SRIDHARPUR CO-OPERATIVE BANK,BARDHAMAN V. ITO, WARD-3(2), BURDWAN

ITA 672/KOL/2024

AI Insights

The case involves Sridharpur Co-Operative Bank, which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the addition of Rs. 10,07,14,500 as unexplained income during the demonetization period. The Income Tax Officer (ITO) had initially added this amount as income from other sources, citing that the bank was not authorized to accept SBNs during the specified period. The Tribunal examined the submissions, including the details of depositors and the circumstances under which the SBNs were accepted, and found that the bank had acted within the legal framework and that the deposits were legitimate.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786482 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 02-04-2024
• Other Referred Cases: Sri Bhageeratha Pattina Sahakara VS ITO Ward-3 Davanagere ITA No 646/Bang/2021, Yagnavalkya Souhardha Credit Co. Ltd. Vs. ITO WARD-5(2)(4) Bangalore ITA No 1086/Bang/2022, Om Sai Co-Op. Credit Souharda Sahakari Niyamit vs PCIT Hubli ITA No.454/Bang/2022, The Totgars' Co-operative Sale Society Ltd. Vs PCIT Hubli, Merchants Credit Co-operative Society Ltd vs Income Tax Officer, Ward 1, ITA 329/Bang/2023, Bhavana Co-operative Credit Society Niyamita, ITO Ward- 1, Sirsi. ITA No. 739/Bang/2021, Malda Co-operative Agriculture & Rural Development Bank vs. ITO in ITA No. 1138/KOL/2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Unexplained cash credit; Onus to prove; Co-operative Credit Society
• Section: 142(1); 56; 68; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank Vs. ITO, Ward-3(2), Burdwan (Appellant) (Respondent) PAN: AACAS8623A Appearances: Assessee represented by : M. Goenka and S.Goenka, AR. Department represented by : Praveen Kishore, CIT (DR). Date of concluding the hearing : 08-September-2025 Date of pronouncing the order : 20-November-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 30.01.2024. 1.1. The Registry has informed that the appeal is barred by limitation by 3 days. Though the assessee has not filed any petition for condonation of delay however, at the time of hearing, Ld. Counsel for the assessee submitted explaining the reasons for the delay in filing the appeal. After considering the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: Printed from counselvise.com Page | 2 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. “1) That the Learned CIT (Appeal) NFAC has erred in upholding the addition made by the A.O. under section 68 of the I.T Act, 1961 money deposited in S.B.N. during the Demonetization period of Rs. 100714500/- as unexplained income which is grossly illegal and unwarranted and unjustified. 2) That the Learned A.O. disallowed money deposited by members during Demonetization period under section 68 as unexplained income on the ground that the assesses was not authorized to receive S.B.N. during demonetization period was unjustified and not as per provisions of the section 68. 3) That section 68 of the I.T. Act, 1961 states as follows: \"where any sum is found credited in the books of the assesses maintained in any previous year and the assesses offers no expatiation about the notice and sources thereof or the explanation offered buy him is not on the opinion of the Assess sing Officer satisfactory sum so credited may be charged to income tax as the income of the assesses. 4) That the assesses submitted full list of S.B.N. deposited with name and address of the depositor together with PAN of depositor of Rs. 50000/- or more and the same fact is acknowledge by the A.O. in his assessment order. He did not verify the nature of deposit and its genuiness and did not confirm the same by giving notice to the depositor to verify its geniuses of the deposits' made and disallowed the sum as unexplained income which is grossly unjust and unlawful. A complete list of the depositor is attached paper Book Page 35 ΤΟ 103 5) That some part of the above list and some confirmation of the depositors were given to the Commissioner of Income Tax (Appeal) NFAC. He also did not verify the geniuses of the deposits and upheld the decision of the A.O. which is illegal and unjustified 6) That the charge of the Learned CIT (Appeal) NFAC that the infrastructure of the bank is not capable to receive S.B.N. of Rs. 100714500/- was baseless. The society has ten branches and have following the working hours. As per certificate of the society attached. As per book paper book page 117. 7) That the above deposit was recorded in day book of bank branches and cannot be added back on suspicion. 8) That the Learned A.O. & CIT (Appeal) NFAC did not mention why the explanation offered by the assesses was unsatisfactory which is bad in law. The A.O. did not issue any show came notice to the assesses before invoking section 68 which is unjust and unlawful. 9) That all over India District Central Co-Operative banks, Urban Co-Op. banks and primary Agricultural co-Op. societies doing banking business accepted S.B.N. during 09/11/16 to 14/11/16 and the R.B.I. has exchanged all the S., B.N. received after inspection by NABARD and special Printed from counselvise.com Page | 3 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. audit by Chartered Accounts of all money received by the above societies. When RBI has accepted the SBN received by the above societies during 09/11/16 to14/11/16 there is no authority for I.T. Department to disallows same on the ground that the society has no authority to receive SBN. 10) That confirmation of some of the depositors are attached page paper book page No. 104-116 11) That the honorable Income Tax Appellate Tribunal SMC \"C\" Bench Bangalore in the case Sri Bhageeratha Pattina Sahakara VS ITO Ward-3 Davanagere ITA No 646/Bang/2021 held in page 8 and 9 that the lordship is unable to understand how the contravention of any of the notification of R.B. I would attract the provisions of sec 68 of the Income Tax Act. Here the assesses has explained before the ITO that why it has collected the SBN and is ordered to delete the addition made pages -118-126 of paper book 12) That the assesses is attaching the following decision page 127 to 170 of paper book in support that no disallowance should me made under section 68 for SBN deposited during demonetisetion period, if assesses filed details of such deposits. a) Yagnavalkya Souhardha Credit Co. Ltd. Vs. ITO WARD-5(2)(4) Bangalore ITAT \"B\" Bench Bangalore ITA No 1086/Bang/2022 b) Om Sai Co-Op. Credit Souharda Sahakari Niyamit vs PCIT Hubli ITA No.454/Bang/2022 ITAT \"C\" Bench Bangalore c) The Totgars' Co-operative Sale Society Ltd. Vs PCIT Hubli. ITAT Bangalore \"C\" Bench d) Merchants Credit Co-operative Society Ltd vs Income Tax Officer, Ward 1, ITA 329/Bang/2023 ITAT \"B\" Bench Bangalore No. e) Bhavana Co-operative Credit Society Niyamita, ITO Ward- 1, Sirsi. ITA No. 739/Bang/2021 ITAT \"C\" Bench Bangalore Pages 127 to 170 of paper Book 13) That all the above decision cited is in favor Of the assesses and the addition made was unjust and unlawful and addition made should be deleted. 14) That any other ground if any shall be urged at the Time of hearing.” 3. Brief facts of the case are that the assessee is a Primary Agricultural Co-operative Credit Society (PACCS) registered under the West Bengal Co-operative Societies Act in the year 2018 and engaged in the business of accepting deposits and providing credit facilities from/to members and non-members, dealing in fertilizer, pesticides, seeds, cold storage/warehousing, LPG, consumer goods, etc. Its activities are mainly confined to semi-urban and village level and the customers are also mainly small farmers, traders and villagers who mainly depend on Printed from counselvise.com Page | 4 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. the assessee for their banking activities and a large section of them had no bank account other than that with the assessee, it is stated by the assessee. The assessee submitted its return of income on 07.11.2017 declaring NIL income, which was subsequently revised on 13.11.2017 declaring NIL income after claiming deduction u/s 80P of the Act at ₹2,71,78,477/- on both the occasions. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (in short 'CASS') and notices u/s 143(2) and 142(1) of the Act were issued and served, in response to which the Ld. AR of the assessee appeared before the Assessing Officer (hereinafter referred to as Ld. 'AO') on several dates and several documents, information and explanations were submitted through e-proceeding portal. The legal tender character of existing ₹500/- and ₹1000/- Specified Bank Notes (SBNs) was withdrawn with effect from 09.11.2016 in terms of Gazette Notification No. 2652 dated November 08, 2016 issued by the Government of India. It is stated that at the initial stage of demonetization, there was huge confusion about the entity who could accept or exchange SBNs. Immediately no written instruction was made available to the assessee regarding the entity who could accept/exchange SBNs. At that time, other than media coverage, the only source of information/instruction was concerned Burdwan Central Co-operative Bank Ltd (BCCB). Since the assessee was mobilising deposits on the basis of the authorisation from Burdwan Central Co-operative Bank Ltd., the assessee had verbally consulted them for necessary guidance. At that time all over India all co-operative Banks including Primary Agriculture Co-Operative Societies (PACS) and ARDBs engaged in the business of banking and providing credit facilities had accepted old ₹1000/- and ₹500/- notes. It was only on 14.11.2016, when the Reserve Bank of India came out with a Printed from counselvise.com Page | 5 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. clarification that District Central Co-operative Banks cannot accept or exchange SBN with effect from 15.11.2016 that after the said clarification of RBI, the assessee had also stopped accepting/exchanging SBN on and from 15.11.2016. As the assessee was not holding any Licence other than the authorisation from BCCB Ltd. and under the rules of Co-operative Societies Act, RBI had not made any direct communication with the assessee, during the period from 10.11.2016 to 14.11.2016, the assessee had accepted SBNs of ₹10,07,14,500/- from its members and depositors and deposited in its bank accounts. The assessee submitted the details of all depositors who had deposited SBNs during the demonetization period. During the course of hearing, the Ld. AO had asked the assessee to explain under which authority it had accepted SBNs from 09.11.2016. In response to that query, the assessee had made a written explanation clarifying the circumstances and the authority under which it had accepted SBNs. The Ld. AO rejected the explanation of the assessee and invoked the provisions of section 68 of the Act and added the total amount of SBNs received at ₹10,07,14,500/- as income from other sources. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who considered the facts of the case, the observations of the Ld. AO and the assessee’s submissions. The Ld. CIT(A) perused the documents available on record and dismissed the appeal of the assessee after holding as under: “5.5 In less than five days, the appellant assessee received demonetized currency notes totalling over Rs. 10 crores, which raises suspicion that there may be anomalies, in cash receipts worthy of investigation. It has been already stated that the appellant the appellant that the appellant could not demonstrate that the money they received during the demonetization period was not from its unaccounted cash. Printed from counselvise.com Page | 6 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. 5.6 The decision made by the Hon'ble Bangalore Tribunal, which has been previously mentioned is directly applicable to the facts of this case. Thus, respectfully following the Hon'ble Bangalore Tribunal decision wherein it has been held that the burden of proof lies with the appellant and as they have failed to establish the genuineness of the deposits, identity of the depositors and their creditworthiness and also failed that cash so deposited fall outside the scope unaccounted cash and in view of my observation made above, the addition of Rs. 10,07,14,500/- is confirmed. The ground of appeal on the issue is, thus, dismissed. 5.7 It is observed from the assessment that the ld AO has allowed deduction u/s 80P of the Act on the interest received from investment of its surplus fund with other co-operative bank which is as per the latest decision of the hon'ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd & Ors. v. CIT in Civil Appeal no. 7343 to 7350 of 2019 reported in 123 taxmann.com 161 held that the interest income derived from non-members is assessable u/s 56 as income from other sources and therefore, not eligible for benefit u/s 80P(2)(a)(i). However, the same has not been applied in the present case. The AO may initiate action as per law for the same as it is seen that in the subsequent assessment year the issue has been dealt with in the light of the other decision on similar line and the appeal for the same is pending with me. 5.8. The appellant's remaining two grounds of appeal are general and consequential and do not require any discussion, so they are dismissed. 6. In the final result, the appeal filed by the appellant is treated as Dismissed.” 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. The Ld. AR drew our attention to page 2 para 4 of the assessment order. It was stated that the assessee is a Society and not a bank. The assessee, after receipt of the RBI Circular, had stopped receiving the SBNs as by virtue of the circular, the cooperative banks and the Societies were not allowed to accept Specified Bank Notes. During the period from 8 to 14 November, 2016, the SBNs were exchanged by the RBI. The assessee had received a sum of ₹10 Crore from about 10,000 individuals within a period of 4 days, the details of Printed from counselvise.com Page | 7 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. which were filed. The assessee has relied upon the decision of the Coordinate Bench of ITAT in the case of Malda Co-operative Agriculture & Rural Development Bank vs. ITO in ITA No. 1138/KOL/2024 order dated 30.04.2025. 6. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The assessee had received a sum of ₹10,07,14,500/-. A perusal of the assessment order shows that the assessee cooperative society had submitted a list of depositors from whom the demonetized currency notes had been received; the total of which comes to ₹10,07,14,500/- with the assessee having opening balance of ₹1,11,33,500/- and the total amount of ₹11,18,48,000/- was deposited in the Burdwan Central Co-operative Bank Ltd. In the documents filed along with Form No. 36, the assessee has enclosed a list of the depositors, the amount received from each of them as well as the PANs of the depositors in most of the cases for amounts exceeding ₹50,000/-, which was also acknowledged by the Ld. AO. A perusal of the assessment order shows that the Ld. AO added the sum only in view of the fact that the assessee had no authority to receive demonetized notes of ₹1000/- and ₹500/- during this period. The relevant extract from the assessment order paras 4, 5, 6 & 7 is as under: “4 The assessee co-operative society submitted a list of depositors from whom the demonetised currency notes of Rs. 1000 and Rs. 500 were received during the period of demonetisation, on 12.11.2016, 13.11.2016 and 15.11.2016. The total of such sum of demonetised cash received was Rs. 10,07,14,500. They have opening balance of demonetised currency notes of Rs. 1000 and Rs.500 for an amount of Rs. 1,11,33,500. They deposited the total amount of Rs. 11,18,48,000 to The Burdwan Central Co- operative Bank Ltd. 5. The assessee co-operative society failed to bring into record any justification of accepting demonetised currency notes of Rs. 1000 and Printed from counselvise.com Page | 8 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. Rs.500 during the period of demonetisation from 09.11.2016 to 30.12.2016 for an amount of Rs. 10,07,14,500. The assessee co-operative society failed to discharge their onus to bring into record in support of tendering demonetised currency notes and the submission in this regard is not satisfactory. So the amount of money received in the form of demonetized currency notes amounting to Rs. 10,07,14,500 is hereby treated as \"Unexplained Cash Credit\" in terms of section 68 of the Income Tax Act, 1961. 6. The assessee co-operative society having no authority to receive demonetized currency notes of Rs. 1000 and Rs.500 during the period 09.11.2016 to 30.12.2016. So the demonetized currency notes collected/received by the assessee co-operative society, is not valid in the eyes of law. When someone made any cash deposit in bank account and he fails to explain its valid and cogent reason in spite of his liability, the Assessing Officer has to make an inference about that deposits in bank account within the ambit of the relevant provisions of the Income Tax Act, 1961 and on the basis of information available on record. The amount credited in the bank account of the assessee amounting to Rs. 10,07,14,500 during the demonetization period 09.11.2016 to 30.12.2016, is therefore treated as \"Unexplained Cash Credit\" within the purview of Section 68 read with Section 115BBE of the Income Tax Act, 1961. 7. Since in the instant case the addition is made under Section 68 and tax is payable under Section 115BBE of the Income Tax Act, 1961, the assessee co-operative society is liable for penalty proceedings under Section 271AAC of the of the Income Tax Act, 1961, which is reproduced below :- \"Section 271AAC (1) The Assessing Officer may, not withstanding anything contained in this Act other than the provisions of section 271AAB, direct that, in a case where the income determined includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any previous year, the assessee shall pay by way of penalty, in addition to tax payable under section 115BBE, a sum computed at the rate of ten per cent of the tax payable under clause (i) of sub-section (1) of section 115BBE.\" In view of the above, penalty proceedings under Section 274 read with Section 271AAC of the Income Tax Act, 1961 has been initiated separately.” 7. We have considered the submissions made. The addition was confirmed by the Ld. CIT(Appeals), as in few cases incomplete addresses are there while in most of the cases, there was no address of the persons who made deposits of ₹ 50,000 more. It is mentioned in paragraph 5.2 of the appeal order that the assessee provided the AO with a list of its Printed from counselvise.com Page | 9 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. members and the PANs. It is stated that for the amount of ₹5,07,55,500/- received from 3,173 persons, the same was received in 3 days, one of which was a Sunday and the balance amount of ₹4,99,59,000/- was also received during these 3 days and the number of persons must be few times more. It is also inferred by the Ld. CIT(A) that the assessee could not have increased the infrastructure to accept the demonetised currency unless some other arrangement was made by the assessee. According to him, it was humanly impossible with limited infrastructure of the assessee, to receive this much amount. Such an inference is not based upon any objective analysis as this was an exceptional period. Reference is also made to the CBDT issuing standard operating procedures in the form of instruction and circular for assessment of cash deposits in demonetised currency which was not taken into account by the Ld. AO. The Ld. CIT(A) has mentioned in paragraph 5.5 that the assessee received demonetised currency totalling over ₹ 10 Crores which raises suspicion that there may be anomalies in cash receipts worthy of investigation, however, no such investigation was carried out resulting into any adverse findings. It is stated that the assessee could not demonstrate that the money received during the demonetisation period was not from unaccounted cash while on the other hand, the assessee had submitted the details of the members from whom the amount was received. Relying upon the decision of the Bangalore criminal in the case of Bhavana Co-operative Credit Society NIyamita Vs ITO in ITA No. 739/Bang/2021, the addition was confirmed. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. The Ld. AR also brought to our notice the decision in the case of Malda Co-operative Agriculture & Rural Development Bank (supra) decided by the same constitution of Printed from counselvise.com Page | 10 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. “A” Bench of the ITAT, Kolkata (the Ld. Judicial Member being the author) and para 6 of which is extracted as under: “6. We have considered the rival submissions. A perusal of the facts in the present facts clearly shows that the assessee has produced the details of the persons from whom the SBNs have been collected by the assessee. The assessee, admittedly, a primary cooperative society and is entitled to deduction u/s.80P of the Act but it is not a cooperative bank as per the terms of the provisions of Section 80P(4) of the Act. Be that as it may, the assessee has also categorically admitted that the amounts received in the form of SBNs are from its members and these receipts are against the loan liabilities that are owed by the said members to the assessee. When a debtor is being realized when a bank would not be looking at the issue as to whether the notes are SBNs or not, the interest of the bank lies to recover its loans. The details of the members who have deposited the SBNs were also very much available before the Assessing Officer. If at all the Assessing Officer wanted to examine the same, it was very much opened to him. The Assessing Officer, however, chose to disregard the persons, who have deposited the SBNs and has sought to treat the receipts as unexplained income of the assessee, which is a credit cooperative society. The repayments of the loans from the members are very much available in the accounts of the assessee. The amounts have come in cash book only. The source of all the deposits has also been explained by the assessee. The identity of the debtors is also very much available before the Assessing Officer. The statement against the loan accounts are also available before the Assessing Officer. Thus, clearly the identity, genuineness and the creditworthiness of the receipts of the SBNs from its members are also proved and consequently the same cannot be treated as an unexplained income in the hands of the assessee. This being so, we are of the view that the addition as made by the Assessing Officer and as confirmed by the Id. CIT(A) is unsustainable and consequently we delete the same.” 8. Before the Ld. AO, the assessee had relied upon the decisions in the case of Shree Mahadeshwar Sahakari Patpedhi Marydit vs. ITO, 21(2)(2), Mumbai, ITA No. 374/Mum/2018 order dated 13.03.2019 Mumbai, 'D' Bench and ITO, Bundi vs. Shree Keshorai Patan Sahakari Sugar Mill, ITA No. 418 & 419/JP/2017 order dated 31.01.2018 Jaipur Benches, Jaipur which did not find any favour with him. Printed from counselvise.com Page | 11 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. 9. We have considered the submissions made and also gone through the documents relied upon. Since after the assessee was specifically not permitted to exchange the SBN, the assessee stopped accepting the SBNs and the Specified Bank Notes received from 8 to 14 November, 2016 were exchanged by the RBI as it stated, therefore, merely because the assessee had received the money from a number of members, the details of which are also available on record, therefore, it cannot be said that the amount received was unexplained so as to render the same as liable to be added u/s 69A of the Act. Therefore, following the findings in Malda Co-operative Agriculture & Rural Development Bank (supra), there is no justification for the addition made and the addition made is hereby deleted as the assessee had details and evidence of the persons in the form of their PANs who had deposited the money with the assessee and merely because the assessee had received SBNs, there was no justification for making the addition u/s 69A of the Act. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 20th November, 2025. Sd.- Sd.- [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 20.11.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 12 ITA No.: 672/KOL/2024 Assessment Year: 2017-18 Sridharpur Co-Operative Bank. Copy of the order forwarded to: 1. Sridharpur Co-Operative Bank, Vill & PO. Hat Sridharpur Memari-1, Paschim Bardhman, West Bengal, 713146. 2. ITO, Ward-3(2), Burdwan. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "