TaxTMI 
TaxTMI 
2024 (9) TMI 1756
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.... per provisions and scheme of the Act it be held that the assessment so completed u/s 144 of the Act is incorrect and not in accordance with the provisions of the Act. The Order so passed by Ld. AO and that upheld by Ld. CIT(A) is incorrect. Accordingly, the assessment so completed be kindly quashed and appellant be granted just and proper relief in this respect. 3. Without prejudice to above grounds, on the facts and circumstances prevailing in the case and as per provisions and scheme of the Act it be held that the addition of Rs. 12,47,000/- so made by AO and that upheld by Ld. CIT(A) is incorrect since the Appellant has duly explained and substantiated the nature and source of the funds received and deposited in bank. Accordingly, the additions so made & that upheld be kindly deleted and appellant be granted just and proper relief in this respect. 4. On the facts and circumstances prevailing in the case and as per provisions & scheme of the Act it be held that the Ld. CIT(A), National Faceless Appeal Centre, has not effectively granted an opportunity of Virtual Hearing, since the notice relating to Virtual Hearing was sent on an e-mail Id different than the registered e-mai....
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....rd. The Ld. AO noted inter-alia that it is the submission of the assessee that during the period under consideration i.e. AY 2017-18 cash deposited in the bank account were received from various customers and tenants. In para 5 of his order the Ld. AO has observed that regarding cash deposit in the bank account the assessee stated that during the demonetization period the assessee society has deposited cash of Rs. 13,61,080/- in Dena Bank, Murud Branch. Further, the assessee stated that the cash deposited amounting to Rs. 1,14,080/- on 08.11.2016 was legal tender and the same was received from tenants of the assessee society and from its members. In support of this contention the assessee submitted documents i.e. rent agreement and deposit denomination details and other relevant documents which were examined by the Ld. AO and placed on record. 5.1 Thereafter, the assessee was asked to explain the sources of remaining amount of Rs. 12,47,000/- deposited during the demonetization period. In response to which the assessee submitted the computation of total income and the amount of Rs. 12,47,000/- were stated to be out of income from other sources. The Ld. AO in the absence of any str....
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.... their own money. (1.3) Accordingly, the net money which remains with the Appellant society at the end of day or any carried forward cash balance from previous day is deposited into the bank accounts maintained by with Dena bank and LDCC bank. (1.4) Thus, the money so deposited into both the banks are purely sourced from the members. In the instant case the addition of Rs. 12,47,000/- is of cash deposited into banks on 10 and 11th November 2016. (1.5) Sir, said cash deposited is substantially received by the Appellant on the 9th and 10th only. Sir, we are enclosing herewith the cash book for the month of November 2016 as Enclosure No. 4 for your ready reference. (1.6) Further, we humbly seek your kind attention on the Enclosure No. 1 which contains the 'Counter slips'/'receipts' of cash received from the members by the Appellant on 08/11/2016 to 10/11/2016, on sample basis. Said slips can be cross verified with the names as appearing the cash book enclosed at Enclosure No. 4. (1.7) Sir, from the cash book it is evident that the cash so deposited is completely sourced from the members of the Appellant Society. (1.8) In view of above facts, we humbly submi....
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.... not why) Whether, Assessee is found to be the owner of money, bullion, jewellery or other valuable article. Yes Whether, such money etc. is not recorded in books of accounts of the assessee. No (All the cash deposited is sourced from the its members and is property recorded in books of account-Cash book was already furnished before AO, though the same is not mentioned in the order) Assessee offers no explanation in this regard Or The explanation offered is not satisfactory Not relevant, since appellant has recorded cash (money) in its books this step of seeking explanation does not arise. However, Appellant in good faith have provided entire explanation of each penny. The crux of our above tabulated submission is, condition of providing explanation arises only and only when the money. bullion or jewellery is not recorded in books of account. Accordingly, in the instant case since all the cash deposits are duly accounted in cash book' the provisions of section 69A does not apply. '(However, it be please' noted that Appellant has duly provided detailed explanation in good faith since there is nothing to hide) (2.4) Our above contention that section 69A should n....
