SRI.GIRISH URBAN CO-OPERATIVE CREDIT SOCIETY LIMITED ,HUBLI V. INCOME TAX OFFICER, WARD-2(1), HUBLI

ITA 1725/BANG/2025

AI Insights

The case involves Sri Girish Urban Co-operative Society Ltd., which appealed against the addition of Rs. 31,10,500 to its income as unexplained cash credit under section 68 of the Income Tax Act for the assessment year 2017-18. The addition was initially made by the Assessing Officer (AO) following the society's deposit of Specified Bank Notes (SBNs) during the demonetisation period. The AO and the CIT(A) upheld the addition, viewing the deposits as not valid tender. However, the Tribunal found that the society had provided sufficient evidence regarding the legitimacy of the deposits, including details of the members from whom the cash was collected, and that the banks had accepted these deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777469 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 11-08-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREERAKSHA
• Keywords: Unexplained cash credit
• Section: 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA No. 1725/Bang/2025 Assessment year : 2017-18 Sri Girish Urban Co-operative Society Ltd., No.3, Matti Building, Desai Oni, Hubli – 580 028. PAN: AACAS 7490R Vs. The Income Tax Officer, Ward 2(1), Hubli. APPELLANT RESPONDENT Appellant by : Ms. Shreeraksha, CA. Respondent by : Shri Ganesh R Ghale, Standing Counsel for the Revenue. Date of hearing : 23.09.2025 Date of Pronouncement : 30.09.2025 O R D E R 1. This appeal is filed by Sri Girish Urban Co-operative Society Ltd. (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 11.07.2025 wherein the ld. CIT(A) has confirmed the addition made by the AO u/s. 68 of Rs.31,10,500, 2. The brief facts of the case show that assessee is a co-operative society, filed its return of income on 7.11.2017 at a total income of Nil wherein deduction u/s. 80P(2)(a)(i) of the Act of Rs.8,58,800 was claimed. The case of the assessee was selected for scrutiny on account of high Printed from counselvise.com ITA No.1725/Bang/2025 Page 2 of 6 value receipt of cash shown from 3rd parties. Notice u/s. 143(2) was issued on 11.8.2018. In response to the notice, the assessee furnished P&L account, balance sheet, registration certificate, computation of total income, details of regular members and details of interest earned, etc. Assessee also furnish the day books and also the cash deposited during the demonetisation period along with the list of members who deposited the money with the assessee either as deposit or as loan repayment. 3. Ld AO found that assessee has deposited Rs.26,51,000 in Hubli Urban Co-op. Bank, Rs.3,42,000 in Bank of Baroda and Rs.3,83,500 in SVC Co-op. Bank, Hubli amounting in all to Rs.33,76,500. The ld. AO issued notice u/s. 133(6) of the Act to all these Banks. These Banks gave information to the AO. Based on this information, it was noted that during the demonetisation period assessee has deposited Rs.23,88,000 with Hubli Urban Coop. Bank, Rs.3,42,000 with Bank of Baroda and Rs.3,83,500 with SVC Coop. Bank. 4. Assessee was asked to furnish the details of cash receipt, deposit and withdrawals. The assessee submitted necessary information. As the assessee deposited the sum in Specified Bank Notes (SBN) of Rs.31,13,500 during the demonetisation period, the AO was of the view that such amount deposited by the assessee is not a valid tender and assessee was not authorised to collect the same. Therefore, he applied the provisions of section 68 and made the addition of Rs.31,10,500 and charged the same to tax u/s. 115BBE of the Act. Printed from counselvise.com ITA No.1725/Bang/2025 Page 3 of 6 Accordingly assessment order was passed on 19.12.2019 determining the total income of the assessee at Rs.31,79,204. 5. Assessee aggrieved with the same, preferred appeal before the ld. CIT(A). With respect to the addition u/s. 68 of the Act, the ld. CIT(A) confirmed the addition holding that as assessee has deposited SBNs into his bank account, there is no infirmity in the addition. The assessee is in appeal before me. 6. The assessee submits that the only dispute in this appeal is the addition of Rs.31,10,500 u/s. 68 of the Act as unexplained cash credit. Ground Nos.2 to 7 are on this aspect only. It was submitted that assessee is a cooperative society which has deposited cash during the demonetisation period amounting to Rs.31,10,500 with 3 banks. The same have been added by the AO as unexplained income u/s. 68 of the Act. She submitted that the amount is recorded in the books of account as collected members etc. The assessee has filed complete details of copy of cash book, details of cash receipt, deposit and withdrawals in the required proforma. This is in old currency notes which is collected