ITO Vs Chikhodara Sewa Sahakari Mandali Ltd. (ITAT Ahmedabad)
The Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, challenging the order dated 03.06.2025 passed by the Commissioner of Income-Tax (Appeals), NFAC, for Assessment Year 2017-18. The sole issue was whether the CIT(A) erred in deleting an addition of ₹93,75,500/- made by the Assessing Officer under Section 68 of the Income-tax Act, 1961, on account of acceptance of Specified Bank Notes (SBNs) during the demonetization period.
The assessee is a cooperative society registered under the Gujarat Cooperative Societies Act on 28.02.1959, having more than 1,937 farmer members. It functions primarily for the benefit of farmers in village Chikhodra and surrounding areas. During the relevant year, the assessee implemented the Kisan Credit Card (KCC) Scheme, a Government-backed agricultural credit scheme routed from NABARD to District Cooperative Banks and then to Seva Sahkari Mandalis like the assessee. The society acted as an intermediary for disbursement and recovery of loans from farmers and earned a marginal 1% interest spread. As per directions of the District Cooperative Bank, loan recoveries were to be completed by 30.11.2016. During the demonetization period, the assessee accepted repayments from farmers in SBNs.
The Assessing Officer observed that SBNs aggregating to ₹93,75,500/- were accepted and treated the amount as unexplained cash credit under Section 68, holding that acceptance of demonetized currency was illegal. The addition was made to the total income of the assessee.