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....d that addition under section 69A of the Act cannot be made in respect of those assets 1 monies 1 entries which are recorded in the assessee's books of account. In my considered view, the aforesaid decision of the ITAT - Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee's books of account. In this view of the matter, I am of the opinion that the addition of Rs. 6,30,000/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs. 6,30,000/- made thereunder. The AO is accordingly directed.' (2.5) In view of our above submission, we humbly and most respectfully submit that the entire amount of addition u/s 69A categorized as unexplained is totally incorrect since entire amount is duly recorded in books of accounts the source of which is properly and in detail explained to the Ld. AO and vide this submission also. thus, the addition so made be kindly deleted. (3) Our Submission with regard to legality of Depositing the Specified Bank Notes and its relevance under section 69A, we respectfully submit that (3.1) Sir,....
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....16 anybody who was in possession of those SBN was entitled to get the equivalent consideration from RBI. (3.7) I.e., though from 08th November 2016, the SBN ceased to be legal tender Money, they were not declared to be illegal Article/ thing/ document/ paper to possess as like Contraband articles. Since these SBN weren't illegal, the same were considered as a commodity for barter which had a value till 31.12.2016. (3.8) Sir, Money may be defined as anything which is generally acceptable as a medium of exchange and at the same time acts as a measure, store or value and standard of deferred payment. (This is the definition included in books of class 12th of CBSE syllabus). (3.9) Further, the phrase 'Legal Tender' mens one can enforce making payment in that Specific Currency. Whereas, once a particular Note is declared to be 'Not Legal Tender' it means one cannot force another person to accept those Notes. However, if both the transacting parties has no problem in transacting in those SBN then it's a valid consideration. That is to say, just the enforceability is taken away not the barter value. (3.10) Sir, the intention 6f submitting above aspects of SBN....
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....ill 31.12.2016 and not for the Societies to accept SBN after 08.11.2016. The appellant is not an authorized person to collect the SBN after 08.11.2016. Therefore, the explanation offered that they belong to members of society has no relevance. They have been correctly treated as unexplained money. The AO should have treated it as unexplained income u/ s.68 and not under section 69A of the Act and this fact itself does not change the character of the money. Therefore, the addition made by the AO is upheld and the ground No. 2 is dismissed." 7. Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto. 8. The Ld. AR submitted that the limited issue involved in the present appeal is that whether depositing of SBN(s) during demonetization period in bank can be the reason for addition u/s 69A of the Act. He submitted that the Ld. CIT (A) at para 6.2 and 6.2.1 of appellate order has accepted the source of money but has upheld the addition only because the said money was SBN and were deposited during demonetization period. He relied on the decision of the Co-ordinate Bench of the Tribunal in the case of ITO Vs. Ambika Gramin Bigarsheti Saha....
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.... the source of cash deposited during the demonetization period. Nothing has been brought on record before us by the Revenue to prove otherwise. 12. The ld. AR though admitted that the assessee may have violated the relevant provisions of law by accepting SBN from its members subsequent to 08.11.2016. However, both the Ld. CIT(A) and the Ld. AO have not taken into consideration the legality of SBN and that the assessee has not ultravired the provisions of the Act. Therefore, no addition u/s 69A is warranted under the present facts and circumstances of the case. 13. We are inclined to agree with the submissions of the Ld. AR that there is no dispute with regard to the source of money i.e. cash deposits which have been received by the assessee society form its members and the case of the assessee finds support by the decision of Co-ordinate Bench of the Tribunal in the case of Ambika Gramin Bigarsheti Sahakari Patsanstha (supra) and M/s. Bhagur Urban Credit Co-operative Society Ltd. (supra) however, we, also express our opinion that appropriate legal action may be initiated under the relevant provisions of law with respect to acceptance of SBN subsequent to 08.11.2016. 14. We have ....
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.... is duly audited by Government Auditors. The source of the deposits were not disputed by the AO. The AO has not accepted the impugned credit entries and added the same u/s 68 only for the reason that the society had accepted SBNs from members and as per AO such acceptance of SBNs was not permissible and the said notes were worthless pieces of papers. This contention of the AO is legally unjustified and incorrect in view of the provisions of section 5 of and Section 2(1)(a) of Specified Bank Notes (Cessation of Liabilities) Act, 2017 as per which any person can transfer or received SBNs upto 30/12/2016. Therefore, the contention of the AO is against the provisions of the Specified Bank Notes (Cessation of Liabilities) Act, 2017. Therefore, the addition u/s 68 is based on incorrect and unjustified reason. (1) The SBNs deposited in bank is from explained source and hence addition of Rs. 1,20,45,000/- u/s 68 of is not justified. The activity of the credit co-op. societies is governed by Co-Operative Department of Government of Maharashtra and also by RBI. The books of accounts of the patsanstha are audited by Government Auditors and the same were accepted to be true and fair by the....
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..../2016 Rs. 6,34,689/- SBNs deposited 2,29,500 SBNs deposited on 8/11/2016 i.e. before demonetization period 6,50,000 Out of deposits / loans repayments received from members 1,11,66,300 Total 1,20,45,800 However, it appears that, due to heavy work load, the AO had not considered the above fact, while passing the assessment order. In view of the above facts, the AO should have verified the impugned members about source of SBNs deposited by them in the patsanstha, particularly in view of the fact that the appellant patsanstha had filed their full details alongwith PANs. It is very much unjustifiable to tax the patsanstha for the SBNs held by its members, details of which are filed with the AO. In short, the impugned members have deposited their SBNs in bank through patsanstha and hence the patsanstha should not be held responsible for their SBNs deposited in bank accounts. The huge demands raised by the Department on patsansthas shall certainly hamper the co-operative movement and if the impugned demands are recovered from patsansthas they will become bankrupt. In any case, in view of the facts of case mentioned above, the addition u/s.68 of the Income-tax is not justified.....
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....ment under the law to explain the source of the source. In the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect i.e., he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur. 15 In view of discharge of burden by the assessee, burden shifted to the revenue; but revenue could not prove or bring any material to impeach the source of the credit." (ii) Further the Honourable Bombay High court has mentioned in the case of H.R. Mehta V. ACIT (2016) 289 CTR 0561 in pare 12 of the order as under: 12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the case....
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....Ns were worthless papers and cannot be treated as legal tender and hence did not accept the credit entries received from members. It is worth mentioning here that the AO has held that the impugned SBNs of Rs. 500/- & Rs. 1000/- deposited by members are worthless pieces of papers. This contention of the AO is apparently incorrect as the impugned SBNs became worthless pieces of papers only after 30/12/2016 as the RBI had promised to pay the amount mentioned in the said SBNs and banks have given credit of the SBNs deposited with them upto 30/12/2016. The above contention is supported by provisions of Specified Bank Notes (Cessation of Liabilities) Act, 2017. Section 5 of this Act reads as under: "On and from appointed day, no person shall knowingly or voluntarily, hold transfer or receive any specified bank note." Section 2(1)(a) of this Act defines "appointed day" to mean "31st day of December 2016" Therefore the AO has erred in treating the impugned notes received prior to 31/12/2016 as worthless papers and in making addition on this wrong assumption. The AO had noted that the appellant had accepted SBNs on 10/11/2016 and 11/11/2016. The AO had asked the appellant to expla....
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....nt deposited, the details of which are on the record of the patsanstha. The appellant submitted that the AR of the appellant has also shown his willingness to produce the impugned members before the AO for verification, if needed. The appellant has also submitted to the AO vide submissions dated 20/04/2019, 27/08/2019, 21/11/2019 and 09/12/2019 that in view of the facts of the case and submission filed, the identity & creditworthiness of the members stands proved and genuineness of the transaction is also proved. 5.4 The details of total deposits in bank of Rs. 1,20,45,800/- during demonetization period is as under: Particulars Amount Out of balance as on 8/11/2016 Rs. 6,34,689/- SBNs deposited 2,29,500 SBNs deposited on 8/11/2016 i.e. before demonetization period 6,50,000 Out of deposits / loans repayments received from members 1,11,66,300 Total 1,20,45,800 The appellant submitted that the addition as per provision of section 68 is not justified in view of the facts of the case. The appellant has also relied on a number of judicial decisions. 5.5 The appellant also submitted that the AO had incorrectly assumed that the transactions of SBNs were not permitted during....
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....d money deposited by its members towards repayment of loans, pigmy deposits, etc. Accordingly, he submitted that the assessee has discharged its responsibility u/s 68 of the Act. Further, the collections and deposits have been duly recorded in the books of account and hence, there is no reason to treat the same as unexplained money of assessee. The Ld. A.R. further submitted that merely because demonetized notes ceased to be legal tender, it does not mean that the amount collected by the assessee from its members would become unexplained money of the assessee. The Ld. A.R. also submitted that the Reserve Bank of India issued a series of notifications with regard to the deposit of demonetized notes from 8.11.2016 onwards. He submitted that the RBI, vide notification dated 14.11.2016, clarified that District Central Co-operative Banks can allow their existing customers to withdraw money from their accounts up to Rs. 24,000/- per week. It further clarified that no exchange facility against demonetized notes or deposit of such notes should be entertained by them. In view of the above said notification, the assessee has stopped collecting the demonetized notes from 14.11.2016 onwards. A....
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....ped 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." 5.7 In the case of Prathamika Krushi Pattina Vs ITO [Appeal Number : ITA No. 593/Bang/2021 Date of Judgement/Order : 01/06/2022 Related Assessment Year : 2017-18] the Hon;ble ITAT Banglaore has hled as under:- "6. In the instant case, there is no dispute with regard to the fact that sources for making deposit of Rs. 36.36 lakhs by the assessee into its bank account are the money collected from its members. The AO is also not doubting that all the SBNs have been collected by the assessee from its members. Accordingly, following the above said decision, I hold that the addition made u/s 68 of the Act is not justified. The Ld A.R also submitted that the SBNs have been collected ....
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....e appellant. It has not been proved by the AO that the cash deposited did not belong to the members. Therefore, I find that the identity & creditworthiness of the members stands proved and genuineness of the transaction is also proved. Hence, the above said deposits cannot be considered as "unexplained money" in the hands of the appellant. 5.9 Section 3 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 clearly states that the specified bank notes shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act from the appointed date, i.e. 31st December, 2016. 2. Therefore, the contention of the AO that SBNs were just pieces of papers and they bear no value on or after 9th November appears incorrect in law.The SBNs of 500 and 1000 rupee denominations can be measured in monetary terms since the guarantee of Central Government and liability of Reserve Bank of India does not cease to exist until 31st December 2016 in lieu of the 500 and 1000 rupee SBNs. Due to the sudden announcement of demonetization, there is merit in the claim of the appellant that ....
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....cy during the demonetization period between 08.11.2016 to 13.12.2016 of Rs. 12,34,000/ -. The assessee submitted before the AO that these amounts were deposited by their customers towards the loan installments. Assessee submitted list of customers. Assessee also submitted that all the customers were having proper KYC Documents. However, the AO made addition under section 68 of the Act, on the ground that as per the RBI Guidelines assessee being an NBFC was not permitted to accept the old currencies which were no-more legal tender after 08.11.2016. Ld.CIT(A) confirmed the said addition. The only plea taken by the AO, ld.CIT(A) and ld.DR that as per the notification No. S.O. 3407(E) dated 08/11/2016 & S.O. 3418(E) of Ministry of Finance (Department of Economic Affairs), New Delhi dated 08/11/2016 (F. No. 10/03/2016-cy.l) only banking company defined under the Banking Regulation Act were allowed to accept demonetized currency after 08.11.2016, and NBFCs were not allowed to accept impugned currencies. 5.1 The AO made addition under section 68 of the Act. To invoke section 68 of the Act, the AO has to prove that assessee failed to file identity of the depositors, genuineness of the tr....