Jadeya Shankarling Urbank Co-op. Credit Society Ltd. Vs ITO (ITAT Bangalore)
ITAT Bangalore holds demonetisation cash deposits by co-op society not per se unexplained; remands Sec. 68 addition for verification
In this case, the Bangalore ITAT dealt with addition u/s 68 relating to cash deposits of ₹13.69 lakh in demonetised notes (SBNs) made by a co-operative credit society during the demonetisation period. The AO treated the deposits as unexplained on the ground that the assessee was not authorised to accept SBNs, and therefore such receipts were illegal and had no evidentiary value.
The assessee contended that the deposits represented amounts received from members towards loan repayments, savings deposits, and pigmy collections, supported by member-wise details, PAN/Aadhaar, and books of account.
The Tribunal held that:
- Section 68 applies only when source is unexplained, not merely because of alleged violation of RBI/demonetisation guidelines
- There was no absolute legal prohibition prior to 31.12.2016 (Specified Bank Notes Act came later) on accepting SBNs
- If deposits are regular business receipts from members and duly recorded, they cannot be automatically treated as unexplained
- Reliance on earlier coordinate bench rulings (e.g., Sri Bhageeratha Pattina Sahakara Sangha) supports assessee’s case
However, since the AO had not properly verified the detailed evidence furnished by the assessee, the Tribunal deemed it appropriate to restore the matter to the AO for fresh verification of identity, creditworthiness, and genuineness.
Accordingly, the ITAT held that addition u/s 68 cannot be sustained merely on demonetisation ground, and remanded the issue for de novo examination, granting proper opportunity to the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been instituted by the assessee against the order of the office of the Commissioner of Income – Tax (Appeal), Addl/JCIT – 4, Chennai dated 21.10.2025 for the assessment year 2017 18.
