Thirunelly Service Co-op. Bank Ltd. Vs JCIT (ITAT Cochin)
No RBI Licence, No Relief – Primary Agricultural Credit Society not spared – ITAT Confirms Penalty for Section 269SS Breach; Genuineness of transactions no shield against Section 269SS Penalty
Assessee, a primary agricultural credit co-operative society under the Kerala Co-operative Societies Act, accepted & repaid deposits in cash exceeding ₹20,000 from members. AO held this violated section 269SS & referred the matter to the JCIT, who levied a penalty of ₹2,18,31,129 u/s 271D. CIT(A) upheld the penalty, holding that section 269SS applies to co-operative societies not having an RBI banking licence.
Assessee’s contended that being akin to a co-operative bank & sec 269SS should not apply. Assessee relied on ITAT decision in Poothady Service Co-op. Bank Ltd. & CBDT Circular dated 25.03.2004. Assessee claimed a bona fide belief that provisions did not apply & also argued penalty invalid without AO’s satisfaction in the assessment order.
Tribunal noted that in Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. AO (2023) 458 ITR 384 (SC) it was categorically held that in the absence of license to carry on the banking business by a cooperative society, it cannot be considered as a co-operative bank. It is an admitted fact that the appellant does not enjoy the license issued by the RBI to carry on the business of banking. Therefore, the contention that it is a co-operative bank cannot be accepted. Tribunal noted that Parliament has inserted the third proviso to sec.269SS providing for enhancing the threshold limit from Rs.20,000 to Rs.2,00,000 in the case of loan or deposit accepted by the primary agricultural co-operative credit society, primary agricultural & rural development bank. Thus, the intention of the Parliament is abundantly clear that the provisions of sec.269SS should be applied even in respect of loan or deposits accepted by primary agricultural cooperative credit society. The legislative intention is very clear that to make the provisions of sec.269SS applicable to a primary agricultural co-operative credit society.
