Unexplained cash credits during demonetisation upheld as explained when source and books support deposits, and cooperative interest deduction allowed.

Dispute concerns unexplained cash credits during the demonetisation period and claim of deduction for interest received by a cooperative society. The tribunal accepted that when the assessee explains the nature and source of cash deposits and records them in books, section 68 is not attracted, and thus the additions on account of deposited demonetised currency were deleted. On deduction, the tribunal agreed that interest earned from a cooperative bank falls within the statutory deduction available to cooperative societies, recognising precedents extending coverage to cooperative banks, and upheld the appellate authoritys allowance of relief on interest income.

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Issues: (i) Whether deposits of demonetised notes made into the assessee society's bank account during the demonetisation period could be treated as unexplained cash credit under Section 68 of the Income-tax Act, 1961; (ii) Whether interest income earned from a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Issue (i): Whether deposits of demonetised notes made into the assessee society's bank account during the demonetisation period could be treated as unexplained cash credit under Section 68 of the Income-tax Act, 1961.

Analysis: The facts showed that the deposits were recorded in the assessee's books and the nature and source of the amounts were explained as collections from members (repayments, pigmy deposits, etc.). Documentary records including cash book entries were presented to substantiate the provenance of the deposits. Reliance on a closely similar precedent addressing cooperative societies and demonetised-note deposits was found appropriate and persuasive for the factual matrix.

Conclusion: The addition under Section 68 treating the deposits as unexplained cash credit is not sustained; conclusion in favour of the assessee.

Issue (ii): Whether interest income earned from a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The statutory language of Section 80P(2)(d) and controlling authorities concerning cooperative banks and societies were applied to the interest income claimed. Precedents recognizing cooperative banks within the scope of Section 80P(2)(d) were found relevant and the claimed portion of interest income was analysed against that framework.

Conclusion: The allowance of deduction under Section 80P(2)(d) for the interest income is upheld; conclusion in favour of the assessee.

Final Conclusion: The departmental appeal challenging the deletion of unexplained cash credit and the grant of deduction for interest income is dismissed, resulting in the assessee retaining the reliefs allowed by the lower authority.

Ratio Decidendi: Where an assessee supplies contemporaneous books and evidence explaining the nature and source of deposits, those deposits cannot be treated as unexplained cash credit under Section 68; interest income from cooperative banks falls within the deductibility scope of Section 80P(2)(d) when statutory criteria are met.

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