The Gudivada Co-op urban bank limited, Gudivada V. Assitant Commisioner of Income Tax, Vijayawada

ITA 3/VIZ/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6523 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 31-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 143(3); 142(1); 250; 143(2); 13

Judgement Text

आयकरअपीलीयअधिकरण, विशाखापटणमपीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एल रेड्डी, न्याययक सदस्य एिं श्री एस बालाक ृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No.03/Viz/2024 (निर्धारणवर्ा/ Assessment Year :2017-18) The Gudivada Co-operative Urban Bank Limited, Gudivada. PAN: AAAAT 2586 R Vs. Asst. Commissioner of Income Tax, Circle-1(1), Vijayawada. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थीकीओरसे/ Appellant by : Sri C. Subrahmanyam, AR प्रत्यधर्थीकीओरसे/ Respondent by : Dr. Satyasai Rath, CIT-DR स ु िवधईकीतधरीख/ Date of Hearing : 27/03/2024 घोर्णधकीतधरीख/Date of Pronouncement : 13/06/2024 O R D E R PER S. BALAKRISHNAN Accountant Member : This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short Ld.CIT(A)-NFAC] in DIN & Order No. ITBA/NFAC/S/250/2023-24/1058150642(1), dated 22/11/2023 arising out of the order passed U/s. 143(3) of the 2 Income Tax Act, 1961 [in short ‘the Act’], dated 12/12/2019 for the AY 2017-18. 2. Briefly stated the facts of the case are that the assessee being a Cooperative Bank filed its return of income for the AY 2017-18 on 30/10/2017 admitting a total income of Rs. 3,22,16,210/-. The assessee Bank is under the control of Reserve Bank of India and carrying on banking business as per Banking Regulation Act, 1949. The case was selected for limited scrutiny and statutory notices U/s. 143(2) and 142(1) of the Act were issued from time to time calling for information. In response, the assessee field the details before the Ld. AO. The Ld. AO observed that the assessee has received cash and deposited Rs. 11,10,67,500/- in Specified Bank Notes (SBNs) from 9/11/2016 to 30/12/2016 which included the amount of Rs. 4,68,39,000/- in SBNs during the period 15/11/2016 to 30/12/2016. The Ld. AO considering the Reserve Bank of India (RBI) Circular No. DCM(Plg) No. 1273/10, 27.00/2016-17, dated 14/11/2016 opined that the assessee is not entitled to receive cash in SBNs and thereby treated the amount of Rs. 4,68,39,000/- being the amount deposited during the period 15/11/2016 to 30/12/2016 as unexplained cash credit U/s. 68 3 r.w.s 115BBE of the Act. Aggrieved by the additions of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A)-NFAC. 3. The Ld. CIT(A)-NFAC, considering the submissions of the assessee, dismissed the appeal. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal: “1. That under the facts and circumstances of the case the order passed U/s. 143(3) of the Act that was confirmed by the Ld. CIT(A) vide order passed U/s. 250 of the Act dated 22/11/2023 is in violation of the provisions of the law and facts of the case. 2. The Ld. CIT(A) is in summary and casual manner disregarded the submission made by the assessee society, when it was brought to his notice that accepting cash deposits in the form of SBN, during the demonetization period, from 15/11/2016 to 30/11/2016 is acceptable and is in accordance with the Circular, dated 14/11/2016, issued by Reserve Bank of India, hence in this view of the matter the orders passed U/s. 250 and as well as order passed U/s. 143(3) of the Act are not legally sustainable order. 3. The Ld. CIT(A) while coming to adverse conclusion with regards to applicability of RBI Circular dated 14/11/2016 that was relied upon by the assessee in support of its case, totally missed himself by observing in his order “it is clear from the Circular RBI addressed to the banks......not to give exchange facility against SBN or deposit of such notes.....” by this observation it is clear that Ld. CIT(A) did not understand the Circular in proper manner. 4. The Ld. CIT(A) failed to take note that additions made by the AO U/s. 68 of the Act relates to cash deposits, deposited by assessee customers in their respective bank accounts, in no way can be considered as cash credit to rope in the same U/s. 68 of the act. 5. Without prejudice to the above grounds, the Ld. CIT(A) and the Ld. AO ought to have noted that the cash deposits 4 made by the customers into their accounts do not fall within the mischief of section 68 of the Act considering that the assessee society is a scheduled bank governed by the RBI regulations and accepting cash deposits is not a violation within such deposits were accepted under normal banking business. 