Appeal Details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 8479 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-02-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
G
Next Hearing Date
15-01-2024
Assessment Year
2016-2017
Appeal Filed On
13-03-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAHUL CHAUDHARY, JM ITA No. 2145/Mum/2022 (Assessment Year: 2016-17) ITA No. 473/Mum/2022 (Assessment Year: 2016-17) Goresh wa r G ram in Mult istate Co.op C r. so c A/P Gore gaon, Pa rt naer, Ahm ednagar, Maharash tra-414103 Vs. ACIT, Central Circle 2(1) 804, Pratishtha Bhavan, M.K. Road, Mumbai-400 020 (Appellant) (Respondent) PAN No. ABAG2982K Assessee by : Shri Sharad Vaze & Shri Amod Vaze, ARs Revenue by : Shri Dr. Kishor Dhule, CIT DR Date of hearing: 16.01.2024 Date of pronouncement : 28.02.2024 O R D E R PER PRASHANT MAHARISHI, AM: 01. ITA No.473/Mum/2022 is filed by Goreshwar Gramin Multistate Co-operative Credit society Ltd., [ Assessee/ Appellant] against the appellate order passed by learned Commissioner of Income-tax (Appeals)-48, Mumbai,[ the ld CIT (A)] for A.Y. 2016-17, wherein the appeal preferred by the assessee against the assessment order dated 15 th April, 2021, passed by the Asst. Commissioner of Page | 2 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Income Tax, Central circle 2(1), Mumbai, (the ld AO), was dismissed. 02. ITA No.2145/Mum/2022, is filed by the assessee against the order of the learned CIT (A)-48, Mumbai dated 30 th June, 2022, for A.Y. 2016-17, wherein the appeal filed by the assessee against the assessment order dated 15 th April, 2021, passed by the learned Assessing Officer under Section 147 of the Income- tax Act, 1961 (the Act), was dismissed. 03. Both the appeals pertain to the same assessment year for different proceedings, one against regular assessment proceedings and another against reassessment proceedings. 04. In ITA No. 473/Mum/2022, assessee has raised following ground of appeal:- “1. The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the learned Assessing Officer in assessing the total income at ₹25,58,92,800/- as against loss of ₹47,84,871/- declared by the Appellant in the return of income. 2. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition on account o deposits accepted from its members of ₹14,33,45,343/- under section 68 of the Income Tax Act 1961 (the Act), without appreciating that the appellant had offered an explanation about Page | 3 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 the source and nature of the said amount credited in its books. 3. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹14,33,45,343/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members. 4. the learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹11,43,70,335/- on account of cash deposited in its own bank account, without appreciating that it was deposited in the normal course of business out of the deposits received from its members. 5. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in not appreciating that the learned Assessing Officer had failed to give due credence to the additional evidence submitted by the appellant during the remand proceedings. 6. Without prejudice to the above grounds, the learned Commissioner of Income-tax (Appeals) erred in not appreciating that once addition on account of deposits accepted from its members is sustained, addition on account of cash deposits in own bank accounts is not warranted. 7. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of ₹29,61,985/- computed as a percentage Page | 4 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 of total deposits accepted from members during the year, without appreciating that the commission charged by the appellant during its normal course of business was already included in its returned income. 8. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in relying on the statement of the managing director of the appellant recorded under Section 131 of the Act without providing a copy thereof to the appellant, thereby grossly violating the principle of natural justice. 9. The appellant craves leave to add alter or amend any of the grounds of appeal at any time before or at the time of hearing. 05. In ITA No. 2145/Mum/2022, the assessee has raised following ground of appeal:- “1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the learned assessing officer in assessing the total income at Rs. 164,49,95,110/- as against loss of Rs. 47,84,871/- declared by the Appellant in the return of income. 2. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the additions of Rs. 164,49,95,110/- without appreciating that the re-assessment under section 147 was made without even considering that original assessment under section 143(3) of the Act was already made and there was no new information on record justifying the re- opening of assessment. Page | 5 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 3. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in not appreciating that the re-assessment proceedings under section 147 were bad in law and the assessment order passed under section 147 r.w.s 143(3) of the Act ought to have been quashed. 4. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 164,33,51,753/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members. 5. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 16,43,352/- computed as a percentage of cash deposits accepted from members at Hyderabad branch, without appreciating that the commission charged by the appellant during its normal course of business was already included in its returned income. 6. The learned commissioner of Income Tax (Appeals) erred in facts and in law in relying on the statement of the managing director of the appellant recorded under section 131 of the Act without providing a copy thereof to the appellant, thereby grossly violating the principle of natural justice. ” 06. Brief facts of the case shows that assessee is an association of person, Multi state credit cooperative society, engaged in providing banking services Page | 6 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 including savings banks account and providing all types of loans. The assessee is a multi state co- operative credit society, based at Ahmednagar. It filed its return of income on 27 th September, 2016, declaring a loss of ₹47,84,861/-. The return was picked up for scrutiny. A survey under Section 133A was conducted in case of Shanti Trading Company and Vankatesh Multi State Credit Co-operative society on 27 th April, 2021. It was found that i. Assessee has accepted unsecured loan of ₹14,33,45,343/-, the learned Assessing Officer asked the assessee to substantiate the name, address, permanent account number and confirmation of the parties. Despite opportunities none appeared on behalf of the assessee and no reply was filed. The learned Assessing Officer made addition under Section 68 of the Act of ₹14,33,45,343/- as unexplained credit under Section 68 of the Act. ii. The assessee was also specifically asked that it has made a cash deposit in the ICICI bank amounting to ₹4,27,55,550/- and in Mahanagar co-operative Bank amounting to ₹7,16,14,785/-. As no details were forthcoming, the learned Assessing Officer made the addition of ₹11,43,70,335/- as unexplained credits. Page | 7 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 iii. As there is a search and seizure action in case of Shanti Trading Company and Vankatesh Multi State co-operative credit society and assessee was also covered by survey under Section 133A of the Act, wherein during the survey, it was established that assessee has accepted cash deposits of ₹296 crores from its members in various branches. The managing director of the society in statement recorded under Section 131 of the Act also stated that once cash was accepted in Hyderabad branches without maintaining proper KYC and not ascertaining the whereabouts or the nature of business activity of those cash depositors. The learned Assessing Officer made the addition of commission at the rate of 0.10% on such transaction amounting to ₹29,61,985/-. 07. Accordingly, the assessment order was passed under Section 143(3) of the Act on 6 th November, 2018, determining the total income of the assessee at ₹25,58,92,800/-. 08. Assessee aggrieved with that order preferred the appeal before the learned CIT (A). The assessee furnished additional evidences which were sent to the learned Assessing Officer for his comments, the learned Assessing Officer furnished remand report, wherein the complete list of deposits along with details of the KYC were stated to be not submitted. Page | 8 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Subsequently, assessee submitted certain further details which were also sent to the learned Assessing Officer for remand report. During the remand proceedings, the learned Assessing Officer issued 40 notices under Section 133(6) of the Act, out of which only 2 replies were received and 14 notices return unserved. The remand report submitted by the learned Assessing Officer was also provided to the assessee. Mr. Sharad Sunil Kakde, CEO and Managing Director of the society submitted that the above cash deposited in the bank account at Hyderabad Bench is a fraud committed by one of the employee of the branch and FIR has been lodged against him. The assessee was further given an opportunity by learned CIT (A) to give the details about the various deposits received by the assessee as well as the cash deposited by the assessee. The assessee furnished ledger accounts and bank statements only. The learned CIT (A) also found instances that in the detail submitted by the assessee of the various cash deposits, the permanent account number and Adhar Number are either blank or submitted as farmer. Therefore, an addition made by the learned Assessing Officer was confirmed. The assessee also made a claim of deduction under Section 80P of the Act. The learned CIT (A) rejected the same holding that there is no income from the business of the society and Page | 9 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 accordingly, the appeal of the assessee was dismissed. 09. Therefore, assessee is in appeal before us in ITA No.473/Mum/2022. 010. Subsequently for the same assessment year, proceedings under Section 147 of the Act were initiated and 148 notices were issued on 25 th September, 2019, wherein it was found that during the course of search at Shanti Trading Company and Vankatesh Multi State Co-operative Society Limited, it was found that assessee is providing credit and dubious transaction by accepting huge cash deposits and thereafter transferring these accounts to various other suspicious entities by making RTGS or NEFT. Assessee was found to have received cash of ₹296 crores including cash of ₹164 crores in Hyderabad Branch. Investigations were also made in the case of the entities, who have made cash deposits in huge bulk. The cash depositors have defective KYC details and are not traceable. Most of them are non-filer of IT return. The accounts remain operative for a limited period of time for depositing cash and transfer of money from that account. Therefore, cash deposits of ₹296 crores in Hyderabad branch with respect to 10 members was found to be dubious and subsequently, the assessment was reopened. Page | 10 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 011. Pursuant to various notices issued, assessee only submitted the basic details of return of income audit report, profit and loss account and balance sheet, seize material was provided to the assessee and response to the assessee was considered. 012. During the course of assessment proceedings, the learned Assessing Officer found that in the KYC records of such cash depositors, neither the name, PAN, nature of business were mentioned completely and proof of identity was also not available completely. Thus, it was impossible to make any enquiry with the depositors. At various places whereas the PANs are mentioned, same were also different from KYC form, mobile no stated are inactive. Whatever address have in those account opening form summons under Section 131 of the Act were issued, same were returned with remark to Postal Authority as not known. The inspector sent could not trace the depositors. During the post search proceedings, the learned Assessing Officer found bankers from which NEFT or RTGS was made and who are the persons in whose favour the amount was sent. On examination of the statement of those entities where the funds are found to be transferred some of them are remitted directly as foreign remittances. The learned Assessing Officer stated that this is the complete modus operendi and connivance of the bank, assessee for tax evasion, summons u/s 131 were issued to the Sharad Kakde, Page | 11 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Managing Director of the society. He was questioned about huge deposit of ₹164 crores in Hyderabad Branch. He submitted that 3 employees of the society were involved in the above cash deposit scam and stated that FIR has been lodged against them. The learned Assessing Officer further issued summons under Section 131 of the Act to one of the key persons Shri Bajirao Shankar Panmand, chairman of the society. He reiterated what is stated by the Managing Director. The learned Assessing Officer identified 10 persons who have deposited 164 crores in cash at Hyderabad Branch and found that all these 10 persons are not available at their given address. He also independently issued summons under Section 131 of the Act to these entities which were not responded. He then analyzed the statement of the chairman and managing director and issued show cause notice on 2 nd February, 2021, but none appeared. A reply was not submitted, therefore, the learned Assessing Officer made an addition of only ₹164 crores deposited in Hyderabad Branch in cash as income of the assessee and addition of commission at the rate of 0.1% of ₹ 16,43,352/- on the above cash deposit. The total income was assessed at ₹164,49,95,100/-. The assessment order was passed on 15 th April, 2021. 013. The assessee aggrieved with the reassessment order preferred the appeal before the learned CIT (A)-48, Mumbai. The assessee submitted that assessee is a Page | 12 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Multi State Co-operative Society and its members are farmers. The Hyderabad staff has committed the fraud, whatever details were available have already been furnished by the assessee. The learned CIT (A) in absence of any evidences submitted by the assessee confirmed the order of the learned Assessing Officer. 014. Therefore, the assessee is in appeal before us. 015. Assessee has submitted four paper books containing huge volume of documents. The claim of the assessee is that assessee is a banker and fraud has been committed by the Hyderabad Bench employees and in case of a bank addition under Section 68 of the Act cannot be made for the reason that whatever documents provided by the account holders are already given. It is the claim that assessee has given name and address of the member or the person which is provided at the time of opening of the bank accounts and therefore, no addition in the hands of the assessee could have been made. The assessee also submitted that in case of Mr. Nandalal Joshi who have deposited cash with the bank has already been assessed on the amount of cash deposited by the learned Assessing Officer wherein sum of ₹288 crores is outstanding tax for which the assessee has received notice under Section 226(3) of the Act. It is also the claim that when the person who has deposited the cash with the Hyderabad Branch has Page | 13 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 already been assessed on the amount of cash deposited; addition in the hands of the assessee cannot be made. The same income cannot be taxed in both the hands i.e. in the hands of the Nandalal Choksi as well as the assessee. Ld AR referred decision of Honourable Gujarat High court in case of The Commissioner of Income Tax Vs. Pragati Co. Op. Bank Ltd. Income Tax Reference No. 215 of 199329.06.2005 016. During the course of hearing, the assessee has raised additional ground that if any addition is made to the total income of the assessee, whole of such income is eligible for deduction under Section 80P(2)(a) of the Act. 017. The learned Departmental Representative supported the orders of the lower authorities. He submitted that assessee is one of the Multi State Co-operative Bank wherein huge cash is deposited at Hyderabad Branch in very few numbers of days. This cash was deposited only with the AXIS bank and from there the money was transferred to the different account and such accounts where the money deposited was also closed after the money transferred to different account. He further submitted that some of the money has gone to foreign countries. This shows that the assessee is one of the parties where the huge tax evasion has been made. He further submitted that when the bank has not maintained Page | 14 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 the KYC information of the depositors, it itself proves the connivance of the management in the above process of tax evasion. He further submitted that it cannot be a law that in case of assessee who is a Multi State Co-operative Society, who can only accept the money from member can get out of clutches of the provision of Section 68 of the Act. He further submitted that even otherwise, assessee has not given any details through which any enquiry can be made. Thus assessee is thwarting the inquiry by the Revenue to reach at the beneficiaries. 018. The learned Departmental Representative further submitted that even before the ITAT no evidence are produced and therefore, no infirmity can be found in the orders of the lower authorities. 019. During the hearing, the assessee was asked to submit the annual financial statements of the assessee and details of the directors of co-operative society as well as the details of depositors who deposited more than 2.5 lacs in the bank account in cash. The assessee submitted such detail as per paper book no. E. 020. We have carefully considered the rival contentions and perused the orders of the lower authorities. 021. We first take up ITA number 473/M/2022 for assessment year 2016 – 17 against the original assessment proceedings. Page | 15 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 022. Ground number 1 of the appeal is general in nature, no arguments were advanced, hence dismissed. 023. Ground number 2- 6 of the appeal are with respect to the addition of ₹ 143,345,343/– in the hands of the assessee under section 68 of the assessee credit co-operative society. 024. The facts clearly shows that assessee is a multi state co-operative credit society at A/P, Goregaon, Parner, Tal. & Dist. Ahmednagar, Maharashtra-414103, Sendawa, Dhar and Indore in the state of Madhya Pradesh. The assessee has the object of credit co- operative societies and services are provided to the members. There are various accounts of memberships provided in the Article 9 of the Memorandum. A person can be admitted as member if the membership application is submitted complete in all aspect, admission fee paid and crediting shares allotted fee, the membership application is found complete in all respect. In such cases member can be admitted as member. In such situation, the assessee co-operative society has deposited of ₹14.33 crores, share capital of ₹21,71,500/- and reserve fund of ₹ 14,46,000/- as on 31 st March, 2006. It has granted loans and advances of ₹8,57,37,000/- as on that date. In nutshell, the assessee’s total balance sheet strength is ₹14.70 corres. Looking to the amount deposited by members is very huge and unusual. Page | 16 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 025. In the original assessment proceedings, the learned assessing officer has made an addition under section 68 of the income tax act of ₹ 143,345,343/– wherein the deposits have been accepted by the assessee from its members but could not give the complete name, address and permanent account number of such members. Before the learned CIT – A assessee furnished additional evidences which were sent to the assessing officer for comment and enquiry, the AO stated that complete list of depositors along with the details of the KYC documents were not submitted. The finding was that that the documents of 'Know your customer' were not properly filled and were not supported with proper documents and no physical verification of the address was made. The AO issued several [40] notices under section 133 (6) at the details submitted by the assessee, out of which 26 notices did not reply and only 2 out of them replied to such notices. The balance 14 notices issued returned back unserved. Therefore, the learned CIT – A also confirmed the addition. The facts clearly shows that assessee has accepted deposits to the tune of ₹ 143,345,343/– and deposited such cash in ICICI Bank of ₹ 42,755,550/– and ₹ 71,614,785/– at Mahanagara cooperative bank Ltd. 026. At this stage the argument of the learned authorised representative cannot be accepted that in case of a bank no addition under section 68 of the act can be Page | 17 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 made as held by the honourable Gujarat High Court in case of Pragati credit co-operative society Ltd. (2005) 278 ITR 170 (Gujarat) for the reason that in that case names and addresses of all the depositors had been supplied by the assessee as demanded by the assessing officer and the assessing officer has agreed to treat the same as samples of the total number of depositors. This fact was not disputed by the revenue. Further when the assessee has given sufficient indication regarding particulars of the deposits and the depositors and thereafter it was for the assessing Officer to carry out necessary investigation in respect of the depositors, If the learned assessing officer has any doubt about the capacity of the investors. The failure of the assessing officer to make further investigation cannot justify an addition in the hands of the assessee. Further the coordinate bench in that particular case has held that there are cases of inadvertent errors in the course of accepting and repaying hundreds of deposits where the procedure for acceptance on repayment of such deposits was explained and the causes for irregularities in the specimen signature cards was also narrated. However in the present case out of the total deposit of ₹ 14.33 crores, the AO sent notices in 40 cases out of which 26 were served and only two of them replied to the notices. The balance 14 notices could not be served on the parties. Therefore it is apparent that in the present case the AO carried Page | 18 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 out the enquiry in the remand proceedings which showed the result. Therefore, the facts in this case are clearly distinguishable. However, it is also to be accepted that out of the 40 cases, 26 notices could be served on the parties, therefore, it cannot be said that the details with respect to these 26 accounts were not available with the AO. The AO as well as the learned CIT – A, did not delete the addition to the extent of at least these 26 accounts wherein the parties were identified as per the know your customer norms. The balances of 14 notices were received back. The learned AO did not say that whether the addresses to which this notices were served were not correct, it has changed, or the parties have left or for any other reasons. It is the claim of the assessee that the members of it are residing in rural areas and most of them are farmers having agricultural income, some of them are small shopkeepers. It is also not the finding of the AO that that the members had only account for which the addition is made. Those members may also have the accounts in the nature of other deposits such as savings, current deposits or fixed deposits. Further, with respect to 26 accounts, the addition is sustained by the learned CIT – A in the hands of the assessee is also not justified. No reason is given by the learned CIT – A to confirm the action of the AO with respect to the full amount of ₹ 14.33 crores when those parties were served notices and 2 of them Page | 19 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 have replied to such notice. According to this, the addition made by the learned AO and confirmed by the learned CIT – A cannot be sustained. However, the learned assessing officer is further required to examine with respect to the balance 14 parties (members) who have not responded to his notices under section 133 (6) of the act by giving an opportunity to the assessee to identify those members by their other credentials of savings bank account, current account, agricultural loan accounts etc. Of course, the addition with respect to those 26 parties deserves to be deleted in view of the decision of the honourable Gujarat High Court. However as the amount pertaining to those 26 parties is not available, so we set-aside ground number 2 – 6 of the appeal back to the file of the learned assessing officer (1) with a direction to the assessee to substantiate the identity of the members of the society. The AO may examine the same and decide the issue afresh with respect to those of 14 parties and after ascertaining the detail of amount involved (2) with respect to 26 parties, delete the same. Accordingly, ground number 2 – 6 of the appeal is allowed with above direction. 027. Ground number 7 is with respect to the addition of ₹ 2,961,985/– computed as a percentage of total deposit accepted from the members during the year as undisclosed commission income earned by assessee. Facts shows that during the course of Page | 20 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 search and seizure action conducted in case of Shanthi trading company & Venkatesh Murthy cooperative credit society Ltd on 27/4/2017 and simultaneous action under section 133A on the assessee it was found that there is a cash deposit of ₹ 296 crores from the members of the assessee society in various branches during the year. The managing director was examined who stated that the society accepted cash deposit and made RTGS transfer on commission basis and earned commission of ₹ 10,000/– for Rs one crore at the rate of 0.10%. On the basis of this as the complete KYC details are not available, the addition of ₹ 2,961,985/– is made beings commission at the rate of 0.10% on the cash deposit of ₹ 296 crores. The learned CIT – (A) as per para no nine of the order confirmed the same. 028. On hearing the parties, we find that this addition cannot be made in the hands of the assessee because assessee has earned this commission income and has shown it into its profit and loss account. It is not the case of the learned AO or the learned CIT – A this commission income has not been credited in the books of assessee. The statement of the managing director and the chairman of the bank clearly shows that they have earned this commission income in the books of society. Accordingly we direct the learned assessing officer to delete the addition of ₹ 2,961,985/–. Page | 21 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Accordingly, ground number 7 of the appeal is allowed. 029. Ground number 8 is with respect to the statement of the managing director of the assessee recorded under section 131 of the act which was not provided to the assessee. This is with respect to ground number seven of the appeal. As the ground number seven of the appeal has already been allowed in favour of the assessee, ground number 8 becomes infructuous and hence dismissed. 030. Accordingly ITA number 473/M/2022 for assessment year 2016 – 17 is partly allowed as indicated above. 031. Now we come to the appeal in ITA number 2145/M/2022. Ground number 1 of the appeal is general in nature, no arguments were advanced, therefore, same is dismissed. 032. Ground number 2 – 4 of the appeal is with respect to the addition of ₹ 1,643,351,753/– on account of the cash deposited by 10 members of the society during a short span and the details furnished by the assessee of KYC norms is inadequate or incorrect. 033. The fact shows that assessee opened a branch at Hyderabad by passing a resolution on 25 th May, 2014. In that branch huge cash deposited of ₹ 164 crores and RTGS or NEFT was made to the different bank accounts. The name of 10 persons were Page | 22 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 provided stating their account number, permanent account number, address and total cash deposited by them. Out of the total cash of ₹ 164 crores, cash of ₹ 97.55 crores was introduced by one person shri Joshi Nandlal Ratanlal whose permanent account number is AEKPMG 8858F having address at 5/2/405 Risala Abdulla, Osman Gunj, nampally, Begumbazar, Hyderabad 500012. The learned AO was supplied details of different entities with the identical details available except in one case where even permanent account number is not available who have deposited the balance sum in their bank accounts. When learned AO issued enquiry letters, summons to these parties, none of them is available at the given address. The statement recorded of managing director and chairman confirms that the above cash deposited in the bank account of the assessee, is a fraud committed by the employees of that branch by not maintaining proper know your customer details as well as without doing any verification of the permanent account number of the business of the parties. It is also stated that a first information report is also registered against those employees. It is also shown that in case of Mr Joshi Nandlal Ratan Lal the bank is issued garnishee defaulter notice under section 226 (3) of the act with respect to the tax demand arising on that person for depositing the money in his account with this assessee. Therefore, it is apparent that at least an addition to the extent Page | 23 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 of ₹ 97.55 crores has also been made in the hands of the person who deposited that sum. None of the addresses was found to be verifiable. The assessee has submitted that it has filed an police complaint against the fraud committed by employees of the assessee who were in charge of Hyderabad branch. On verification of the documents by learned AO of those 10 persons it was found that the nature of businesses not mentioned, permanent address column is not filled, the name of the