SHREE SANTOSHIMATA MAJOOR SAHAKARI SANSTHA,PEN V. INCOME TAX OFFICER, PANVEL

ITA 2019/PUN/2024

AI Insights

The case involves Shree Santoshimata Majoor Sahakari Sanstha, a cooperative society engaged in the collective disposal of labor, which appealed against the order of the CIT(A)/NFAC for the assessment year 2015-16. The primary issues in the appeal were the disallowance of purchases amounting to Rs.85,26,000 under section 40A(3) of the Income Tax Act due to cash payments exceeding Rs.20,000 on a single day, and the disallowance of deductions claimed under sections 80P(2)(a)(vi) and 80P(2)(d). The Tribunal found that the Assessing Officer had not adequately considered the unique circumstances of the cooperative society, including the nature of its operations and the educational background of its chairman, which led to the initial disallowances.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47250 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI
• Assessee Lawyers: SUNIL R. TALREJA
• Keywords: Condonation of delay; Reasonable cause; Bogus
• Section: 143(3); 142(1); 40A(3); 44AB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2019/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2015-16 Shree Santoshimata Majoor Sahakari Sanstha, 203, GR. Floor, Sonkhar, Pen, Raigad- 402107. PAN : AVHPM2201K Vs. ITO, Ward-4, Panvel. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 21.06.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2015-16. 2. There is delay in filing of this appeal. In this regard, the assessee has filed an application for condonation of delay along with an affidavit. We are satisfied with the explanation of the assessee that he was prevented by reasonable cause for not filing the appeal within prescribed time limit. Ld. DR raised no serious Assessee by : Shri Sunil R. Talreja Revenue by : Shri Arvind Desai Date of hearing : 08.01.2025 Date of pronouncement : 08.04.2025 ITA No.2019/PUN/2024 2 objection to the condonation request made by the assessee. Accordingly, the delay in filing of this appeal is condoned and the appeal is admitted for adjudication. 3. Facts of the case, in brief, are that the assessee is a cooperative society engaged in collective disposal of labour of its members and has furnished its return of income on 21.09.2015 after claiming deduction of Rs.2,28,232/- u/s 80P(2)(a)(vi) and Rs.1509/- u/s 80P(2)(d) of the Act. The case of the assessee was selected for scrutiny and notices u/s 142(1) were issued to the assessee. The Assessing Officer found that the assessee has made payments in cash more than the limit prescribed under the Statute and accordingly disallowed the whole of the purchases of Rs.85,26,000/- u/s 40A(3) of the IT Act and completed the assessment u/s 143(3) by determining the total income at Rs.87,65,290/-. The Assessing Officer also disallowed the deduction claimed u/s 80P(2)(a)(vi) and 80P(2)(d) of the Act. 4. After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal and confirmed the order passed by the Assessing Officer. It is this order against which the assessee is in appeal before this Tribunal. ITA No.2019/PUN/2024 3 5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR further submitted before the Bench that the Assessing Officer has relied on the statement made by the Chairman of the cooperative society. In this regard, Ld. AR submitted that the Chairman of the assessee society is an uneducated person and the society itself is meant for the benefit of labourers and the members of the society are also labourers and the labourers have selected one of the labour as Chairman. It was further submitted by Ld. AR that the Chairman does not know anything about the books keeping and accounts books and due to ignorance the statement was made during the course of hearing of the case and during the assessment proceedings. Ld. AR further submitted before the Bench that the assessee cooperative society executed civil contract work allotted by the State of Maharashtra & during its execution members of the society have worked as labourers, however they worked under sub contractors guidance, accordingly collective disposal of labour was achieved. The total payments were received in their bank accounts since the same was transferred by the State Government. It was also submitted that the contract work allotted by the State Government were completed within time limit provided by the ITA No.2019/PUN/2024 4 respective Government Department. The work completion certificates were also issued by the respective Department to the assessee cooperative society. It was contended before the Bench that if certain contract work/civil work was completed the same could not have been completed without the involvement of material such as Iron steel, Cement, Sand, Murum, Boulders etc. It was submitted that except Iron steel and Cement, rest of the material were purchased from unregistered dealers who are small vendors situated near the site of the contract work, many of them do not have bank accounts or even the VAT registration number since their turnover was below the threshold limit. Ld. AR submitted before the Bench that in support of its contentions, the assessee in his paper book has produced copy of audited financial statements along with audit report duly signed by Chartered Accountant u/s 44AB of the Act, bank statements including the works completion certificate issued by the Architect and copy of running bills approved by the State Government, PWD Department are also annexed in the paper book. All the payments towards the purchases of building material was not made on one day, all the payments were made on various dates in part-part i.e. less than Rs.20,000/-. Secondly, it was also submitted by Ld. AR that if it is presumed that the purchases are ITA No.2019/PUN/2024 5 bogus then it will also be deemed that no contract was executed by the assessee, but it would be wrong presumption since the contract work allotted by the State Government was executed and on its completion the payment was duly received in the bank accounts which proves that the material was also used in the execution of above contracts and therefore, it would be genuine hardship on the assessee if his purchases are treated to be bogus. It was also submitted by Ld. AR that the deduction u/s 80P(2)(a)(vi) was also rightly claimed by the assessee since the contract work were executed with the help of members of the assessee cooperative society, who also happens to be the labours. Accordingly, it was prayed by Ld. AR that deduction u/s 80P(2)(a)(vi) & 80P2(c)(ii) may kindly be allowed and the purchases disallowed u/s 40A(3) may kindly be allowed. 6. Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same. 7. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the Assessing Officer has disallowed payment made towards purchases of building ITA No.2019/PUN/2024 6 material such as Iron steel, Cement, Sand, Murum, Boulders etc. amounting to Rs.85,26,000/- since according to him they were made in contravention of section 40A(3) since on a single day more than Rs.20,000/- cash was paid to the vendors. Further, the Assessing Officer has also disallowed the deduction u/s 80P(2)(a)(vi) claimed by the assessee since the assessee cooperative society has claimed to be engaged in collective disposal of labour and labourers being the member of the society. In this regard, it was the contention of Ld. Counsel of the assessee that the vendors from whom the building material such as Iron steel, Cement, Sand, Murum, Boulders etc. was purchased who are small vendors situated near the construction site. Many of them were small vendors whose turnover was below the threshold limit, therefore, they do not have any State Government VAT registration. It was also the contention that many of them were paid the bill amount in various part i.e. less than Rs.20,000/- at one time. It was also the contention of Ld. Counsel of the assessee that the assessee cooperative society was formed by various labours who were engaged in execution of contract work allotted by the State Government and accordingly the deduction was claimed u/s 80P(2)(a)(vi) for collective disposal of labour. We further find that the assessee in his paper book has produced audited ITA No.2019/PUN/2024 7 financial statement, their bank statements, copy of work completion certificate and running bills approved by the State Government, i.e. PWD. The assessee has also produced before us a summarized statement of payment made in cash in excess of Rs.20,000/- and regarding the allowability of payment under Rule 6DDJ since the payment dates were falling either on bank holiday or Sunday. Considering the totality of the facts of the case and the documents produced before us, & in the light of the fact that the chairman of the society was an uneducated person, & the statement was given under ignorance, & in the light of the fact that even though the payment was made to the subcontractor but the members of the society being labour have been engaged by the subcontractor to execute contract allotted to the assessee cooperative society & therefore the collective disposal of labour was achieved, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Jurisdictional Assessing Officer with a direction to pass the assessment order afresh as per fact and law after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by the Jurisdictional Assessing Officer in this regard and produce explanation/evidences in support of expenditure ITA No.2019/PUN/2024 8 claimed in the return of income and also in support of claim of deduction u/s 80P(2)(a)(vi) of the Act without taking any adjournment under any pretext, otherwise the Jurisdictional Assessing Officer shall be at liberty to pass appropriate order as per law. Thus, the grounds of appeal raised by the assessee are partly allowed for statistical purposes. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 08th day of April, 2025. Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 08th April, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "