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2024 Supreme(Online)(ITAT) 1983
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
Siddhartha Nautiayal, J, Annapurna Gupta, ACJ
SHRI UMIYA COOPERATIVE CREDIT SOCIETY LTD. 1 SENETARY ROAD KUTCHHI PATIDAR VADI PETLAD TAL. PETLAD DIST. ANAND – Appellant
Versus
INCOME TAX OFFICER WARD-1(3)(1) PETLAD – Respondent
I.T.A. No.277/Ahd/2022
For the Appellants/Petitioners: Shri S. N. Divatia, A.R.
For the Respondents: Ms. Saumya Pandey Jain, Sr. DR
The court emphasized the importance of verifying claims and observing principles of natural justice in income assessments, particularly regarding disputed interest and cash credits during demonetization.
Headnote:(A) Income Tax Act - Sections 68, 80P - Issue related to the treatment of income, classification of interest earned, and unexplained cash credits made during demonetization period. Court discussed that receipts from SBNs treated as non-legal tender cannot lead to income additions without proper inquiry from members. (Paras 10, 18)
(B) Procedural Fairness - Need for assessing officers to verify claims when parties provide detailed responses, upholding principles of natural justice in assessment proceedings. (Paras 4, 18)
Facts of the case:
The assessee filed a return claiming deductions and had substantial cash deposits during the demonetization period, which were added to the income due to lack of documentation validated by the assessing officer.
Findings of Court:
The court held necessary to restore issues regarding interest income disallowances back to AO for verification, and rejected claims of illegal income from SBN deposits due to lack of appropriate verification by the AO.
Issues: The court addressed the treatment of cooperative society income and obligation of the tax authority to assess claims adequately.
Ratio Decidendi: The court noted that sufficient records provided by the assessee needed to be properly investigated rather than dismissed outright, aligning its determination with due process under Section 68.
Result: Appeal partly allowed for statistical purposes.
| Table of Content |
|---|
| 1. summary of the assessment context and grounds of appeal. (Para 2 , 3) |
| 2. discussion on incorrect interpretation of deductible income. (Para 6 , 7) |
| 3. clarification of legal tender acceptance rules during demonetization. (Para 10 , 12 , 18) |
| 4. rejection of income addition based on inadequate verification. (Para 14 , 17) |
| 5. final ruling allowing the appeal partially for verification. (Para 20) |
ORDER
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 27.05.2022 for Assessment Year 2017-18.
2. The Assessee has taken the following grounds of appeal:-
“1. The Commissioner of Income Tax (Appeals) erred on facts and in law in treating the interest earned on Term Deposits with Nationalized Banks as income from other sources and disallowed deduction of Rs. 2,06,392/- eligible to the appellant u/s 80P. The appellant prays that the disallowance made in respect of deduction claimed u/s 80P(2)(a)(i) be deleted.
2. The Commissioner of Income Tax (Appeals) erred on facts without appreciating the circumstances of the case and in Law in holding that cash deposits of Rs.1,15,97,500/- in the bank account during demonetization period as unexplained cash credit u/s. 68 is wholly illegal, unlawful and against the principles of natural justice. The appellant prays that the addition of Rs. 1,15,97,500/- made in respect of cash deposited by the appellant be deleted.
3. The Commissioner of Income Tax (Appeals) has grievously erred in law and on facts in not considering fully and properly the explanations furnished and the evidences produced by the appellant. The Commissioner of Income Tax (Appeals) erred in law in not providing adequate opportunity of being heard in the appellate proceedings before him and passed appellate order which is not in accordance with principles of natural justice. The appellant prays that direction may be given to provide the appellant sufficient opportunity to file its submissions and the appellant may be allowed to produce additional evidences as per Rule 46A.
4. The Commissioner of Income Tax (Appeals) has grievously erred in law and on facts in charging tax of Rs. 63,85,500/- u/s 115BBE in respect of addition of Rs. 1,06,47,500/- made as unexplained cash credit u/s 68 of the I.T. Act. The appellant prays to delete the tax of Rs. 63,88,500/- charged u/s 115BBe.
5. Your appellant craves leave to add, amend, alter, vary and / or withdraw any or all of the above grounds of appeal in the course of appellate proceedings.”
3. The brief facts of the case are that the assessee filed it’s return of income on 14.03.2018 declaring total income at Rs. NIL after claiming deduction under chapter VI-A of the Act. The case of the assessee was selected for scrutiny under CASS. The issues for examination were low income in comparison to high advances / investments and large deduction under chapter VI-A of the Act and cash deposits made during demonetization period. The assessee submitted that it is a cooperative society and business income is exempted as per the provision of Section 80P of the Act. Further, the assessee submitted the details of the loans / advances made to various parties such as members, other banks etc. On perusal of the details, the Assessing Officer observed that the assessee has received interest income of Rs. 9,67,392/- from parties other than members or other cooperative societies. Accordingly, the Assessing Officer was of the view that the interest is not eligible for deduction under the provisions of Section 80P of the Act. The Assessing Officer was of the view that such interest income comes in the category of “income from other sources” and is taxable under Section 56 of the Act and cannot be said to be attributable to the activities of the society, namely, carrying on the business of providing credit
