The Deputy Commissioner of Income Tax, Circle-3(1), Visakhaprtnam V. Yashoda Mutually Aided Cooperative Credit Society Limited, Visakhaprtnam

ITA 61/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4728 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 29-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 142(1); 143(2); 69A

Judgement Text

आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.61/Viz/2021 (ननधधारण वर्ा / AY: 2017-18) The Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam. Vs. Yashoda Mutually Aided Cooperative Credit Society Limited, Visakhapatnam. PAN: AABAT 0094 K C.O. No. 43/Viz/2021 (In आयकर अपील सं./ I.T.A. No.61/Viz/2021) (ननधधारण वर्ा / AY :2017-18) Yashoda Mutually Aided Cooperative Credit Society Limited, Visakhapatnam. PAN: AABAT 0094 K Vs. The Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam. (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Sri G.V.N. Hari प्रत्यधथी की ओर से / Respondent by : Sri SPG Mudaliar, Sr. AR सुनवधई की तधरीख / Date of Hearing : 09/03/2022 घोर्णध की तधरीख/Date of Pronouncement : 11/04/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : The captioned appeal is filed by the Revenue and the Cross Objections is filed by the assessee. The Revenue’s appeal is 2 against the order of the Ld. CIT(A)-1, Visakhapatnam in appeal No.10491/2019-20/CIT(A)-1/VSP/2020-21, dated 18/09/2020 passed U/s. 143(3) r.w.s 250(6) of the Act for the AY 2017-18. 2. The Revenue has raised the following grounds in its appeal: “1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in holding that the AO has incorrectly invoked section 69A of the Act without verifying the genuineness of the transaction made during the months of October, 2016 to November, 2016. 3. The Ld. CIT(A) erred in deleting the addition made U/s. 69A of the IT Act, 1961 by the AO for Rs. 3,22,80,000/- . 4. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or at the time of hearing of appeal. 5. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that these above additions made on relevant disallowances be restored.” 3. Brief facts of the case are that the assessee is a Cooperative Credit Society (AOP) filed its return of income on 19/06/2017 declaring loss of Rs. 41,04,670/- for the AY 2017-18. The case was selected for complete scrutiny under CASS and statutory notices u/s. 143(2) and 142(1) were issued and served on the assessee. In response to the notice, the assessee filed information through online to the Ld. AO. The Ld. AO after perusing the submissions noted 3 that there was cash deposits of Rs. 3,22,80,000/- in specified bank notes (SBNs) during the period of demonetization. The Ld. AO then issued a show cause notice on 20/12/2019 for which the assessee submitted its reply on 23/12/2019. The Ld. AO after considering the reply to the show cause notice quoted that “the Reserve bank of India (RBI) had withdrawn Legal Tender Character of old bank notes in the demonetization of Rs. 500 and Rs. 1000/- w.e.f 9 th November, 2016, through Specified Bank Notes (Cessation of Liabilities) Act, 2017 and Specified Bank Notes (deposit of confiscated notes) Rules, 2017” and also quoted that the cash deposits during the period are unexplained and from undisclosed sources and by invoking the provisions of section 69A, the Ld. AO made an addition of Rs. 3,22,80,000/- to the income returned by the assessee. The Ld. AO also proposed to tax the income U/s. 115BBE of the Act. Aggrieved by the order of the Ld. AO, the assssee filed an appeal before the Ld. CIT(A). 4. The Ld. CIT(A), considering the written submissions covering the grounds raised by the assessee originally and also additional grounds raised, directed that the addition 4 made by the Ld. AO be deleted and partly allowed the assessee’s appeal. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 5. Ld DR argued that the cash deposits of Rs. 3.22 Crs were made in the bank account during the demonetization period. The Ld. DR also submitted that the deposits during the period of demonetization by the assessee has increased manifold. The Ld. DR also submitted that out of the list of depositors furnished by the assessee which was scrutinized by the Ld.AO 2 depositors out of 25 have confirmed that the deposits are not made by them. The Ld. AR also submitted that the other two depositors as detailed in page No.61 of the paper book, stated that they made deposits by way of cheques through banking channels and not by way of cash. The Ld. DR pleaded that the order of the Ld. Assessing Officer be upheld. 6. Per contra, the Ld. AR argued that section 69A cannot be invoked as the deposits are accounted for in the books of accounts maintained by the assessee. The Ld. AR also stated that as per the cash book submitted a copy of which is placed at pages 90 to 168 of the paper book there was an 5 opening balance as on 08/11/2016 to the extent of Rs. 2,96,34,776/-. The Ld. AR also submitted that the balance amount was received during the period as cash deposits and a consolidated amount of Rs.3,22,80,000/- was deposited into bank account of the assessee during the period. 