Vidyasagar Samabay Krishi Unnayan Samity Limited, Kolkata V. ACIT, Cir. 38, , Midnapore

ITA 6/KOL/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1214 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-04-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 31-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Competent authority; Set aside
• Section: 68; 69; 250; 69A

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी मनीष बोरड, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd...........................Appellant C/o. S.N. Ghosh & Associates, Advocates 2, Garstin Place, 2 nd Floor, Suite No.203, Off Hare Street, Kolkata-1. [PAN: AABAV4239J] vs. ACIT, Circle-38, Kolkata..................................................................... Respondent Appearances by: Shri Somnath Ghosh, Advocate, appeared on behalf of the appellant. Shri P. P. Barman, Addl. CIT-Sr. DR, appeared on behalf of the Respondent. Date of concluding the hearing : April 10, 2024 Date of pronouncing the order : July 03, 2024 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 18.12.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has agitated against the confirmation of addition by the CIT(A) of Rs.91,87,680/-, which has been made by the Assessing Officer by treating the cash deposits made in Specified Bank Notes during the demonetization period as unexplained income of the assessee u/s 69A of the Act. 3. The brief facts of the case are that the assessee is a cooperative credit society. The assessee is engaged in the business of providing I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd 2 loans and advances to its members and also in trading activities in fertilizers and allied products. The Assessing Officer noted that during the period of demonetization, the assessee-society deposited a total cash of Rs.2,20,97,000/-. The assessee-society claimed that this amount of deposits was out of repayment of loans received from the members of the society. The details of such deposits were furnished before the Assessing Officer. Books of accounts and other documents as asked for by the Assessing Officer were also produced by the assessee- society for examination. The assessee-society also furnished a written submission explaining the reasons and source of cash deposits during the demonetization period. The Assessing Officer after scrutiny of the record noted that the assessee-society had made cash sales of Rs.91,87,680/- during the demonetization period for Specified Bank Notes which ceased to be legal tender w.e.f. 09.11.2016 vide Central Government Gazette Notification No.2652 dated 08.11.2016 issued under sub-section (2) of section 26 of the Reserve Bank of India Act, 1934. The Assessing Officer noted that since the aforesaid Specified Bank Notes issued by legal tender w.e.f. 08.11.2016, however, the assessee has accepted the said Specified Bank Notes in lieu of cash sales made by it, therefore, the said amount deposited by the assessee in the bank account was to be treated as unexplained money of the assessee u/s 69A of the Act. Accordingly, the Assessing Officer added the said amount into the income of the assessee. 4. The ld. CIT(A) confirmed the additions so made by the Assessing Officer. 5. At the outset, the ld. counsel for the assessee has explained that no cash sales of fertilizer etc. were made by the assessee during the demonetization period. That the assessee supplies fertilizers and allied I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd 3 products to its members-farmers on credit basis. Thereafter, the amount is recovered from the debtor members-farmers by sending agents. That the amounts in Specified Notes were lying with the agents of the assessee which were collected before the commencement of the date of demonetization period i.e. 08.11.2016. On the announcement of the demonetization period, its agents were directed by the assessee- society to deposit the already collected amount with the assessee- society which was further deposited in the bank account. The ld. counsel in this respect has further submitted that the aforesaid amount was collected from the agents and deposited in the bank account on the first three days from the commencement of demonetization period. That if the assessee would have made cash sales during the demonetization period then the deposits would have been found during the entire demonetization period. The ld. counsel in this respect has submitted that the assessee has deposited only the amount which was lying with its agents and no cash sales were made and therefore, the allegation of the Assessing Officer that the assessee has accepted demonetized currency in violation of any rule etc. was not correct. He has otherwise submitted that even otherwise the provisions of section 69A of the Act were not applicable in this case. 6. The ld. DR however has relied upon the findings of the lower authorities. 5. We have heard the rival contentions and gone through the record. In this case, the ld. counsel has explained that no cash sales were made during the demonetization period. That the amount in question was already collected by the agents of the society from the farmers-members which was deposited by the agents with the assessee-society and the same was further deposited by the assessee-society in the bank I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd 4 account. Even from the record/cash sales register etc., there is no evidence on the file that the assessee-society has made cash sales by accepting demonetized currency during the demonetization period. The ld. counsel has duly explained that the amount in question was collected and deposited during the first three days of the demonetization period which supports the contentions of the assessee that already collected amount by the agents was called for and deposited immediately in the bank account and no fresh cash sales were made and there was no violation of the RBI Circular. Even otherwise, in our view, the impugned additions are not sustainable as deposits cannot be said to be unaccounted income of the assessee u/s 69A of the Act. No doubt, the Specified Bank Notes as per the Reserve Bank of India’s notification ceased to be legal tender w.e.f. 09.11.2016, the assessee made the cash sales accepting the Specified Bank Notes in in violation of the said circular of Reserve Bank of India. The action of violation of the said circular can be taken by the competent authority in this respect. However, for the purpose of Income tax Act, what is to be examined is as to whether the said amount received by the assessee was unexplained income of the assessee u/s 69A of the Act? The assessee has duly explained the source of deposits, which has also been accepted by the Assessing Officer. The only contention of the Assessing Officer is that the assessee has violated the notification of the Central Government dated 08.11.2016 and accepted the Specified Bank Notes in lieu of sales made. For that, it is for the competent authority who may take action against the assessee as may be provided/applicable in relevant law. However, for the purpose of either section 68 or 69 of the Act, the said deposits cannot be treated as unexplained income of the assessee. Our above view is fortified by the decision of the Coordinate Bangalore Bench of the Tribunal in the case of ‘Sri I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd 5 BhageerathaPattinaSahakara Sangha Niyamitha vs. ITO’ in ITA No.646/Bang/2021 order dated 18.02.2022. The relevant part of the order is reproduced as under: “15. The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete this disallowance. 16. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.” 6. In view of the above discussion, the addition made/confirmed by the lower authorities in the case of the assessee on this issue is not sustained and the same is accordingly ordered to be deleted. 7. In the result, the appeal of the assessee stands allowed. Kolkata, the 3 rd July, 2024. Sd/- Sd/- [डॉÈटर मनीष बोरड /Dr. Manish Borad] [संजय गग[ /Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member I.T.A. No.06/Kol/2024 Assessment Year: 2017-18 Vidyasagar Samabay Krishi Unnayan Samity Ltd 6 Dated: 03.07.2024. RS Copy of the order forwarded to: 1. Vidyasagar Samabay Krishi Unnayan Samity Ltd 2. ACIT, Circle-38, Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches