ITO, New Delhi V. New Rising Star Co-operative Thrift & Credit Society Ltd., New Delhi

ITA 3807/DEL/2009

• Counselvise Citation: 380720114 RSA 2009
• Duration Of Justice: 5 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-10-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Rejection of books of accounts; Capital asset converted into stock in trade; Business income
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E NEW DELHI AND SHRI J.SUDHAKAR REDDY, J.M AND SHRI RAJPAL YADAV, JM ITA NO: 3807/DEL/2009 AY : - 2005-06 ITO, VS. NEW R ISING STAR CO-OPERATIVE WARD 32 (4), THRIFT & CREDIT SOCIETY LTD. ROOM NO. 337C, 322/1, MASJI T MOTH, NDSE-II, C.R. BUILDING, I.P. ESTATE, NEW DELHI. 11 0 049. NEW DELHI. PAN AAD FN6573A (APPELLANT) (RESP ONDENT) APPELLANT BY :S HRI VED JAIN, CA, SMT. RANO JAIN, ADVOCATE SHRI V. CHOURASTYA, ADVOCATE RESPONDENT :SH RI J.P. CHANDRAKER, SR. DR O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XXVI, NEW DELH I DATED 12.6.2009 FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUND S :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3,00,63,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S 68 OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THE FACT THAT THE IDENTITY OF CREDITORS , CAPACITY OF CREDITORS TO ADVANCE THE MONEY AND GENUINENESS OF T RANSACTION WERE NOT PROVED DURING THE ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING THE FACT THAT BOOKS OF ACCOUN TS BEING INCORRECT, INCOMPLETE AND UNRELIABLE WERE CORRECTLY REJECTED A ND THEREFORE DEDUCTION U/S 80P(2)(I) OF THE I.T. ACT, 1961 WAS N OT ALLOWABLE IN THE CASE. ITA 3807/DEL/2009 AY 2005-06 ITO VS. NEW RISING STAR CO.OPERATIVE THRIFT & CREDI T SOCIETY LTD. 2 2. THE FACTS OF THE CASE ARE BROU GHT OUT IN PARA NO. 2 OF THE ASSESSMENT ORDER WHICH IS EXTRACTED FOR YOUR READY REFERENCE :- THE ASSESSEE IS A COOPERATIVE THRIFT AND CREDIT SO CIETY ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM ITS MEMB ERS AND PROVIDING CREDIT TO THEM. THE MAIN SOURCE OF INCOM E OF THE ASSESSEE IS EARNING OF INTEREST ON LOANS GIVEN TO M EMBERS AND ON FIXED DEPOSITS. THE ASSESSEE HAS CLAIMED 100% DE DUCTION U/S 80P(2)(I) ON THE BUSINESS INCOME SHOWN AT RS.12 ,44,152/- DURING THE YEAR AND THUS, DECIDED NIL INCOME. 3. THE AO IN HIS ORDER U/S 143(3) ON 7.12.2 007 CONCLUDED AS FOLLOWS :- 14. IN THIS CASE, CASH DEPOSITS OF RS. 3,00,63,2 24/- HAS BEEN FOUND IN THE AFORESAID FOUR BANK ACCOUNTS OF THE ASSESSEE DU RING THE YEAR AND IN SPITE OF GIVING SEVERAL OPPORTUNITIES, THE ASSESSEE HAS BEEN FAILED TO EXPLAIN THE SOURCE OF THE DEPOSITS. THE ASSESEE COU LD NOT EVEN FURNISH THE LIST OF DEPOSITORS WHO HAS GIVEN THE MONEY TO T HE SOCIETY IN CASH WHICH WAS STATED TOBE THE SOURCE OF THE CASH DEPOSI TS. CASH BOOK PRODUCED BY THE ASSESSEE ALSO NOT SUPPORTS THAT THE MONEY ACTUALLY BELONGED TO THE ASSESEE. 15. FROM THE ABOVE, IT IS ESTABLISHED THAT THE IDE NTITY OF CREDITORS, CAPACITY OF THE CREDITORS TO ADVANCE THE MONEY AND GENUINENESS OF THE TRANSACTION HAS NOT BEEN PROVED BY THE ASSESSEE WHI CH IS REQUIRED FOR THE SATISFACTION OF THE ASSESSING OFFICER AS HELD B Y VARIOUS COURTS IN THE CASES REFERRED TO ABOVE. SINCE THE ASSESSEE HAS BEE N FAILED TO EXPLAIN THE SOURCE OF CASH DEPOSIT OF RS. 3,00,63,224/-, TH E SAME IS BEING TREATED AS ITS UNEXPLAINED INCOME U/S 68 OF THE I.T . ACT AND BEING ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL THE FIRST APPELLATE AUTHORITY DELETED THE ADDITION. 5. AGGRIEVED THE REVENUE IS IN APPEAL. 6. WE HAVE HEARD SHRI J.P. CHANDRAKER, DEPARTM ENTAL REPRESENTATIVE ON BEHALF OF THE REVENUE AND SHRI VED JAIN AND SMT. RA NO JAIN ON BEHALF OF THE ASSESSEE. ITA 3807/DEL/2009 AY 2005-06 ITO VS. NEW RISING STAR CO.OPERATIVE THRIFT & CREDI T SOCIETY LTD. 3 7. ON A CAREFUL CONSIDERATION OF THE FACTS A ND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS :- THE UNDISPUTED FACT IS THAT THE ASSESSEE IS A THRIF T & CREDIT CO- OPERATIVE SOCIETY, REGISTERED WITH REGISTRAR OF CO- OPERATIVE SOCIETY, NEW DELHI SINCE 1991. IT IS GOVERNED & REGULATED AS PER THE DELHI CO-OPERATIVE SOCIETIES ACT, 1972. THE MAIN OBJECT OF THE SOCIETY IS TO PROMOTE THE ECONOMIC INTEREST OF THE MEMBERS AND PARTICULARLY T O CREATE FUNDS TO GIVE LOANS IN THEIR NECESSITY. THE MEMBERS OF THE APPELL ATE SOCIETY HAVE ACCOUNTS WITH THE SOCIETY AND THEY DEPOSITED C ASH IN SUCH ACCOUNTS . THE RECEIPT FROM THE MEMBERS ARE UNDER THE VARIOUS ACCOUNTS I.E. FIXED DEPOSITS, COMPULSORY DEPOSITS, SHARE MONEY, OPTIONA L DEPOSITS, ADMISSION FEE, REPAYMENT OF PRINCIPAL LOAN, LOAN INTEREST, ET C. THE AO HAS MADE AN ADDITION ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURNISH A) SOURCE OF CASH DEPOSITS OF RS. 3,00,63,324/- IN HIS BANK ACCO UNTS B) THE COMPLETE LIST OF DEPOSITORS WITH THEIR NAME AND ADDRESS, OCCUPATI ON, QUANTUM OF DEPOSITING MONEY AND DATE OF ADMISSION TO THE SOCIE TY; C) TO RECONCILE THE DISCREPANCIES PREVAILED IN THE CASH BOOK RELATING T O CASH WITHDRAWN AND DEPOSITS D) SUPPORTING VOUCHERS / BILLS IN SUPPORT OF THE CASH BOOK E) COMPLETE BOOKS OF ACCOUNTS, VOUCHERS, BILLS INCLUDI NG CASH BOOK FOR THE COMPLETE YEAR. 8. THE LD. COMMISSIONER OF INCOME TAX RECORDE D THAT THE PRESIDENT OF THE SOCIETY SHRI B.S. RAWAT FILED AN AFFIDAVIT DEN YING THE ALLEGATIONS MADE BY THE AO IN THE ASSESSMENT ORDER THAT DESPITE SEVE RAL OPPORTUNITIES THE ITA 3807/DEL/2009 AY 2005-06 ITO VS. NEW RISING STAR CO.OPERATIVE THRIFT & CREDI T SOCIETY LTD. 4 ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS. T HIS AFFIDAVIT IS EXTRACTED BY THE LD. CIT(A) AT PAGE 59-60 OF HIS ORDER. AFTER CONSIDERING THE DETAILED ARGUMENTS MADE BY THE ASSESSEE, THE EVIDENCES PRODU CED AND THE REMAND REPORT OF THE AO, LD. CIT(A) I.E. AT PAGE 62 AND 63 OF HIS ORDER OBSERVED AS FOLLOWS :- TO SUM UP IT IS AN ADMITTED FACT THAT THE ASSESSEE SOCIETY IS THRIFT AND CREDIT CO-OPERATIVE SOCIETY, REGISTERED WITH REGIST RAR OF CO-OPERATIVE SOCIETY, NEW DELHI. THE SOCIETY IS ENGAGED IN THE B USINESS OF LENDING AND TAKING DEPOSITS ONLY TO/FROM ITS MEMBERS. THE S OCIETY COLLECTS THE MONEY FROM MEMBERS IN CASH/CHEQUE MAINLY AGAINST TH E REPAYMENT OF LOANS, INTEREST ON LOAN, FIXED DEPOSIT, ADMISSION F EE, SHARE CAPITAL, ETC. AND THEY DEPOSIT THE SAME IN BANK ACCOUNTS. I AM OF THE OPINION THAT SINCE THE SOCIETY IS A THRIFT & CREDIT CO-OPERATIVE SOCIETY, THEREFORE SOURCE OF CASH DEPOSITED IN THE BANK OF RS. 3,00,63,224/- OUT OF THE CASH RECEIPT RECEIVED FROM ITS MEMBERS AGAINST THE REPAY MENT OF LOANS, INTEREST ON LOAN, FIXED DEPOSIT, ADMISSION FEE, SHA RE CAPITAL ETC. IS EXPLAINED ADEQUATELY UNLESS SOME OTHER INCRIMINATIN G FACT WAS BROUGHT ON RECORD. KEEPING ALL THESE FACTS AND CIRCUMSTANCE S IN VIEW, AND ALSO THE DOCUMENTS PRODUCED, SUBMISSIONS AND ARGUMENTS M ADE, I AM OF THE CONSIDERED OPINION THAT SOURCE OF CASH DEPOSIT AND THE VARIOUS ALLEGED DISCREPANCIES MENTIONED BY THE AO HAVE BEEN ADEQUATELY EXPLAINED AND THE ADDITION MADE U/S 68 OF THE INCOM E TAX ACT, 1961 AMOUNTING TO RS. 3,00,63,224/- DESERVES TO BE DELET ED. HELD ACCORDINGLY. 9. WHEN THE MEMBER OF CO-OPERATIVE SOCIETY DE POSITS MONEY IN HIS ACCOUNT MAINTAINED WITH THE CO-OPERATIVE SOCIETY, T HE MONEY DOES NOT BECOME UNEXPLAINED CASH CREDIT OF THE SOCIETY, UNLE SS THE IDENTITY OF THE MEMBER IS NOT PROVED. IN THE CASE ON HAND NO SUCH E VIDENCE HAS BEEN GATHERED BY THE AO. ON THE OTHER HAND THE ASSESEE H AS GIVEN EVIDENCE AS TO THE IDENTITY OF THE MEMBER. THE FACTUAL FINDING OF LD. CIT(A) COULD NOT BE CONTROVERTED BY THE LD. DR. HENCE, WE HAVE TO UPHO LD THESE FACTUAL FINDINGS. LD. CIT(A) HAS AT PAGE 69 ON THE ISSUE OF THE BOOKS OF ACCOUNTS HELD AS FOLLOWS :- ITA 3807/DEL/2009 AY 2005-06 ITO VS. NEW RISING STAR CO.OPERATIVE THRIFT & CREDI T SOCIETY LTD. 5 IN THE GIVEN FACTS AND CIRCUMSTANCES, IT IS FELT T HAT THE OBSERVATION OF THE LD. ASSESSING OFFICER THAT MERELY DUE TO THE IN ABILITY AND FAILURE OF THE ASSESSEE TO FURNISH CERTAIN DESIRED REQUIREMENT S, IT IS ESTABLISHED THAT THE ASSESSEE HAS FAILED TO MAINTAIN ACCOUNTS A S REQUIRED U/S 145(1) & 145(2) OF THE INCOME TAX ACT, 1961, IS WIT HOUT ANY BASIS AND CAN NOT BE SUSTAINED. ACCORDINGLY THE REJECTION OF BOOKS OF ACCOUNTS BY THE LD. ASSESSING OFFICER STATING THAT CORRECTNESS AND COMPLETENESS OF ACCOUNTING SYSTEM ADOPTED BY THE ASSESEE IS HELD AS DEFECTIVE CANNOT BE SUSTAINED. HELD ACCORDINGLY. 10. THIS FINDING HAS NOT BEEN CHALLENGED BY T HE REVENUE. THUS THE BOOKS OF ACCOUNT HAVE TO BE ACCEPTED. 11. IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW O F THE FACT LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT TH E FACTUAL RECORDING MADE BY THE FIRST APPELLATE AUTHORITY AND AS THE AS SESSEE HAS FILED ALL NECESSARY EVIDENCE BEFORE THE REVENUE AUTHORITIES, WE UPHOLD THE ORDER OF FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND O F REVENUE. 12. GROUND NO. 2 IS OF DISALLOWANCE U/S 80P AS AGAINST THE DENIAL OF DEDUCTION U/S 80P(2)(I). THE AO REJECTED THE CLAIM FOR THE REASON THAT THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY HIM. LD. CI T(A) HAS REVERSED THIS DECISION. UNDER THESE CIRCUMSTANCES WE UPHOLD THE F INDING OF THE FIRST APPELLATE AUTHORITY THAT DEDUCTION U/S 80P(2)(I) IS TOBE GRANTED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER,2014. SD/- SD/- (RAJPAL YADAV) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 17 TH OCTOBER,2014 *VEENA COPY OF THE ORDER FORWARDED TO: ITA 3807/DEL/2009 AY 2005-06 ITO VS. NEW RISING STAR CO.OPERATIVE THRIFT & CREDI T SOCIETY LTD. 6 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER ASST. REGISTRAR