Merchants Credit Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
The appeal before the Income Tax Appellate Tribunal, Bangalore Bench, concerned Assessment Year 2017-18 and challenged the confirmation of an addition of Rs.67,31,239 under Section 68 of the Income-tax Act in respect of cash deposits received during the demonetisation period.
The assessee, a co-operative society registered under the Karnataka State Co-operative Societies Act, 1959, was engaged in accepting deposits, providing credit facilities, making investments and advancing agricultural loans to its members. It filed its return declaring gross total income of Rs.62,44,052, which was claimed as deduction under Chapter VIA, resulting in nil taxable income. During scrutiny proceedings, the Assessing Officer noticed that the assessee had deposited Rs.68 lakh in cash between 09.11.2016 and 14.11.2016. After considering the opening cash balance of Rs.78,761, the balance amount of Rs.67,31,239 represented cash received from members and deposited into the bank.
The Assessing Officer observed that, under the Central Government Notification dated 08.11.2016 and RBI directions, the assessee was not authorised to accept Specified Bank Notes (SBNs). Consequently, the SBNs collected after 08.11.2016 were treated as unexplained, and the amount was added under Section 68 and taxed under Section 115BBE. The CIT(A) upheld this action.
