ITO Vs Porbandar Credit Cooperative Society Ltd. (ITAT Rajkot)
The ITAT Rajkot considered the Revenue’s appeal for AY 2016-17 against the NFAC order dated 02.01.2025, which had deleted an addition arising from cash deposits in the assessee’s bank account. The assessee, a co-operative society, had been assessed under Sections 147 read with 144 of the Income-tax Act, 1961, after information was received regarding substantial cash deposits in its savings bank account.
The reassessment was initiated against PAN AAAAS8104Q, whereas the assessee contended that it had regularly filed its returns under PAN AAAAS2528L. According to the assessee, the former PAN had been inadvertently allotted as a duplicate PAN and an application for its cancellation had already been filed on 05.12.2022, before commencement of the assessment proceedings. The assessee maintained that the bank account in question and its transactions were duly reflected in its books, audited financial statements and return filed under the regular PAN.
The Assessing Officer, however, treated the cash deposits in the bank account as unexplained and made an addition under Section 68. The CIT(A) deleted the addition after noting that the bank account was reflected in the assessee’s financial statements and that the return had been filed under the regular PAN.
Before the Tribunal, the Revenue argued that the assessee had failed to establish the source of the cash deposits with supporting documentary evidence. The assessee maintained that the reassessment resulted from the duplicate-PAN issue and that the relevant bank account and transactions had already been disclosed under the correct PAN.
The ITAT found that the audited balance sheet and Schedule 5 reflected the relevant bank balance and that the bank account was disclosed in the return filed under PAN AAAAS2528L. It observed that the assessee had not concealed the existence of the bank account and that the controversy arose because two PANs had been allotted to the same assessee.
However, instead of finally sustaining the CIT(A)’s deletion, the Tribunal considered it appropriate to restore the matter to the Assessing Officer for verification. The AO was directed to examine the transactions in Account No. 4507 maintained with Porbandar Commercial Co-operative Bank Ltd., verify whether those transactions had already been disclosed under the regular PAN, examine the cancellation status of the duplicate PAN, and determine whether any independent transactions had been carried out under the duplicate PAN.
The Tribunal further directed that, if any transactions under the duplicate PAN were found to have not been disclosed under the regular PAN, the AO could take appropriate action in accordance with law. The assessee was to be given a reasonable opportunity of being heard.
Accordingly, the Revenue’s appeal was allowed for statistical purposes, the CIT(A)’s order was set aside, and the matter was restored to the AO for fresh examination in accordance with the Tribunal’s directions. The order was pronounced on 23 July 2026.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the revenue, pertaining to Assessment Year (AY) 2016-17, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 02.01.2025, which in turn arises out of an order passed by assessing officer u/s. 147 of the Act, dated 23.03.2024.
2. Brief facts of the case that the assessee is a co-operative society registered under the Gujarat Co-operative Societies Act. The assessment was completed under sections 147 read with 144 of the Income-tax Act, 1961. In the case of the assessee the Assessing Officer noticed that no return of income had been filed in respect of PAN AAAAS8104Q. Based on information received regarding cash deposits exceeding 210,00,000/- in the savings bank account maintained with Porbandar Commercial Co-operative Bank Ltd., Porbandar Branch, proceedings under section 148 of the Act were initiated. During the assessment proceedings, the assessee contended that the notice had been issued with reference to PAN AAAAS8104Q, which was never used for filing its return of income. It was submitted that the assessee had inadvertently been allotted another PAN, namely AAAAS8104Q, whereas it had regularly been filing its returns of income under PAN AAAAS2528L. The assessee further submitted that it is a co-operative society whose accounts are audited under the Gujarat Co-operative Societies Act, as well as under the Income-tax Act, 1961, and that the return of income for the year under consideration had duly been filed under PAN AAAAS2528L along with the audited financial statements and other relevant documents. The assessee also explained that immediately upon coming to know of the existence of the duplicate PAN AAAAS8104Q, it filed an application for cancellation of the said PAN on 05.12.2022, much before the assessment proceedings under section 147 of the Act commenced. It was further submitted that for all assessment years from 2007-08 to 2023-24, the returns of income had consistently been filed only under PAN AAAAS2528L.However, the Assessing Officer observed that cash deposits amounting to 28,79,24,3531- had been made in the savings bank account maintained with Porbandar Commercial Co-operative Bank Ltd. Since, according to the Assessing Officer, the assessee failed to satisfactorily explain the source of the deposits, the entire amount of 28,79,24,353/- was treated as unexplained and added to the total income while framing the assessment under sections 147 read with 144 of the Act.
3. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who deleted the addition.
The relevant extracts from Ld.CIT(A)’s findings, as contained in Paragraph-6 to 7 of the Appellate Order, are reproduced hereunder:
“6. The appellant is a credit cooperative Society. In this case, there was no return of income u/s 139. The assessment was re-opened on the basis of information that the appellant deposited cash of Rs. 8,79,24,353 in a SB a/c No.4507 with Porbandar Commercial Co Operative Bank during the previous year.
