आयकर अपीलीय अिधकरण, ‘बी’ यायपीठ, चे ई

IN THE INCOME TAX APPELLATE TRIBUNAL

‘B’ BENCH, CHENNAI
ी वी दुगा राव, याियक सद य एवं ी मंजुनाथ. जी, लेखा सद य के सम
BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER AND
SHRI MANJUNATHA. G, HON’BLE ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.: 1063/Chny/2022

िनधारण वष / Assessment Year: 2017-18

Devampalayam PACCS, Income Tax Officer,

5/18, Karuvaloor Road, v. Non-Corporate Ward-3(2)
Sarkarsamakulam Post, Race Course Road,
Coimbatore South, Coimbatore – 641 018.
Coimbatore – 641 107.
[PAN: AAAAD-8153-E]
(अपीलाथ /Appellant) ( यथ /Respondent)

अपीलाथ क ओर से/Appellant by : Shri. M. Karunanatham, Advocate

यथ क ओर से/Respondent by : Shri. D. Hema Bhupal, JCIT

सुनवाई की तारीख/Date of Hearing : 20.02.2023

घोषणा की तारीख/Date of Pronouncement : 24.02.2023

आदे श /O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against the

order passed by the Commissioner of Income Tax, National

Faceless Appeal Centre (NFAC), Delhi, dated 21.10.2022 and

pertains to assessment year 2017-18.

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2. The assessee has raised the following grounds of appeal:

“We would like dispute the following points in the order passed
by the CIT (Appeals).

4.3

The AO Submitted the claim of cash deposits of Rs. 55,68,994

by members, are not genuine.

We would like to bring to your notice that we have submitted

records such as the Daybook, Pay-in-slip, and KYC of all
members who made cash deposits. UnderSection 2858A of the
income tax act 1961 the obligation to furnish a statement of
the financial transaction complied by us. This shows our
Genuinity.

4.3.1 and 4.3.2

The AO has observed that we are not authorized to collect the

SBNs from 09-11-2016.

On this point, we agree, and submit that we collected the

deposits on 08-11-2016 which is before the SBNs became invalid.

4,5,4.6 and 5

The AO has submitted that the recorded statement in the

affidavit of all depositors whose details were submitted by the
society, were either signed or not aware of the content of the
affidavit by signed.

It can be observed that all members appeared before the

inquiry officer of the Income Tax department, clearly stated
that they made the cash deposits in Society on 08-11-2016.
The Members either said they did not sign the affidavit or don't
remember signing it.

We submitted the pay-in slip with the member's signature and

their Pan card for signature verification.

Even though the affidavits are not admitted, the sworn

statement of depositors before the income tax department
enquiry officer states the same as in the affidavit. So, it is very
clear the cash deposit was made by the member only.

5.2 The AO has in his observation accused us of manipulating

the manual maintenance of records to our benefit.
 :-3-: ITA. No:1063/Chny/2022

We would like to submit that we had submitted all records such

as cash book, pay-in-slip, pass book to the Income tax
department which clearly shows our genuinity, and the accusation
is baseless.

Based on the above grounds we request you to set aside the

order of GI! (Appeals) for the addition of income of Rs.
55,26,606/-, Since we have complied as per section 285BA of
the income tax act and given all details of the depositors, action
should be taken on depositors only not on us.”

3. The brief facts of the case are that, M/s. Devampalayam

Primary Agricultural Co-operative Credit Society is a society

registered under Tamilnadu Co-operative Societies

Registration Act and engaged in the business of providing

credit facilities to its members and running public distribution

shops. The appellant did not file its return of income for the

assessment year 2017-18. As per information available with

the Assessing Officer, it was noticed that a sum of Rs.

61,46,000/-, cash deposits was made during the

demonetization period from 08.11.2016 to 30.12.2016 in the

SB accounts of Society maintained with Coimbatore District

Central Co-operative Bank Ltd. It was further noted that,

during the demonetization period huge amount of credit (cash

as well as credit through other banking mode) in their bank

account maintained with District Central Co-operative Bank

and relevant details of deposits made with bank are given in

 :-4-: ITA. No:1063/Chny/2022

para 5 of assessment order. The assessee was called upon to

explain the credits in the bank account, for which the assessee

neither filed any details nor explained source. Therefore, the

AO treated total deposits found in the bank account

maintained with Coimbatore District Central Co-operative Bank

Ltd as unexplained money u/s. 69A of the Income-tax Act,

1961 (hereinafter referred to as “the Act”).