6. For these and other reasons that are to be urged at the time of hearing of the case prayer of the assessee society is that the additions made by the AO U/s. 68 of the Act and sustained by the Ld. CIT(A) are liable to be set aside in the interest of justice and fair play.” 4. The crux of the issue emanating from the grounds raised is with respect to the additions made by the Ld. Revenue Authorities amounting to Rs. 4,68,39,000/- for the period 15/11/2016 to 30/11/2016 being the cash deposits accepted in the form of SBNs. 5. At the outset, the Ld. Authorized Representative [AR] referred to page 7 of the paper book wherein the RBI Circular No. DCM (Plg) No. 1226/10.27.00/2016-17, dated 08/11/2016 is enclosed and stated that even the Urban Cooperative Banks are authorized to accept the SBNs or depositing the SBNs to the members accounts up to the period 30/12/2016. The Ld. AR further submitted that the Circular No. DCM(Plg) No. 1273/10, 27.00/2016-17, dated 14 th November, 2016 placed at page 13 of the paper book clearly states that the exchange facility against the SBNs was restricted only with respect to District Cooperative Central Banks (DCCBs) and not to Urban Cooperative Banks. 5 The assessee being an Urban Cooperative Bank is not covered under the Circular (supra) and hence the acceptance of the SBNs is valid in law and as per the directions of the RBI. The Ld. AR also submitted a copy of the assessment order in the case of The Gandhi Cooperative Urban Bank Limited passed by the same Assessing Officer ie., ACIT, Circle-1(1), Vijayawada vide order U/s. 143(3) dated 19/03/2019 wherein the Ld. AO has accepted the deposit of SBNs in various banks for the period from 15/11/2016 to 30/12/2016. The Ld.AR pleaded that while passing the order in the case of the assessee, the same Ld. AO contradicted himself by disallowing the SBNs deposited by the assessee viz., Gudivada Cooperative Urban Bank Limited for the period from 15/11/2016 to 30/12/2016 in the form of SBNs. The Ld. AR therefore pleaded that the additions may please be deleted. Per contra, the Ld. Departmental Representative [DR] relied on the orders of the Ld. Revenue Authorities. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. Admittedly, the assessee has accepted the cash in the form of SBNs during the demonetization period and has 6 deposited the same into the bank accounts of the assessee. There is merit in the argument of the Ld. AR where the Circular cited by the Ld. AR clearly states that only District Cooperative Central Banks (DCCB) are not allowed to extend the exchange facility against the SBNs from 14/11/2016. For the sake of clarity, we extract below the RBI Circular No. DCM(Plg) No. 1273/10, 27.00/2016-17, dated 14/1/2016. “RBI/2016-17/130 DCM (Plg) No.1273/10.27.00/2016-17 November 14, 2016 The Chairman / Managing Director/Chief Executive Officer, Public Sector Banks / Private Sector Banks/ Foreign Banks/Regional RuralBanks / Urban Co-operative Banks / State Co-operative Banks/ District Central Cooperative Banks Dear Sir, Withdrawal of Legal Tender Character of existing ₹ 500/- and ₹ 1000/- Bank Notes – Applicability of the Scheme to DCCBs Please refer to our Circular No. DCM (Plg) No.1226/10.27.00/2016-17 dated November 08, 2016 on the captioned subject. It is clarified that District Central Cooperative Banks can allow their existing customers to withdraw money from their accounts upto ₹ 24,000/- per week upto November 24, 2016. However no exchange facility against the specified bank notes (₹ 500/- and ₹ 1000/-) or deposit of such notes should be entertained by them. 2. All banks are advised to permit withdrawal of cash by DCCBs from their accounts based on need. The cash withdrawal limit of ₹ 24,000/- per week is not applicable to withdrawal of cash by a DCCB from its account with any other bank. Yours faithfully, (P Vijaya Kumar) Chief General Manager” 7 7. As per the submissions of the Ld. AR, the Ld. AO has allowed the deposit of SBNs in the case of Gandhi Cooperative Urban Bank Limited by passing the order dated 19/12/2019. However, in the instant case, the Ld.AO has contradicted himself by considering the assessee as District Central Cooperative Bank (DCCB) and has not allowed the deposit of SBNs for the period 14/12/2016 to 30/12/2016. However, we find that in the instant case, the assessee being an Urban Cooperative Bank, which is not being covered by the above referred RBI Circular and hence acceptance of the cash in the form of SBNs cannot be considered as unexplained for addition U/s. 68 of the Act. We are therefore inclined to allow the grounds raised by the assessee. 8. In the result, appeal of the assessee is allowed. Pronounced in the open Court on 13 th June, 2024. Sd/- Sd/- (द ु व्ि ू रु आर.एल रेड्डी) (एस बालाक ृ ष्णन) (DUVVURU RL REDDY) (S. BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER लेखासदस्य/ACCOUNTANT MEMBER Dated :13.06.2024 OKK - SPS 8 आदेशकीप्रतिलिपिअग्रेपिि/Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee–The Gudivada Co-operative Urban Bank Limited, 16/340, GCUB Building, Opp. RTC Bus Stand, Gudivada, Andhra Pradesh – 521301. 2. रधजस्व/The Revenue –Assistant Commissioner of Income Tax, Circle- 1(1), CR Building, 1 st Floor, Annex, MG Road, Andhra Pradesh-520002. 3. The Principal Commissioner of Income Tax, 4.आयकरआय ु क्त (अपील)/ The Commissioner of Income Tax (Appeals), 5. ववभधगीयप्रनतनिधर्, आयकरअपीलीयअधर्करण, ववशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ाफ़धईल / Guard file आदेशधि ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam