Prathamika Krushi Pattina Vs ITO (ITAT Bangalore)
In the instant case, there is no dispute with regard to the fact that sources for making deposit of Rs.36.36 lakhs by the assessee whoo is a primary agricultural credit co-operative society into its bank account are the money collected from its members. The AO is also not doubting that all the SBNs have been collected by the assessee from its members. Accordingly, following the above said decision, ITAT hold that the addition made u/s 68 of the Act is not justified. The Ld A.R also submitted that the SBNs have been collected by the assessee prior to the appointed date of 31.12.2016, i.e., only from 31.12.2016, the assessee is precluded from accepting SBNs from its members. In this view of the matter, the reasoning relating to contravention of rules of RBI also fails.
Accordingly, ITAT set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the impugned disallowance.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed this appeal challenging the order dated 24-092021 passed by Ld CIT(A), National Faceless Appeal Centre, Delhi and it relates to the assessment year 2017-18. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.36,16,262/- u/s 68 of the Act, being the amount collected by the assessee in the form of Specified Bank Notes from is customers by way of deposits during demonetization period. In addition to the above, the assessee has also raised a legal ground questioning the jurisdiction of the assessing officer.
2. The facts relating to the case are stated in brief. The assessee is a primary agricultural credit co-operative society providing credit facilities to its members. The AO noticed that the assessee has deposited a sum of Rs.36,36,000/- in the form of Specified Bank Notes (SBN), i.e., demonetized notes of Rs.1000/- and Rs.500/- during the period from 0911-2016 to 31-12-2016. The assessee explained the sources of these SBN as the deposits made by the members of the assessee society, whose identity is proved. The AO took the view that the assessee was not permitted by RBI to accept demonetized currency during demonetization period. Since the demonetized currencies are not legal tender, the AO did not accept the claim that the sources of deposits made by the assessee into its bank account is out of the currency received from its members. Accordingly, the AO assessed the amount of Rs.36,16,262/- as unexplained cash deposit u/s 68 of the Act. The ld CIT(A) also confirmed the said addition.
3. The ld. A.R submitted that an identical addition made in the hands of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO (ITA No.646/Bang/2021 dated 18-02-2022) on identical circumstances has been deleted by the SMC bench of Bangalore Tribunal.
4. The Ld D.R, on the contrary, submitted that the assessee was barred from collecting the demonetised notes and hence the AO has made the impugned addition.
5. In the rejoinder, the Ld A.R submitted that the provisions of sec. 5 of Specified Bank Notes (Cessation of liability) Act, 2017 specifies that “on and from the appointed day, no person shall knowingly or voluntarily hold, transfer or receive any specified bank note”. He submitted that the appointed day was fixed as 31.12.2016 and the assessee has received the SBN prior to 31.12.2016.
5. I heard the parties and perused the record. I notice that an identical issue has been decided in favour of the assessee in the case of Bhageeratha Pattina Sahakara Sangha Niyamitha (supra) as under:-
“12. The last issue relates to addition made u/s 68 of the Act. The A.O. noticed that the assessee society has deposited “Specified bank notes” (demonetized notes) in the account maintained by it with CDCC Bank, Hosadurga as detailed below:-