4. The assessee carried the matter in appeal before the

CIT(A) and argued that the assessee has filed evidences in the

form of financial accounts and also affidavits from the alleged

depositors to explain cash deposits made during the

demonetization period. The evidences filed by the assessee

have been remanded to the AO for his verification and

comments. The AO, vide his remand report dated 23.05.2022,

observed that out of cash deposits of Rs. 58,36,000/- of

specified bank notes during the demonetization period, the

assessee could not explain source for deposits amounting to

Rs. 55,26,606/-. The ld. CIT(A), on the basis of evidences

filed by the assessee and remand report of the AO, opined that

the assessee had recorded unaccounted cash in the names of

various persons who had no source of income, and thus

 :-5-: ITA. No:1063/Chny/2022

rejected arguments of the assessee and sustained additions

made by the AO towards cash deposits during the

demonetization period amounting to Rs. 55,26,606/-. The

relevant findings of the ld. CIT(A) are as under:

“5.2 The appellant society has utilized its manual maintenance

of books to its advantage to record such huge cash as received
in the demonetized currency in the books just prior to the
announcement of demonetization on the night of 8th November
2016. The unaccounted cash in the demonetized notes has
been recorded in the names of the above the depositors who
had no source of such huge cash. It is also noticed that some
of the accounts are opened on 08.11.2016 and immediately
huge cash was been shown to have been deposited. Similarly
in the accounts opened prior, there were hardly any
transactions recorded earlier and for the first time on the eve
of demonetization, huge cash was deposited which was
otherwise claimed to be in their possession for years together.
It is also notice that the depositors had accounts in other
banks including Public Sector Banks which were authorized to
receive the de-notified currencies, but preferred to open new
accounts in this Society and deposit such huge monies in de-
notified currencies which is highly dubious. Further it is seen
that the appellant never received such huge cash on any single
day in any of the previous years and later years. It was noted
that the whole cash deposited on this day was even more than
the whole cash deposits in a year. The appellant backdated its
entries in the accounts a day prior to the demonetization as it
is not an authorized agency to receive de-notified currency.
These are nothing but the moneys belonging to the Society
which are not accounted for and therefore the action of the AO
to bring them to tax is upheld.
 :-6-: ITA. No:1063/Chny/2022

5.3 Al the grounds relating to the appeal pertain to the claims

of the appellant have been addressed by accepting the profits
reflected in the accounts submitted to the Cooperative Audit
Department. All the credit entries except for the demonetized
notes for the reasons mentioned above have been considered
and the additions made on this account have been deleted. In
result, the addition of Rs. 55,26,606/- pertaining to cash
deposited in the demonetized notes is sustained after
accounting for the opening cash balance as on 08.11.2016 of
Rs 3,08,394/-.”

5. The ld. Counsel for the assessee, submitted that the ld.

CIT(A) erred in sustaining additions made towards cash

deposits made during demonetization period to Coimbatore

District Central Co-operative Bank Ltd, without appreciating

fact that the assessee had explained source for cash deposits

out of huge deposits received from various account holders.

The Ld. Counsel for the assessee, further submitted that

various account holders have deposited specified bank notes

with the assessee and the assessee has in turn deposited said

cash into District Central Co-operative Bank. The assessee

had explained source for cash deposits and also filed necessary

affidavits from various deposit holders. The AO, disregarded

affidavits filed by the assessee and has treated cash deposits

 :-7-: ITA. No:1063/Chny/2022

with District Central Co-operative Society as unexplained

money of the assessee.

6. The ld. DR, on the other hand supporting the order of the

Ld. CIT(A) submitted that, the assessee could not explain

source for cash deposits during the demonetization period.

