THE HARYANA STATE FEDERATION OF CONSUMERS COOPERATIVE WHOLESALE STORES LTD., ,PANCHKULA V. DEPUTY COMMISSIONER OF INCOME TAX, PANCHKULA CIRCLE, PANCHKULA

ITA 670/CHANDI/2025

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The case involves The Haryana State Federation of Consumers Cooperative Wholesale Stores Ltd., a cooperative society, appealing against an order from the Ld. CIT(A) which confirmed an addition of Rs.35,72,679 under section 68 of the Income-tax Act, 1961. This addition was initially made by the Assessing Officer, treating certain cash deposits as unexplained. The society argued that these deposits were legitimate proceeds from depot holders across Haryana, deposited directly into the society's bank accounts and subjected to statutory audit. The Tribunal found that the CIT(A) had dismissed the appeal ex parte without proper adjudication on merits and restored the matter to the Assessing Officer for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772005 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR; VIRTUAL MODE
• Assessee Lawyers: HARISH NAYYAR; C.A VIRTUAL
• Keywords: Set aside; Principle of natural justice
• Section: 147; 144; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 670/Chd/2025 िनधाŊरण वषŊ / Assessment Year : 2018-19 The Haryana State Federation of Consumers Cooperative Wholesale Stores Ltd. Bays 19-20, Sector 2, Panchkula, Haryana बनाम The DCIT Panchkula Circle Panchkula ˕ायी लेखा सं./PAN NO: GUVPS1112L अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Harish Nayyar, C.A (Virtual) राजˢ की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) सुनवाई की तारीख/Date of Hearing : 25/08/2025 उदघोषणा की तारीख/Date of Pronouncement : 25/08/2025 आदेश/Order PER LALIET KUMAR, J.M This appeal by the assessee is directed against the order dated 11.03.2025 passed by the Ld. CIT(A)/ NFAC, Delhi, for the assessment year 2018-19 arising from assessment order framed under section 147 read with section 144 of the Income-tax Act, 1961. 2. The brief facts of the case are that the assessee is a cooperative society registered under the Haryana Cooperative Societies Act, wholly owned and controlled by the Government of Haryana. It acts as a nodal agency for implementation of the Public Distribution System (PDS) for supply of food grains, sugar and kerosene to the weaker sections of society. The Assessing Officer reopened the assessment in the status of a “company” and made an addition of Rs.35,72,679/- under section 68 of the Act treating certain cash deposits as unexplained. 3. Aggrieved, the assessee carried the matter before the Ld. CIT(A), who dismissed the appeal ex parte for want of compliance, thereby confirming the addition. Printed from counselvise.com 2 4. Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal. 5. During the course of hearing the Ld. AR submitted that the assessee federation was set up in 1966 and has consistently been assessed in the status of a cooperative society. Owing to an inadvertent error, a PAN was initially allotted in the status of a company, but subsequently a corrected PAN was issued. The cash deposits reflected under the old PAN were nothing but proceeds deposited by thousands of depot holders spread across the districts of Haryana, who deposited the sales collections of PDS items directly into the bank accounts of the society. These deposits were duly reconciled, reflected in the books of account and subjected to statutory audit. It was further submitted that audited accounts, income-tax returns, reconciliations and confirmations had been produced before the Assessing Officer, but the same were not properly appreciated. The learned AR contended that the order of the Ld. CIT(A) is bad in law as it has been passed without affording effective opportunity of hearing, which is in violation of principles of natural justice. 6. The Ld. DR, on the other hand, supported the orders of the lower authorities and submitted that despite being given sufficient opportunities, the assessee failed to pursue the appeal before the Ld. CIT(A). She argued that no conclusive reconciliation was placed on record, and therefore, the Ld. AO was justified in invoking section 68 of the Act. 7. I have heard the rival submissions and perused the record. It is undisputed that the assessee is a cooperative society, wholly owned and controlled by the Government of Haryana, and functions as an extended arm of the Government in implementing welfare schemes. The very nature of its functioning involves collection of sale proceeds from a large number of depot holders across the State, and such cash collections are deposited directly into bank accounts of the assessee society and subjected to statutory audit under the Cooperative Societies Act. In such circumstances, before invoking the deeming fiction of section 68, the Revenue is required to exercise greater care and caution. 7.1 I also find that the Ld. CIT(A) has dismissed the appeal ex parte without adjudicating the matter on merits, despite the assessee’s explanation that relevant Printed from counselvise.com 3 reconciliations and audited accounts were already available on record. In my considered view, the interest of justice requires that the matter be restored to the file of the Assessing Officer for fresh examination. 7.2 I, therefore, set aside the impugned order and restore the issue to the file of the Ld. AO with a direction to re-examine the matter afresh after granting due opportunity to the assessee. While doing so, I make it clear that since the assessee is a cooperative society run by the nominees of the State Government and functions as an extended arm of the Government, the Revenue should be cautious in invoking section 68 of the Act, bearing in mind the peculiar nature of the assessee’s activities and the statutory audit mechanism to which it is subjected. 8. In the result, the appeal of the assessee is allowed for statistical purposes. (Order pronounced in the open Court on 25/08/2025 ) Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG Date: 25/08/2025 आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "