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2024 Supreme(Online)(ITAT) 9625
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
SHRI B.R. BASKARAN, ACM, SHRI SANDEEP SINGH KARHAIL, J
Shri Renukamata Multi–State Co–operative Urban Credit Society Ltd. – Appellant
Versus
Asstt. Commissioner of Income Tax – Respondent
ITA no.1725/Mum./2023 | ITA no.1726/Mum./2023 | ITA no.1727/Mum./2023 | ITA no.2076/Mum./2023 | ITA no.2077/Mum./2023 | ITA no.2078/Mum./2023
For the Appellants/Petitioners: Shri Dharmendra Kansara
For the Respondents: Ms. Mahita Nair
The Income Tax Act's provisions on unexplained cash credits under Section 68 do not apply if transactions are conducted in compliance with applicable co-operative society regulations, this includes provisions concerning member deposits.
Headnote:(A) Income Tax Act, 1961 - Sections 68, 40A(3), and 80P - Cross appeals for assessment years 2016-17, 2017-18, and 2018-19 - Cross appeals filed by the assessee and the Revenue challenging additions on unexplained cash credits and various disallowances - Role of the assessee as a co-operative credit society and compliance with KYC norms are key factors. The Assessing Officer made additions, citing non-compliance and unexplained funds, but the CIT(A) provided partial relief, finding errors in the AO's reasoning and estimating incomes on dubious grounds. The appeals demonstrate the balance between upholding regulatory compliance and recognizing legitimate banking activities. The CIT(A) emphasized that a co-operative society serving its members does not warrant blanket applications of income tax provisions without a factual basis. (Paras 1-80)
Findings of Court:
The lack of evidentiary support for the AO's claims suggests a misunderstanding of the nature of co-operative societies and the need for a fair application of income assessment.
Issues: 1. Whether additions under Section 68 can be upheld without concrete evidence? 2. The appropriate treatment of cash transactions in co-operative societies.
Ratio Decidendi: The court ruled that discrepancies noted by the AO do not automatically validate additions under Section 68 if transactions are otherwise compliant and documented, emphasizing challenging assessments should be factually supported.
Result: Appeals allowed in part; Revenue's claims dismissed.
| Table of Content |
|---|
| 1. consolidation of cross-appeals for assessment years (Para 1 , 2) |
| 2. assessee's grounds for appeal regarding approval under section 153d (Para 3) |
| 3. revenue's grounds for appeal regarding additions under section 68 (Para 4 , 5 , 6 , 7 , 10) |
| 4. clarification on kyc violations and assessed income (Para 12 , 19) |
| 5. final conclusions on disposals of appeals (Para 50 , 72) |
ORDER
PER BENCH
The present cross–appeals have been filed challenging the separate impugned orders of even date 30/03/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)-52, Mumbai, [―learned CIT(A)‖], for the assessment years 2016–17, 2017–18 and 2018–19.
2. Since these appeals pertain to the same assessee and involve similar issues that arise out of a similar factual matrix, therefore, these appeals were heard together and are being decided by way of this consolidated order. With the consent of the parties, the cross-appeals for the assessment year 2016-17 is taken up as a lead case and the decision rendered therein shall apply mutatis mutandis to the cross-appeals for the assessment years 2017-18 and 2018-19.
ITA no.1725/Mum./2023 (Assessee’s appeal)
ITA no.2076/Mum./2023 (Revenue’s appeal)
Assessment Year: 2016–17
3. In its appeal for the assessment year 2016-17, the assessee has raised the following grounds:–
―The following grounds of appeal are independent of, and without prejudice to one another-
1. It is submitted that in the facts and the circumstances of the case, and in law, the approval granted under section 153D by the competent authority is mechanical and without application of mind.
2 It is submitted that in the facts and the circumstances of the case, and in law, the Assessing Officer erred in issuing a notice dated 27.12.2019 directing the appellants to get the accounts audited under section 142(2A) at the fag end of the assessment proceedings which were getting barred by limitation on 31.12.2019 and without disposing of the objections raised by the appellants. Thus, the aforesaid direction of the Assessing Officer to get the accounts audited under section 142(2A) is nothing but mere tactics to extend the period of limitation which the Courts have held as bad in law.
3. Addition under section 68 of the Act for aggregate cash deposits and credit transactions but excluding the remote deposits.
3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 4,21.34,504, estimated at the rate of 0.15 per cent of Rs 2,808.96 crores being the aggregate cash deposits and credit transactions but excluding the remote deposits of all the account holders in the appellant-society against the addition of Rs 8,488.80 crores made by the Assessing Officer.
3.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society, without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures.
3.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act.
4. Addition under section 68 of the Act for aggregate demand draft/ at par cheque issued by the appellant-society.
4.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 47,96,398, estimated at the rate of 0.10 per cent of Rs 479.63 crores being the aggregate demand draft/ at par cheques issued by the appellant-society on receipt of cash from the account holders against the addition of Rs 479.63 crores made by the Assessing Officer.
4.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the