The assessee was not maintaining regular books of accounts

and also not filed return of income. When the AO called upon

the assessee to explain source for cash deposits, the assessee

claims to have received cash deposits from various account

holders on 08.11.2016. From the details filed by the assessee,

the AO noticed that account holders have opened accounts on

08.11.2016 and further, they do not have any proper source of

income for cash deposits. Therefore, the AO has rightly

treated cash deposits during demonetization period as

unexplained money of the assessee.

7. We have heard both the parties, perused materials

available on record and gone through orders of the authorities

below. The assessee being a Co-operative Society is engaged

in the business of providing credit facility to its members and

in this process the assessee is operating savings and current

 :-8-: ITA. No:1063/Chny/2022

account of its members. During the course of demonetization,

the assessee has made cash deposits of Rs. 58,36,000/- in

specified bank notes to savings bank account maintained with

Coimbatore District Central Co-operative Bank Ltd. The

assessee explained before the AO that, source for cash

deposits is out of cash deposits received from various account

holders, and to support this, the assessee has filed account

copies of certain deposit holders along with their affidavits.

The AO, disregarded affidavits filed by the assessee only on

the ground that deposit holders could not explain source for

cash deposits. Therefore, he treated cash deposits made

during demonetization period as unexplained money of the

assessee.

8. Having heard both the sides and considered relevant

materials on record, we find that the AO has assessed total

cash deposits during the demonetization period with District

Central Cooperative Bank as unexplained money of the

assessee. We have gone through reasons given by the AO, in

light of various arguments made by the ld. Counsel for the

assessee and we do not find any substance in reasons given

by the AO to treat cash deposits as unexplained money of the

 :-9-: ITA. No:1063/Chny/2022

assessee for simple reason that the assessee being a Co-

operative Society has received cash deposits from various

account holders in specified bank notes on 08.11.2016 to

10.11.2016. The assessee has deposited very same cash in

specified bank notes to District Central Co-operative Bank

during demonetization period. In our considered view, when

the assessee has explained source for cash deposits and said

cash deposits is out of cash deposits received from its

members through savings bank /current bank, which is

supported by necessary affidavits, then it is for the AO to

examine the claim of the assessee keeping in mind the nature

of business of the assessee. But, in the present case, the AO

without carrying out any verification, simply disregarded all

affidavits filed by the assessee and made additions u/s. 69A of

the Act, by stating that the depositors could not explain source

for cash deposits made during demonetization period with

assessee society. In our view, the AO is completely failed in

his duty to understand the issue, because the assessee need

not to prove source for cash deposits of his account holders,

but what the assessee needs to do is explain source for cash

deposits made with District Central Co-operative Bank. In this

case, the assessee has explained the source for cash deposits
 :-10-: ITA. No:1063/Chny/2022

with District Central Co-operative Bank with necessary

evidences. If at all, the AO is not satisfied with explanation

furnished by the account holders then, it is for the AO to treat

said cash deposits in the account of various account holders as

their unexplained money. However, said cash deposits cannot

be treated as unexplained money of the assessee. Therefore,

we are of the considered view that the AO and CIT(A) have

completely erred in making additions towards cash deposits

found during the demonetization period as unexplained money

of the assessee, even though the assessee has explained

source for cash deposits with necessary evidences. Thus, we

set aside the order passed by the CIT(A) and remit the issue

back to the file of the AO and direct the AO to re-examine the

claim of the assessee in light of affidavits filed by various

deposit holders to ascertain true nature of cash deposits found

during the demonetization period. In case, the assessee is

able to explain source for cash deposits with necessary

evidences, then the AO is directed to delete additions made

towards cash deposits as unexplained money of the assessee.

We, further made it clear that in case the AO is having any

doubt about the source for cash deposits of various deposit

holders in the bank account maintained with assessee’s

 :-11-: ITA. No:1063/Chny/2022

society, then the AO is free to look into the issue in the hands

of various deposit holders in accordance with law.

9. In the result, appeal filed by the assessee is allowed for

statistical purposes.

Order pronounced in the court on 24th February, 2023 at Chennai.

Sd/- Sd/-
(वी दुगा राव) (मंजुनाथ. जी)
(V. DURGA RAO) (MANJUNATHA. G)
ाियकसद /Judicial Member ले खासद /Accountant Member

चे ई/Chennai,
th
दनांक/Dated: 24 February, 2023
JPV
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A)
4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF