ITO, WARD-2(2), PUNE, PUNE V. ANNAPURNA MAHILA CO. OP. CREDIT SOCIETY LTD. , PUNE

ITA 2117/PUN/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the decision of the CIT(A) which had deleted an addition made by the AO on the grounds that the assessee, Annapurna Mahila Co-op. Credit Society Ltd., had deposited a substantial amount of cash in demonetized notes during the demonetization period in India. The AO had treated these deposits as unexplained money under section 69A of the Income Tax Act, 1961, arguing that the assessee was not authorized to accept such deposits post-demonetization. However, the CIT(A) found that the assessee had provided adequate explanations and documentation regarding the source of these deposits, leading to the deletion of the addition. The Tribunal, after reviewing the submissions and evidence, concurred with the CIT(A) and dismissed the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396595 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: ITO vs. Ambika Gramin Bigarsheti Sahakari Patsanstha, M/s. Mauli Mahila Nagari Sahakari Path Sanstha Ltd vs. ITO, Shrijeet Finance Pvt. Ltd. v. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: NIKHIL S. PATHAK
• Section: 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “A” BENCH : PUNE BEFORE SHRI RAMA KANTA PANDA, VICE-PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER I.T.A.No.2117/PUN/2024 (Assessment Year 2017-2018) ITO, Ward-2(2), Pune vs. Annapurna Mahila Co-op. Credit Society Ltd., 26, Shubham Heights, Aditya Garden City Road, Warje, Pune PAN : AAAAA 7999 P (Appellant) (Respondent) For Assessee : Shri Nikhil S. Pathak, Advocate For Revenue : Shri Amol Khairnar, CIT-DR Date of Hearing : 06.03.2025 Date of Pronouncement : 26.05.2025 ORDER PER ASTHA CHANDRA, JM: The appeal filed by the Revenue is directed against the order dated 09.08.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2017-18. 2. The Revenue has raised the following grounds of appeal:- “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs. 7,90,34,500/- made u/s 69A of the Income Tax Act, 1961 by the AO on account of cash deposits of demonetized Legal Tender (Specified Bank Notes of Rs. 500 and Rs. 1000) without appreciating the fact that the assessee society was not authorized to take deposits of Specified Bank Notes during the period of demonetization in terms of Reserve Bank of India's Circular No. RB1/2016-17/112 DCM (Plg) No. 1226/10.27.00/2016-17 dated 08.11.2016? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in not considering the various guidelines issued by Reserve Bank of India from time to time on the Demonetization including Circular No. RBI/2016-17/112 DCM(Plg) 2 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) No. 1226/10.27.00/2016-17 dated 08.11.2016 and Circular No. RBI/2016-17/130 DCM(Pig) No. 1273/10.27.00/2016-17 dated 14.11.2016 while deciding the appeal of the assessee society? 3. The appellant craves leave to add, amend, alter, vary and/or withdraw any of all of the above grounds of appeal in the course of appellate proceeding.” 3. Briefly stated, the facts of the case are that the assessee is a Multistate Cooperative Society registered under the Maharashtra State Cooperative Societies Act, 1960 and also under (Central) Multi State Cooperative Societies Act, 2002. It is engaged in extending micro credit and micro savings programmes aimed at self-employed people with low income and provides micro finance loans to its members who are below the poverty line. The main source of income for the assessee is interest charged on loans to its members and income earned on deposits kept with cooperative banks which is eligible for deduction u/s 80P of the Income Tax Act (the “Act”). For the A.Y. 2017-18, the assessee filed its return of income on 30/10/2017 disclosing total income of Rs. NIL. The case of the assessee was selected for scrutiny under CASS. Accordingly, statutory notices u/s 143(2) and 142(1) along with questionnaire were issued and served upon the assessee calling for certain details, in response to which, the assessee filed the requisite details/ documents online. During the course of assessment proceedings, the Ld. Assessing Officer (“AO”) on perusal of the Income Tax records, noted that during the demonetization period ranging from the period 16/11/2016 yp 30/12/2016, the assessee has deposited cash in old currency amounting to Rs.7,90,34,500/- out of total cash deposits of Rs. 14,32,87,200/- in various bank accounts (listed in para 4 of the assessment order). The Ld. AO 3 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) made an addition of Rs. 7,90,34,500/- on account of such cash deposits in the bank account(s) during the demonetization period treating the same as unexplained money u/s 69A of the Act on the ground that Pathsansthas were not allowed to accept the old specified bank notes (SBNs) post midnight of 08.11.2016. 4. Aggrieved, the assessee challenged the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) observed that cash deposits made by the assessee during the demonetization period have been collectively treated as unexplained money by the Ld. AO under the provisions of section 69A of the Act for the reason that the assessee is not authorized to receive the SBNs after 08/11/2016. However, the assertion of the Ld. AO has not been supported by any documentary evidence or RBI guidelines. The Ld. CIT(A) also observed that the assessee has offered plausible explanation for the deposits of Rs. 7,90,34,500/- and has furnished all the requisite details regarding the source of cash in support of its claim. He, therefore, deleted the addition of Rs. 7,90,34,500/- made by the Ld. AO by observing as under:- “Ground No. 1: The ground of appeal has been raised in respect of addition u/s 69A of the Act by the Ld. AO on account of cash deposits of Rs.7,90,34,500/- made by the assessee at the time of demonetization. During the course of assessment proceedings, the assessee submitted that it is a multi-state co-operative society dealing in micro credit and micro savings program aimed at self-employed women with low incomes. The Ld. AO observed that out of the total cash deposits of Rs. 14,32,87,200/-, the assessee has deposited a cash of Rs.7,90,34,500/- in old notes wherein the \"Patsansthas\" of the assessee were not allowed to accept the old SBN notes. Since, the Ld. AO was not satisfied with the reply of the assessee, hence, the impugned addition of Rs.7,90,34,500/- was made u/s 69A of the Act. 4 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) During the course of appellant proceedings, the appellant has submitted the details of cash deposited in and withdrawn from the appellant's various bank accounts in Mumbai and Pune in A.Y. 2016-17, 2017-18 and 2018-19. It has been stated that a summary of such deposits and withdrawals was also submitted to Ld. AO. During A.Y 2017-18, the aggregate cash deposits made by the appellant in bank accounts were Rs. 122.15 crores as against Rs.111.40 crores in A.Y. 2016-17 and Rs.158.02 crores in A.Y. 2018-19. Thus, in A.Y.2017-18, the cash deposits increased by 9.65% and in A.Y. 2018-19, the cash deposits increased by 29.36%. No significant anomaly in the growth of cash deposits can be deduced from this data. Further, in A.Y. 2016-17, the loan portfolio of the appellant as per the balance sheet was Rs.67.69 crores and in A.Y. 2017-18, it was Rs.80.95 crores. It can be seen that there is an increase of 19.59% (In A.Y. 2017-18, the cash deposits increased by 9.65% as stated above). In A.Y. 2018-19, the loan portfolio of the appellant was Rs. 101.33 crores. Thus, the total increase is 25.17% (In A.Y. 2018-19, the cash deposits increased by 29.36% as stated above) Hence, it can be seen that during A.Y.2017-18, the amount of cash deposits was in accordance with the usual activity of the appellant and was not abnormally high. Further, the aggregate of cash deposits made by the appellant in November & December 2016 is Rs. 14.33 crores. Out of these deposits, the aggregate of specified bank notes is Rs.7.90 crores. The same has also been noted by the Ld. Ld.AO. The appellant has offered plausible explanation for the aforesaid cash deposits of Rs.7.90 crores which are part of the total cash deposits of Rs.14.33 crores. As per appellant, there are 67,000 depositors with its organization. If calculated, the amount deposited per depositor works out 1,179.62/-. Hence, the sum thus deposited is within the limit of 4,000/-per head allowed by the as per the RBI notification at the time of demonetization. The appellant had provided all the requisite details such as:- state, the full name and address with pin code of the appellant's members who gave the cash to the appellant etc. The Ld. AO could have examined the veracity of these details as submitted before him. The assertion of the Ld. AO that \"Patsansthas\" were not authorized to receive old notes has not been supported by any documentary evidence or RBI guideline. In view of the foregoing, the addition of Rs.7,90,34,500/- u/s 69A of the Act is hereby directed to be deleted.” 5. Dissatisfied, the Revenue is in appeal before this Tribunal and all the grounds of appeal relate thereto. 6. The Ld. DR strongly supported the order of the Ld. AO and submitted that the Ld. CIT(A) was not justified in deleting the 5 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) addition made by the Ld. AO as there is clear contravention by the assessee of the RBI circular / guidelines issued in respect of legal tender (SBNs) deposited during the demonetization period. 7. The Ld. AR submitted that the assessee has duly furnished all the requisite details relating to cash deposits before the Ld. AO and hence discharged its burden of proving the source of cash deposits. Referring to Page Nos. 35 to 54 of the paper book, the Ld. AR submitted that the sample of 528 depositors was produced before the Ld. AO. He further submitted that the assessee also furnished the year-wise details of cash withdrawals from the bank accounts of the assessee pertaining to F.Y. 2015-16, 2016-17 & 2017-18 to the Ld. AO (page Nos. 20 to 24 of the paper book refers). The Ld. AR submitted that the Ld. AO seems to have accepted the source, but still made the addition only because the said money was SBNs and were deposited during demonetization period. The Ld.AR submitted that when the source of cash deposits is duly explained by the assessee and when the Ld. AO has not brought any adverse material on record, the same cannot be treated as unexplained and no addition can be made u/section 69A of the Act. In support of its above contention, the Ld. AR relied upon the decision(s) of the coordinate Bench of the Pune Tribunal in the case of- (i) ITO vs. Ambika Gramin Bigarsheti Sahakari Patsanstha, ITA No. 1104/PUN/ 2023 dt. 04/06/2024. (ii) M/s. Mauli Mahila Nagari Sahakari Path Sanstha Ltd vs. ITO, ITA No. 1351/PUN/2023, dt. 12/09/2024. 