from several members in cash and cash against loan recovery. The assessee has furnished the list of all members from whom amount in SBNs have been accepted. Therefore assessee has explained the source and nature of receipts. In view of this, provisions of section 68 applied by the AO is incorrect. Even the ld. CIT(A) without appreciating the facts of the case that when the identity and creditworthiness of the persons who have deposited the money with the assessee as well as Printed from counselvise.com ITA No.1725/Bang/2025 Page 4 of 6 repaid the loan has not at all been doubted as the assessee has furnished the complete details, the same could not have been added to the total income of the assessee u/s. 68 of the Act. It was therefore submitted that the orders of the ld. lower authorities in making the above addition is not correct. 7. The ld. DR vehemently supported the orders of the ld. lower authorities and submitted that when the assessee has deposited SBNs which were not a valid tender, the addition has been correctly made in the hands of the assessee. It was further stated that the assessee is not authorised to collect the same from its members during the demonetisation period. 8. I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. I find that when the assessee is a members' urban cooperative credit society which has deposited a sum of Rs.31,10,500 in SBNs during the demonetisation period with Hubli Urban Cooperative Bank, Bank of Baroda, Hubli and SVC Cooperative Bank. The funds were from the books of the cooperative society. To support the same the assessee has furnished the details of cash balance, copy of cash book, details of cash receipt, deposits and withdrawals in the proforma as desired by the ld. AO. The assessee also submitted that collection of small deposits from members in cash and collection of cash loan against recovery were deposited to the bank accounts during the demonetisation period. To support this contention, assessee also furnished a list of members from whom the SBNs have been accepted and the same were deposited. The ld. AO has merely on the Printed from counselvise.com ITA No.1725/Bang/2025 Page 5 of 6 basis that when the assessee was not authorised to collect SBNs and same were deposited in the bank account of the assessee with 3 other banks which is not a valid tender, made the addition. The above amount of Rs.31,10,500 is deposited in the bank account and the bank with whom it has deposited have also accepted the same and given the assessee credit of the same amount. Thus, the banks where the money is deposited have also accepted the same valid tender and giving full credit to the assessee. Admittedly assessee may not be authorised to collect the same, but this is not in the realm of taxation u/s. 68 of the Act. The provisions of section 68 says that if the nature and source of the sum deposited in the books of account of the assessee is not explained to the satisfaction of the ITO, then it can be added as unexplained cash credit in the hands of the assessee. In the present case, the nature of the cash deposit is explained to be receipt of deposits from the members and repayment of loan by those members. The source is also the members only, supported by cash book. The list of members are furnished to the AO which was neither examined nor doubted. Further the ld. CIT(A) has held that the members of the society got undue benefit of enrichment by depositing the illegal tender with the assessee and in turn the assessee deposited the same with the bank cannot be considered as legal and genuine transaction. This argument is not sustainable for the reason that if it is non-genuine or illegal transaction, there are respective authorities who would have taken action against the society. In this case, the assessee has explained wherefrom the SBN notes have come and such notes have Printed from counselvise.com ITA No.1725/Bang/2025 Page 6 of 6 been deposited in the respective banks. Therefore the addition made by the ld. AO and confirmed by the ld. CIT(A) is not sustainable for the reason that assessee has given the list of members whose KYC is not doubted or examined and further it is not the case of the ld. AO that the members are non-existent or it is unaccounted money of the assessee which has been deposited in the bank account. The money is deposited from the books of the assessee. Thus, ld AO is directed to delete the addition u/s 68 of the Act of Rs. 31,10,500/-. Accordingly ground Nos. 2 &7 of the appeal of the assessee are allowed. 9. In the result, the appeal by the assessee is allowed. Pronounced in the open court on this 30th day of September, 2025. Sd/- ( PRASHANT MAHARISHI ) VICE PRESIDENT Bangalore, Dated, the 30th September, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "