ITO Vs UK Souharda Credit Cooperative Society Limited (ITAT Bangalore)
The Revenue’s appeal involved deletion of addition of ₹2.14 crore made by the AO under Section 68 on account of deposits of demonetised currency (SBN) received by a co-operative society from its members during the demonetisation period. The AO treated such deposits as unexplained on the ground that SBN had ceased to be legal tender.
The CIT(A) deleted the addition after noting that the assessee had explained the source as receipts from members in the normal course of its credit business and that the AO failed to conduct any meaningful inquiry or bring contrary material on record.
The ITAT upheld this view, emphasizing that once the nature and source of deposits are explained and recorded in books, Section 68 cannot be invoked merely because the receipts were in demonetised currency. It also clarified that any alleged violation of RBI notifications does not automatically trigger addition under the Income Tax Act.
Relying on coordinate bench precedent in similar facts, the Tribunal held that deposits from members in the ordinary course of business cannot be treated as unexplained, and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal filed, at the instance of the revenue, is directed against the order passed under section 250 of the Income Tax Act 1961 dated 07-08-2023 pertaining to A.Y. 2017-18 at National Faceless Appeal Centre-NFAC, Delhi.
