The SomavamshaSahasrarjuna Vs ITO (ITAT Bangalore)
Demonetisation Deposits in Co-operative Society: Bangalore ITAT Says SBN Receipts Before 31.12.2016 Cannot Be Treated as Unexplained Cash Credits Merely Because They Ceased to Be Legal Tender
The Bangalore ITAT granted relief to a co-operative credit society by holding that acceptance of Specified Bank Notes (SBNs) from members during the demonetisation period cannot automatically result in an addition under section 68 merely because the notes ceased to be legal tender after 08.11.2016.
The assessee, a co-operative society engaged in accepting deposits and granting loans to its members, had received SBNs aggregating to ₹22.08 lakh from members towards deposits and loan repayments during the demonetisation period. The Assessing Officer treated the amount as unexplained cash credits under section 68 on the reasoning that SBNs had no value after 08.11.2016 and that the entries created by the assessee in its books therefore represented unexplained credits. The CIT(A) affirmed the addition.
The Tribunal disagreed with the approach of the lower authorities. It observed that under the Specified Bank Notes (Cessation of Liabilities) Act, 2017, the prohibition on holding, transferring or receiving SBNs came into effect only from the appointed date of 31.12.2016. Therefore, receipt of SBNs prior to that date and subsequent deposit of such notes into scheduled bank accounts could not, by itself, justify an addition under section 68.
At the same time, the Tribunal held that the society must establish the identity of the members from whom the SBNs were received by furnishing complete KYC particulars. Accordingly, the matter was restored to the Assessing Officer with a direction to delete the addition in respect of those members whose identity and KYC details are satisfactorily established. The appeal was therefore allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