6.1. The appellant has argued that this amount is part of its normal business and hence duly accounted. According to the appellant it has been issued a later PAN: AAAAS2S28L, under which it has filed the return of income for AY 2016-17 where this bank account is also considered. The PAN, AAAAS8104Q is not is use but the account with Porbandar Commercial Co Operative Bank is linked to the same.
6.2. The appellant has furnished statement of Bank account No. 4507 held with Porbandar Commercial Co Operative Bank This shows total deposits of Rs. 10,29,59,975 and cash deposit of Rs.8,79,24,353 during the year. The balance of this account is reflected in the balance sheet. The appellant has filed return of income for AY 2016-17 under the PAN: AAAAS2S28L. The gross income admitted is Rs.9,99,442. The total income is NIL after claiming deduction u/s 80P.
6.3. Since it is evident that the appellant has been issued with a PAN viz. AAAAS2S28L and has filed a valid return of income for AY 2016-17 wherein the impugned bank account is considered, the claim of the appellant that the credits in the bank account are part of its normal business and duly accounted is acceptable. Addition made u/s 68 may be deleted.
6.4. Grounds 2 to 5 are allowed. Grounds 1, 6 to 8 are general and consequential. These grounds are not separately adjudicated.
7. In the result, appeal is treated as allowed.”
4. Before us, the Ld. DR submitted that the Ld. CIT(A) erred in deleting the addition as the assessee had failed to establish the source of the cash deposits with supporting documentary evidence during the assessment proceedings.
5. Per contra, the Ld. AR supported the order of the Ld. CIT(A). He submitted that the assessment had been framed under sections 147/144 of the Act only because the notice was issued with reference to PAN AAAAS8104Q, which was never used by the assessee for filing its returns. In fact, the assessee had regularly filed its returns under PAN AAAAS2528L, and all transactions, including the savings bank account bearing No. 4507 with Porbandar Commercial Co-operative Bank Ltd., were duly reflected in the books of account and the return of income for the year under consideration. The Ld. AR drew our attention to page 74 of the paper book, wherein the balance in the said bank account as on 31.03.2016 was reflected at 230,52,086.70. He also referred to Schedule 5 of the audited balance sheet, wherein the same bank balance was disclosed. It was therefore submitted that the bank account in question had duly been disclosed in the books of account as well as in the return of income filed under PAN AAAAS2528L. The confusion arose only because two PANs had been allotted to the same assessee, and the duplicate PAN had inadvertently become linked with the bank account.
6. The Ld. DR, however, submitted that since the assessee possessed two PANs, the confusion had arisen on account of the assessee itself.
7. We have heard the rival submissions and perused the material available on record. We find that the assessee has placed on record a copy of the audited balance sheet, including Schedule-5, wherein the cash and bank balances have been disclosed. The balance in the savings bank account maintained with Porbandar Commercial Co-operative Bank Ltd., Porbandar Branch, stands reflected at 230,52,086.70/- as on 31.03.2016. The said bank account was duly disclosed in the audited financial statements as well as in the return of income filed under PAN AAAAS2528L.In these facts and circumstances, it cannot be said that the assessee had concealed the existence of the bank account or failed to disclose the transactions carried out therein. The entire controversy has arisen only because two PANs had been allotted to the same assessee. The assessee had consistently been filing the return of income under the regular i.e., PAN AAAAS2528L, and had also applied for cancellation of the duplicate PAN even before the initiation of the reassessment proceedings. We further find that in the assessment framed under PAN AAAAS8104Q, the bank account in question was linked, whereas in the return of income filed under PAN AAAAS2528L, the bank details and the corresponding bank balance were duly reflected. In these circumstances, we deem it appropriate to restore the matter to the file of the Assessing Officer with the directions that the Assessing Officer shall verify all the details relating to the account maintained with Porbandar Commercial Co-operative Bank Ltd., Account No. 4507, and examine whether the transactions appearing therein have already been disclosed in the return of income filed under PAN AAAAS2528L, if it is found that the transactions have already been reflected in the return of income filed under the regular PAN, the Assessing Officer shall also obtain and verify the names, addresses, and PAN details of the persons connected with the deposits made in the said bank account, if such verification is considered necessary. Further, the Assessing Officer shall verify the return of income filed by the assessee under the correct PAN and ascertain the status of the application for cancellation of the duplicate PAN. The Assessing Officer shall further examine whether any independent transactions were carried out under PAN AAAAS8104Q during the relevant previous year. If any such transactions are found and the same have not been reflected in the return of income filed under the regular PAN AAAAS2528L, the Assessing Officer shall take appropriate action in accordance with law to safeguard the interests of the Revenue. The Assessing Officer shall thereafter decide the issue afresh in accordance with law after providing the assessee with a reasonable opportunity of being heard. Accordingly, the appeal of the Revenue is allowed for statistical purposes. The order of the Commissioner of Income-tax (Appeals) is set aside, and the matter is restored to the file of the Assessing Officer in terms of the directions contained hereinabove.
8. In the result, the appeal filed by the Revenue is allowed, for statistical purposes.
Order pronounced in the open court on this 23rd day of July, 2026.