persons were not properly filled, the proof of identity could also not be ascertained. It is the specific finding of the assessing officer that all efforts have been made to find out the possible address of the depositors but the addresses mentioned in the forms were different to that of the PAN data and 360° profiling of the mobile numbers. The mobile numbers were found to be inactive. Therefore it is clearly established that the assessee has not followed the due diligence procedure for collecting necessary information from the members while opening the accounts with the assessee society. The assessee society has also not carried out any verification before opening of the account of those members. All the summons issued under section 131 of the act returned by the postal authorities as the persons are not known. It is not the case that the addresses are incomplete or the persons have left, the remark was that those persons are not known. The inspectors deputed of the Page | 24 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 investigation wing who also could not trace the members. It was also found some funds have been ultimately transferred were remitted directly as foreign remittances. Further, as the assessee society was not having facility of RTGS, it was done through other banks in Hyderabad. The assessee was asked to produce these parties, assessee failed to. It is surprising that the assessee has accepted cash of ₹ 196 crores from those persons and it does not know whereabouts or complete identity of such persons. It is not the case that all the members have deposited cash with the assessee but only 10 members have deposited the cash that are in question. Therefore, it is highly unusual to believe that when such a suspicious transaction is carried out through a credit institution like assessee, it does not know identity, leave aside the creditworthiness of those parties, genuineness itself is proved in negative. Though statement of the managing director and chairman says that they have maintained proper KYC, but in actual records that assertion does not seems to be correct. It is also the case that the managing director himself was supervising the functioning of Hyderabad branch. Now it is the case of the one person Shri Joshi Nandlal rattan lal, his details are enclosed at page number 61 of the paper book E, there is no signature of any introducer in that account opening form despite there is a specific column. He has savings account as well as current Page | 25 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 account with the bank. It was the claim of the assessee that amount of deposit made with this assessee has already been added in case of that assessee and assessee has been served notice under section 226 (3) of the act. Similarly, in case of other nine persons, KYC documents are submitted but they are stated to be incomplete and incorrect in some cases. It is also a fact that such huge money cannot be the income of assessee, but it is also apparent that the assessee's Hyderabad branch is also a party where this huge cash deposit has been made and the beneficiaries have been benefited by the exercise of deposit of cash through multiple layers of transactions. Further in view of strange facts stated before us, the decision of Honorable Gujarat high court does not apply. In view of the above facts, the whole issue is set-aside to the file of the learned assessing officer to conduct necessary enquiry covering all aspects including the beneficiaries also and decide whether addition can be made in the hands of the assessee or not. It is also to be noted that at page number 1543 the list of directors is produced by the assessee, which shows that most of the directors are either primary teachers or school clerk etc. Further, it is also the appeal of the assessee as huge additions are made in the hands of this assessee. Accordingly, ground numbers 2 – 4 of the appeal are restored back to the file of the AO. The assessee is also directed to submit the necessary Page | 26 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 details to the learned assessing officer for the above enquiry. Accordingly, these grounds are allowed with above directions. 034. Ground number 5 – 6 related to the addition of ₹ 1,643,352/– as commission income earned on the above transaction has already been recorded by the assessee in its books of account, same cannot be added in the hands of the assessee. Learned AO is directed to delete the same. Accordingly, ground number 5 and 6 of the appeal are allowed. 035. In the result, ITA number 2145/M/2022 filed by the assessee is allowed for statistical purpose. 036. Accordingly, both the above appeals are allowed for statistical purposes. Order pronounced in the open court on 28.02.2024. Sd/- Sd/- (RAHUL CHAUDHARY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28.02.2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, True Copy// Page | 27 ITA Nos.2145 & 473/Mum/2022 Goreshwar Gramin Multistate Cooperative Credit Society Ltd; A.Y. 16-17 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
Mehul