURTHER, UNDISPUTEDLY, THE DOCUMENTS SO PRODUCE D WERE DIRECTLY RELATED TO THE ADDITIONS MADE. IN THIS VIE W OF THE MATTER, THE DEPARTMENTS GRIEVANCE IN THIS REGARD A LSO STANDS REJECTED. 15. FURTHER, THE TRIBUNAL, ASSESSEES IN ITS OWN C ASE VIDE ORDER DATED 26.02.2010 IN ITA NO. 1156 TO 1159/HYD/2009 F OR THE ASSESSMENT YEARS 2006-07 TO 2007-08 WHILE DELETING THE PENALTY LEVIED U/S 271D & 271E HELD THAT MONEY RECEIVED BY ASSESSEE COOPERATIVES SOCIETY FROM ITS MEMBERS AND THEIR REL ATIVES BY WAY OF DEPOSITS AND THE SUMS REPAID TO THEM AS PART OF ITS BANKING ACTIVITIES CANNOT BE CONSIDERED AS LOAN OR DEPOS IT SO AS TO ATTRACT S. 269SS OR S. 269T AS THE ASSESSEE IS WORK ING 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 SUC H DEPOSITS AND THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT TH E PROVISIONS OF S. 269SS AND 269T ARE NOT APPLICABLE TO IT. 16. FURTHER, IT WAS HELD BY THE TRIBUNAL THAT THE SOCIETY 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 REQUISITE LICENSE TO CARRY O UT THE BANKING BUSINESS, THE AUTHORITIES COULD HAVE TAKEN ACTION A GAINST THE SOCIETY OR STOP THE SOCIETY ACTIVITY. ONCE THE ASSE SSEE IS ALLOWED TO CARRY 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 TH E ACCOUNTS MAINTAINED BY THE ASSESSEE ARE DEPOSITS OF THE CUST OMERS AND/OR NOT UNDER THE CONTROL OF THE ASSESSEE, AND THEREFOR E, PROVISIONS OF S.68 ARE NOT APPLICABLE TO THE BANK. FURTHER, SOCIE TY/BANK NOT REQUIRED TO GO FOR DETAILED VERIFICATION OF ADDRESS /WHEREABOUTS OF THE CUSTOMERS AND THEREFORE, ADDITION U/S 68 CANNOT BE MADE MERELY BECAUSE THE ADDRESS OF THE CUSTOMERS ARE INC OMPLETE. IN VIEW OF THIS, WE ARE IN AGREEMENT WITH THE FINDINGS OF THE CIT(A) ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 10 ON THIS ISSUE. HENCE, THIS GROUND RAISED BY THE REV ENUE IN ALL ITS APPEALS IS DISMISSED. AS FAR AS THE YEAR UNDER APPEAL IS CONCERNED, TH E CIT(A) HAS MERELY RELIED ON THE ORDER OF THE TRIBUNAL DATED 26 TH JUNE, 2010 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006007 AND 2007 -08 IN ITA NOS.1156 TO 1159/HYD2009, WHEREIN THE ISSUE RELATES TO DELETION OF PENALTIES LEVIED UNDER S.271D AND 271E OF THE ACT, AND NOT WITH REGARD TO THE ADDITIONS MADE UNDER S.68 OF THE ACT, AND ST RAIGHT AWAY DELETED THE ADDITIONS BASED ON THE DECISION FOR THE OTHER Y EARS NOTED ABOVE. SHE HAS NOT DONE THE EXERCISE WHICH THE CIT(A) HAS DONE FOR THE EARLIER YEARS, DISCUSSED IN THE ORDER OF THE TRIBUNAL, RELEVANT PO RTION OF WHICH IS EXTRACTED ABOVE. IN OUR OPINION, IT IS APPROPRIATE , IN THE FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEAR UNDER APPEAL , TO SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATER BACK TO THE FILE OF THE CIT(A), WHO SHALL BRING ON RECORD, THE FACTS RELATING TO TH E ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS, INCLUDING THE NAMES AND ADDRESSES OF THE DEPOSITORS WITH PAN NUMBER, AS PER THE KYC SCHEME, AS COLLECTED BY THE ASSESSEE. T HE CIT(A) SHALL THEREAFTER DECIDE THE MATTER AFRESH IN ACCORDANCE W ITH LAW AND ALSO KEEPING IN MAKING THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08, AND OF COURSE, AFTER GIVING REASONABLE OPP ORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON SD/ - (SAKTIJIT DEY) SD/ - (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 1 ST FEBRUARY, 2013 ITA NO.1534/HYD/12 M/S. CITIZEN COOPERATIVE SOCIETY, HYDERABAD 11 COPY FORWARDED TO: 1. M/S. CITIZEN COOPERATIVE SOCIETY, HUDA COMPLEX, SAROORNAGAR, HYDERABAD 2. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 9( 1 ) , HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD COMMISSIONER OF INCOME-TAX-V, HYDERABAD 5 . THE DEPARTMENTAL REPRESENTATIVE, ITAT HYDERABAD B.V.S.