Chandraprabha Co-operative Credit Society Ltd. vs. Income Tax Officer
Court/Bench:
Income Tax Appellate Tribunal (ITAT), Mumbai Bench
Introduction:
The case revolved around cash deposits made by the assessee, Chandraprabha Co-operative Credit Society Ltd., during the demonetization period (November–December 2016). The Assessing Officer (AO) treated these deposits as unexplained money under Section 68 of the Income Tax Act, alleging that the source of cash was not properly explained. The credit society, however, contended that the deposits were part of its regular business activities, consisting of member savings and loan repayments made in old currency notes before the permissible deadline.
Facts of the Case:
- The assessee was a registered co-operative credit society engaged in accepting deposits and granting loans to its members.
- During demonetization, the society had deposited a significant amount of Specified Bank Notes (SBNs) into its bank account.
- The AO questioned the genuineness of these deposits, doubting whether such cash actually came from legitimate member transactions.
- Despite explanations and records produced by the assessee (including ledgers of members and transaction registers), the AO made an addition under Section 68, treating the deposits as unexplained.
Tribunal’s Observations:
- The ITAT noted that the assessee maintained proper books of account, recording deposits from its members and corresponding withdrawals and repayments.
- The source of funds was duly supported by member-wise details, and the pattern of deposits during the demonetization period was consistent with regular business activity.
- The AO and CIT(A) failed to disprove the assessee’s explanation or identify any fictitious or non-existent members.
- The Tribunal observed that once the assessee establishes the source of cash and maintains verifiable records, the onus shifts to the Revenue to prove the explanation false — which was not done in this case.
Judgment:
The ITAT deleted the addition, holding that:
“The source of cash deposits was satisfactorily explained as arising from genuine member transactions. In absence of any contrary evidence from the Revenue, the addition under Section 68 is unjustified.”
Accordingly, the appeal of the assessee was allowed, and the cash deposit addition during demonetization was deleted.
Key Takeaway:
This decision reinforces that co-operative credit societies engaged in genuine member-based banking activity cannot be penalized merely for depositing old currency notes during demonetization, as long as proper records and sources are demonstrated.