6 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) (iii) Shrijeet Finance Pvt. Ltd. v. ACIT ITA No. 439/PUN/2022, dt. 22/04/2024 8. We have heard the Ld. Representatives of the parties and perused the orders of the Ld. AO/CIT(A) and also paper book filed on behalf of the assessee. We have also considered various decisions cited before us by the Ld. AR. We find that the Ld.AO in the instant case has made addition of Rs. 7,90,34,500/- on account of cash deposits made during the demonetization period as unexplained money u/s 69A of the Act for the reason that the assessee was not authorized to receive SBNs (old currency notes) post 08/11/2016 and there is no whisper of questioning of the source of such deposits in his order. The Ld. CIT(A) deleted the addition made by the Ld. AO, the reasons of which have already been reproduced in the preceding paragraphs. It is not in dispute that the assessee has collected the cash from its members which were deposited in its bank accounts during the demonetization period. The assessee demonstrated the source of cash deposits by submitting sample details of 538 depositors before the lower authorities. The issue thus to be decided before us pertains to whether depositing SBNs during demonetization period in bank can be added to the income of the assessee under the provisions of section 69A of the Act. We observe that the Ld. CIT(A) has categorically recorded in his appellate order that during the appellate proceedings, the assessee submitted the details of cash deposits and withdrawals from its various bank accounts in A.Y. 2016-17, 2017-18 & 2018-19, a summary of which was also 7 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) submitted before the Ld. AO. Perusal of CIT(A)’s order reveals that only after analysing the pattern of the aggregate cash deposits and the loan portfolio of the assessee in AY 2016-17, 2017-18 & 2018- 19, the Ld. CIT(A) arrived at a conclusion that during AY 2017-18 under consideration, the amount of cash deposits was in accordance with the usual activities of the assessee and not showing abnormally high. According to Ld. CIT(A), the assessee has offered plausible explanation for the cash deposits of Rs. 7.90 crores which are part of the total cash deposits of Rs. 14.33 crores made by the assessee during the relevant A.Y. 2017-18 for the reason that there are total of 67,000 depositors and if the amount deposited per depositor is calculated, the same works out to Rs. 1,179.62 and, therefore, the sum deposited is within the limit of Rs. 4000 per head which was allowed as per RBI notification at the time of demonetization. The Ld. CIT(A) has further observed that the assessee has provided all the requisite details such as state, full name, address etc. pertaining to its members who gave cash to the assessee, to the Ld. AO, the veracity of which could have been examined by him, but he did not do so and that the assertion of the Ld. AO that “Patsansthas” were not authorized to accept SBNs post 08.11.2016 has not been supported by any documentary evidence or RBI guideline. He, therefore, deleted the impugned addition of Rs. 7,90,34,500/- made by the Ld. AO. It is the submission of the assessee all along that the cash deposited during the demonetized period has been received from its members in regular course of its business which fact has been duly accepted by the Ld. AO/ CIT(A). The fact on record reveals that the assessee had placed the relevant 8 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) documentary evidence to prove the source of cash deposits made during the demonetization period. Nothing has been brought on record by the Revenue to prove otherwise. We are thus inclined to agree with the submissions of the Ld. AR that there is no dispute with regard to the source of money i.e. cash deposited in the bank accounts which has been received by the assessee society from its members. We find that the case of the assessee is supported by the decision(s) of the coordinate Bench of this Tribunal cited by the Ld. AR before us in the case of Ambika Gramin Bigarsheti Sahakari Patsanstha (supra), M/s. Mauli Mahila Nagari Sahakari Path Sanstha Ltd and Shrijeet Finance Pvt. Ltd. (supra) wherein under the similar set of facts as that of the assessee in the present appeal, the Tribunal deleted the addition u/s 68/69A of the Act in respect of cash deposited during the demonetization period. We therefore do not find any infirmity in the order of the Ld. CIT(A). 9. Considering the totality of the facts and legal position enumerated above, respectfully following the decision(s) (supra) of the coordinate Bench of the Tribunal and in absence of any contrary material brought on record by the Revenue, we are of the considerable opinion that the addition made by the Ld. AO is not sustainable and the Ld. CIT(A) has rightly deleted the said addition by allowing the appeal of the assessee. We uphold the order of the Ld. CIT(A) and direct the Ld. AO to delete the addition made by him to the income of the assessee of Rs. 7,90,34,500/- u/s 69A of the Act. We hold and direct accordingly. Ground Nos. 1 & 2 raised by the Revenue are dismissed. 9 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) 10. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 26.05.2025. Sd/- Sd/- [RAMA KANTA PANDA] [ASTHA CHANDRA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 26th May, 2025 vr/- Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune concerned. 4. D.R. ITAT, “A” Bench, Pune. 5. Guard File. By Order //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune. 10 ITA.No.2117/PUN./2024 (Annapurna Mahila Co-op. Credit Society Ltd.) "