Unexplained Money: Sec 69A not applicable on deposits accepted by Co-operative Society from its members

The present appeal has been filed by the assessee challenging the impugned order dated 29/07/2021, passed under section 250 of the Income Tax Act, 1961 (the Act) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [learned CIT(A)], for the assessment year 2017–18.

The brief facts of the case, relevant to the issues involved in the present appeal, are: The assessee is a registered Co-operative Credit Society under the Maharashtra Cooperative Societies Act, 1960 vide Registration Certificate No. MUMBAI/DDR – 3/RSR/(CR)/9371/2003 – 2004. As per the assessee, its only and sole aim is to encourage thrift and co-operation among the members by pooling financial resources and using the same to help the needy members. Pursuant to the information, received on Actionable Information Monitoring System (AIMS), module of ITBA, with respect to the cash deposited in bank account by the assessee during the period of the demonetisation i.e. 08/11/2016 to 31/12/2016, system generated notice was sent to the assessee requiring it to file its return of income for assessment year 2017–18.

However, assessee failed to file its return of income as per the conditions in manner prescribed in Rule 12 of Income Tax Rules, 1962, on or before 22/02/2018 for the relevant assessment year. However, the assessee filed its return of income on 08/08/2019, for the year under consideration, after prescribed date under Rule 12 of Income Tax Rules, 1962 and hence the said return filed by the assessee was treated as invalid return by the Assessing Officer.

Further, during the course of assessment proceedings, notices under section 142(1) were issued to the assessee for furnishing the details, which was responded by the assessee. The Assessing Officer also issued notices under section 133(6) of the Act to the assessee‘s bank i.e. Mumbai District Central Co-operative Bank, Borivili (West), Mumbai branch to get the details of bank statement and KYC details of the assessee. The assessee filed the details pursuant to the notice issued by the Assessing Officer, however, same were not found to be acceptable by the Assessing Officer. In the absence of valid return of income filed as per Rule 12 by 22/02/2018, the Assessing Officer passed the order dated 28/11/2019 under section 144 of the Act and computed the total taxable income of the assessee at Rs. 27,82,985 after disallowing the cash of Rs. 18,07,000, deposited during the demonetisation period, under section 69A read with section 115BBE of the Act.

ITAT Order:

9. Thus, provisions of section 69A of the Act are applicable only in the case where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article. In the present case, it is an accepted fact that assessee is a Co-operative Credit Society and in its business it accepts deposits from its members and also gives credit to its members which is repaid by them. The cash/money deposited by its members is further deposited by the Society in its bank account. Thus, in the facts of the present case, the assessee who is a registered Co-operative Credit Society cannot be considered to be the owner of the money, which only belongs to its members and same is retained by the assessee as its custodian. Further, from the perusal of the record we find that the assessee provided the details of cash deposited during the demonetisation period before the Assessing Officer in reply to the notices issued. From such reply filed by the assessee, forming part of the paper book, we find that assessee also provided name and address of the members who have deposited cash with the assessee during the year under consideration. The assessee has also provided the PAN number of some of its members. However, the Assessing Officer without commenting upon any of these details added the cash deposit made during the period of demonetisation as undisclosed income of the assessee. We find that though Assessing Officer has issued notice under section 133(6) of the Act to the bank seeking information regarding the details of bank statement and KYC details of the assessee, however, neither such notice under section 133(6) was issued nor examination/enquiry was done from the members. During the hearing before us, the assessee also submitted the list of members along with their PAN/TIN No. who had deposited cash during the demonetisation period in old currency notes. Be that as it may, since this money is of the members of the assessee society and the same is not owned by the assessee society, therefore, we are of the considered view that Assessing Officer has wrongly made the addition under section 69A of the Act, in respect of the cash deposit made during the demonetisation period.

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