Manjunatheshwara Souharda Sahakari Sangha Niyamitha Vs ITO (Karnataka High Court)
No Deposit Challan, No Addition Automatically: Karnataka HC Orders Bank Verification of ₹24.05 Lakh Cash Deposit
Cash Deposit Cannot Be Treated as Unexplained Without Examining Cash Book and Bank Records
The Karnataka High Court has quashed an assessment order confirming an addition relating to a cash deposit of ₹24,05,000, allegedly consisting of 4,810 currency notes of ₹500 denomination, and restored the matter to the jurisdictional Assessing Officer for fresh examination.
The addition had been confirmed principally because the assessee could not produce the original bank challan establishing the denominations of the currency notes deposited with its banker. The High Court observed that if the assessee, being a cooperative society and not a cooperative bank, was not legally required to maintain denomination-wise particulars before demonetisation, that circumstance would be relevant while examining its explanation.
More importantly, the Assessing Officer could obtain the necessary information directly from the banker to verify whether the cash deposited by the assessee consisted of 4,810 notes of ₹500 denomination.
Facts of the Case
Sri Manjunatheshwara Souharda Sahakari Sangha Niyamitha was a cooperative society registered under the Karnataka Souharda Sahakari Act, 1997.
An addition was made in its assessment for Assessment Year 2017-18 concerning a cash deposit made around the demonetisation period. The controversy was whether the deposited cash represented ₹500 currency notes received and held by the society before demonetisation came into effect on November 8, 2016.
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