7. We have heard both the sides and perused the material available on record and the orders of the authorities below. We find from the submissions made by the assessee that the assessee has four branches at MVP, Arilova, Gajuwaka and Atchutapurama. The assessee also maintains four bank accounts as detailed in para 2.1 of the Ld. CIT(A)’s order. We find from the order of the Ld. AO that he has not disputed the books of accounts of the assessee. We also find from the paper book submitted by the assessee that the requirements like membership of the depositor, date of deposit, amount received, depositor PAN, AADHAR and other particulars are provided by the assessee before the Ld. AO which was not disputed by the Ld. AO. We also find no merit in the orders of the Ld.AO that section 69A can be invoked. For the sake of convenience, section 69A is reproduced herein below: “Unexplained money, etc. 6 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.” 8. From the plain reading of section 69A of the Act, it can be observed that any money not recorded in the books of account maintained by the assessee and if he offers no explanation about the nature and source of the acquisition of money, then the value of money may be deemed to be the income of the assessee for such financial year. In the instant case, the assessee has recorded the cash in its books of account, explained the details of deposits, provided the credentials of the depositors to the Assessing Officer. The Assessing Officer merely because of two depositors namely Mr. B. Kanakaraju and Mr. G. Santosh Kumar denied to have opened any account with the assessee, it cannot be a ground to be declared the deposits as bogus. The Ld. AO has not provided any opportunity to the assessee to cross-examine these two persons by the assessee. This fact is also recorded by the Ld. AO in his order in para 3.7 stating that these 7 “depositors are not aliens to the assessee”, inspite of the fact that the assessee has requested the AO for cross- examination of these members. The Hon’ble Supreme Court in the case of Andaman Timber Industries reported in 281 CTR 241 (SC) held that the adjudicating authority is bound to provide an opportunity for examination of the witnesses and in the absence of the same except that the assessee demanded for a cross examination the witnesses cannot be used against the assessee. The Ld. AO also erred in observing that the deposits received from C. Venkata Rao and Smt. Chaganti Lakshmi are by way of cheques but has wrongly noted that the deposits have been received by cash by the assessee. This fact was also recorded in para 6.2.2 of the Ld.CIT(A)’s order. The Ld. AO is also not correct in declaring Rs. 500/- and Rs. 1000/- SBN notes as illegal from 8/11/2016 because section 2(1)(a) of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that "appointed day" means the 31 st day of December, 2016. Further, section 5 of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 also states that from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified 8 bank note. So it can be inferred from the said Act that the amounts are considered to be legally tendered till 31/12/2016. The Ld. AO also failed to observe that in the absence of an alternative, when there is only one option available to the assessee ie., to deposit the specified bank notes with a bank, and accordingly the assessee has deposited Rs. 3,22,80,000/- into the bank. These cash deposits which is the aggregate of opening balance of Rs. 2,96,34,776/- as on 8/11/2016 and the amount of cash deposits received from 8/11/2016 to 2/12/2016 amounting to Rs. 3,22,80,000/- is in accordance with law. In view of the above discussions, we find no infirmity in the order of the Ld. CIT(A) and therefore no interference is required. 9. In the result, appeal of the Revenue is dismissed and the Cross Objection filed by the assessee is allowed. Pronounced in the open Court on the 11 th April, 2022. Sd/- Sd/- (द ु व्वूरु आर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 11.04.2022 OKK - SPS 9 आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee – Yashoda Mutually Aided Cooperative Credit Society Limited, 2-8-33/1, Plot No. 79, Sector-9, MVP Colony, Visakhapatnam. 2. रधजस्व/The Revenue – Dy Commissioner of Income Tax, Circle-3(1), Income Tax Office, Infinity Tower, Shankaramatham Road, Santhipuram, Visakhapatnam, Andhra Pradesh – 530016. 3. The Principal Commissioner of Income Tax-1, Visakhapatnam. 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals)-1, Visakhapatnam, 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam