THE ANNDPURA JALBERA PRIMARY AGRICULTURE COOPERATIVE SOCIETY LTD.,AMBALA V. INCOME TAX OFFICER, WARD-5, AMBALA

ITA 1030/CHANDI/2024

AI Insights

The case involves The Anandpur Jalbera Primary Agriculture Cooperative Society Ltd., which appealed against the order of the CIT(A) sustaining an addition of Rs.6,19,500 as unexplained cash credits under section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer (AO) on the grounds that the society accepted Specified Bank Notes (SBNs) during the demonetization period and deposited them in their bank account. The society argued that these deposits were from legitimate sources, including collections from members and repayments of loans, and that the books of accounts had not been rejected by the AO. The Tribunal, referencing decisions from other benches and considering the explanations and evidence provided by the society, concluded that the addition was not justified and directed its deletion.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107688 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO, The Khojkipur Primary Agriculture Cooperative Society Ltd. Vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAKTI SINGH
• Assessee Lawyers: JASPAL SHARMA
• Keywords: Set aside; Additional evidence; Unexplained cash credit; Competent authority
• Section: 147; 143(2); 68; 69

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE ŵी िवŢम िसंह यादव, लेखा सद˟ एवं ŵी परेश म. जोशी, Ɋाियक सद˟ BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA NO. 1030/Chd/2024 िनधाŊरण वषŊ / Assessment Year : 2017-18 The Anandpur Jalbera Primary Agriculture Cooperative Society Ltd. VPO Anandpur Jalbera, Dist: Ambala(Haryana) बनाम The ITO Ward-5, Ambala ˕ायी लेखा सं./PAN NO: AAGFT4551R अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Jaspal Sharma, Advocate राजˢ की ओर से/ Revenue by : Shri Shakti Singh, JCIT सुनवाई की तारीख/Date of Hearing : 21/01/2025 उदघोषणा की तारीख/Date of Pronouncement : 25/02/2025 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A), ADDL/JCIT(A)-5, Delhi dt. 09/08/2024 pertaining to Assessment Year 2017-18. 2. In the present appeal, the Assessee has raised the following grounds of appeal: 1. “The impugned order is both against facts and erroneous in law. 2. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having confirmed the order the Ld.AO which is illegal, without jurisdiction, and void abinitio as no statutory notice u/s 143(2) was issued in the present case. 3. On the facts and circumstances of the case the Ld.CIT(Appeals)NFAC has erred in having confirmed the action of AO in framing the assessment under the old PAN which was already surrendered by the assessee. 4. On the facts and circumstances of the case the Ld. CIT(Appeals) NFAC has erred in having not considered the return of income filed by the assessee under the new PAN allotted to the assessee society and grossly erred in ignoring the additional evidence filed vide assessee's application dated 06.03.2024. 5. On the facts and circumstances of the case the Ld. CIT(Appeals) NFAC has erred in having sustained an addition of Rs.6,19,500/- made by the Ld.AO u/s 68 of the Income Tax Act treating the same as unexplained cash credits, on account of accepting SBNs by assessee society during demonetization period and depositing the same in its bank 2 account although admittedly the cash received and deposited was duly recorded in the books of accounts maintained in regular course of business. 6. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC has erred in having not considered the case laws on point at issue, relied upon by the assessee which are on identical facts and are fully applicable to the facts of present case.” 3. Briefly the facts of the case are that the assessment in this case was completed under section 147 r.w.s. 144 of the Act vide order dt. 24/12/2019 wherein the AO brought the tax a sum of Rs. 6,19,500/- under section 68 of the Act. The assessee thereafter carried the matter in appeal before the Ld. CIT(A) who has since sustained the said addition and against the findings of the Ld. CIT(A), the assessee is in appeal before us. 4. During the course of hearing, the Ld AR submitted that the AO allegedly found that assessee society accepted an aggregate amount of Rs. 17,30,000/- in Specified Bank Notes during the demonetization period which was deposited in its account in Ambala Central Cooperative Bank Ltd. The assessee society explained that source of cash deposit in bank accounts, was the amount collected from the members in their saving accounts with the assessee society as well as the recovery of loans given to the members during the regular course of business. It was further explained vide assessee's reply dated 06.12.2019 that the assessee society deposited cash amounting to Rs. 10,14,845/- during demonetization period out of which SBNs were to the tune of Rs.6,19,500/- and non-SBNs were to tune of Rs.9,95,345/-. It was explained that the assessee society was having closing cash in hand as on 8.11.2016 at Rs.5,76,184/- including SBNs of Rs.5,71,500/-. Out of this closing balance of cash as on 08/11/2016, SBNs of Rs.5,71,500/- were deposited in accounts with Cooperative Bank on 10.11.2016. It was further submitted that SBNs of Rs.48,000/- were received on 15.11.2016 from one member namely Shri Ranjit Singh, which were deposited on 17.11.2016 in PNB. It was submitted that copy of cash book from 08.11.2016 to 15.11.2016 was submitted during the assessment proceedings showing cash in hand on 08.11.2016 at Rs.5,76,185/- (which included SBNs at Rs.5,71,500/-) and showing further collection of Rs.50,500/-(which included Rs.48,000/- as SBNs) from Sh.Ranjit Singh on 15.11.2016. Further, complete details showing the SBNs of Rs.48,000/- collected from Shri Ranjit Singh were submitted during the assessment proceedings. It was submitted that the assessee also submitted 3 cash deposit slips, Balance Sheet, Income & Expenditure account, Audit report duly verified by Registrar of Societies, besides other requisite documents during the assessment proceedings. 5. It was submitted that the Ld. AO observed after perusal of the evidence placed on record that the assessee society had accepted Specified Bank Notes (SBNs) from its members during demonetization period and had credited SBNs to its cash book and deposited these SBNs in its bank account. It was explained that the deposits were made out of collections in the ordinary course of carrying on business i.e. it represented the money deposited by it out of loans, sale proceeds which are duly recorded in its books of accounts maintained in regular course of business. It was submitted that as the books of accounts have not been rejected by the Ld.AO and the closing balance as on 08.11.2016 has not been doubted by the Ld.AO, the addition made by the Ld.AO is not sustainable. Therefore the source of deposits stood proved which has been acknowledged and accepted by the Ld.AO. It was submitted that the AO has not considered the facts correctly as she wrongly presumed that the assessee society has accepted SBNs of Rs.6,19,500/- during demonetization period where as factually only SBNs of Rs.48,000/- were received during demonetization period i.e. on 15.11.2016 and SBNs of Rs.5,71,500/- were out of closing cash balance as on 08.11.2016. As regards accepting of SBNs of Rs.48,000/- on 15.11.2016, attention was invited to Notification dated 14.11.2016 issued by RBI, clarifying that District Central Cooperative banks can allow their existing customers to withdraw money from their accounts up to Rs.24,000/- per week and further clarifying that no exchange facility against demonetized notes or deposit of such notes should be entertained by the District Central Cooperative banks. In view of the above said notification, the assessee has stopped collecting the demonetized notes after 15.11.2016 on which date the Notification dated 14.11.2016 came to the notice of assessee society. Therefore it cannot be considered as violation of any of the provisions of the Act as the amount of Rs.48,00/-collected from a member of society on 15.11.2016 in SBNs which were duly recorded in the books of accounts and deposited on 17.11.2016 in PNB. Therefore the source of SBNs of Rs.6,19,500/- which also includes closing cash balance on 08.11.2016 at Rs.5,71,500/- in SBNs, deposited by the assessee society in its bank accounts maintained with The Ambala Central Co- 4 operative Bank Ltd and PNB, stood fully proved. It was submitted that the cash is found recorded in the books of accounts and the Assessing Officer has not rejected books of account. Therefore on these facts, the AO was not justified in invoking the provisions of section 68 of the Act. The AO made the addition only for the reason that the co- operative societies were not authorized to accept SBNs and invoked the provisions of section 68 to make the addition, which is not permissible under the law as there is no violation of the provisions of section 68 of the Income Tax Act. 6. It was submitted that the issue is squarely covered in favour of assessee by the decision of the Coordinate Bangaluru Benches (ITA NO.646/Bang/2021) in the case of Bhageeratha Pattina Sahakara Sangha Niyamitha, where, on exact identical facts, it was held as under: “ 15. …Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonetized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec.68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by the Ld.CIT(A) on this issue and direct the A.O. to delete this disallowance 7. Further reliance was placed on the decision of Coordinate Chandigarh Benches in case of The Khojkipur Primary Agriculture Cooperative Society Ltd. Vs. ITO (ITA No. 865/Chd/2023 dt. 23/08/2024) wherein, following the aforesaid decision, it was held as under: “7. We have heard the rival contentions and gone through the record. In this case, the Id. counsel has explained that the amount in question was already collected from the farmers-members and the same was further deposited by the assessee-society in the bank account. The Id. counsel has duly explained that the amount in question was collected and deposited during the first three days of the demonetization period. In our view, the impugned additions are not sustainable as deposits cannot be said to be unaccounted income of the assessee u/s 68 of the Act. No doubt, the Specified Bank Notes as per the Reserve Bank of India's notification ceased to be legal tender w.e.f. 09.11.2016 and the assessee accepted the Specified Bank Notes in violation of the said circular of Reserve Bank of India. The action for violation of the said circular can be taken by the competent authority in this respect. However, for the purpose of Income tax Act, what is to be examined is as to whether the said amount received by the assessee was unexplained income of the assessee u/s 68 of the Act? The assessee has duly explained the source of deposits, which has also been accepted by the Assessing Officer. The only 5 contention of the Assessing Officer is that the assessee has violated the notification of the Central Government dated 08.11.2016 and accepted the Specified Bank Notes. For that, it is for the competent authority who may take action against the assessee as may be provided/applicable in relevant law. However, for the purpose of either section 68 or 69 of the Act, the said deposits cannot be treated as unexplained income of the assessee. Our above view is fortified by the decision of the Coordinate Bangalore Bench of the Tribunal in the case of 'Sri Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO' in ITA No.646/Bang/2021 order dated 18.02.2022. The relevant part of the order is reproduced as under: \"15. The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec. 68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec. 68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete this disallowance. 16. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.\" 8. In view of the above discussion, the addition made/confirmed by the lower authorities in the case of the assessee on this issue is not sustained and the same is accordingly ordered to be deleted.” 8. Per contra, the Ld. DR has relied on the findings of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which read as under: “Now coming to the addition u/s 68 of the Act, it is pertinent to mention here that when the case was selected for scrutiny for examining cash deposited during the demonetization period, it was necessary for the Assessing Officer to examine the source of cash and SBNs deposited and as evident from the assessment order, the assessing Officer has analyzed the bank account and ascertained the cash in hand as on 8.11.16 after examination of books, specially the cash book. The relevant extract is reproduced below: Reply filed by the assessee society has been considered but not acceptable due to the following reasons :- 1. The assessee society itself declared in its reply that it accepted SBN from its members during demonetization period. 6 2. The Reserve Bank of India had authorized commercial banks and co-operative banks to accept SBN but co-operative societies were not authorized to accept SBN. Relevant provisions of Reserve Bank of India Act, 1934 and relevant notification are reproduced as under- 6.3 The assessee society has deposited cash during the demonetization period in its bank accounts, in SBNs. In such cases, it was for the assessee to establish that the SBNs (Specified Bank Notes) deposited in the bank accounts were out of receipts prior to demonetization. The AO in the assessment order has determined that the assessee received SBNS after demonetization. Infect, the assessee Itself conceded that it accepted SBNs from members during demonetization period. The RBI circular condoning violation in SBNs received before 14.11.20,16 is applicable to cooperative banks and not appellant which is a cooperative society. Hence, the reliance of appellant on said circular is not justified. 6.4 The SBNs were not legal tender after demonetization. The Government guidelines allowed certain bodies like hospitals, etc. to receive SBNs even after demonetization, subject to certain conditions. The assessee was not one of the persons permitted to receive SBNs. The appellant has himself conceded that it had accepted SBNs during demonetization period. When the SBNs were no longer legal tender after demonetization, receipt of SBNs by the assessee was contrary to public policy and a violation of law. 6.5 Any cash credit has to satisfy the test of identity and credit worthiness of the creditor and the genuineness of the transaction. As SBNs were not legal tender after demonetization, receipt of SBNs was per se illegal and does not satisfy the test of genuineness in terms of Sec. 68 and are therefore, liable to be added as unexplained credits u/s. 68 of the Act.” 9. We have heard the rival contentions and purused the material available on record and are of the considered view that there is no legal and justifiable basis for invocation of provisions of section 68 of the Act as the assessee has duly explained the nature and source of cash deposits so made in specified bank notes during the demonetization period. It has been explained by the assessee that the cash so deposited was received from its members by way of deposits in their saving accounts with the assessee society as well as the recovery of loans given to the members during the regular course of business and in terms of cash deposits in specified bank notes, Rs.5,71,500/- was received from its members prior to demonetization and which was forming part of cash in hand as on 8/11/2016 and Rs 48,000/- in specified bank notes has been received during the demonetization period from one of its members and in support thereof, cash book and cash deposits slips were produced during the course of assessment proceedings. It is therefore a case where almost whole of the cash except for a figure of Rs 48,000/- has been collected by the assessee society by way of deposits/repayment of loans prior to demonization and due to announcement of demonetization on 8/11/2016, the same were deposited on 10/11/2016. As far as 7 deposits of Rs.48,000/- is concerned, the same were collected on 15.11.2016 from one of its members which were thereafter deposited on 17.11.2016 and in this regard, where there is any violation of the Central Government guidelines, it is for the Competent authority to take appropriate action as provided in the relevant laws. As far as the nature and source of such deposits is concerned, there is nothing adverse which has been brought on record rebutting the explanation so submitted by the assessee which stand duly corroborated by cash book and books of accounts, in view of the same, the AO is not justified in invoking of provisions of section 68 of the Act as the amount so collected from its members which has been duly recorded in its books of accounts cannot be held as unexplained credits in hands of the assessee. The decisions referred supra by the Coordinate Benches also support the case of the assessee. In light of the same, the addition so made and sustained by the ld CIT(A) is hereby directed to be deleted and ground no. 5 of the assessee’s appeal is allowed. 10. In view of the aforesaid discussions, other grounds of appeal have become infructious and the same are thus dismissed. 11. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 25/02/2025 Sd/- Sd/- परेश म. जोशी िवŢम िसंह यादव (PARESH M. JOSHI) ( VIKRAM SINGH YADAV) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟/ ACCOUNTANT MEMBER AG आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "