ITAT Sets Aside CIT(A) Order on Kochin Co-op Society's Cash Deposits, Demands Fresh Review [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) has set aside the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in the case of Kochin Co-operative Society Ltd. regarding the unexplained cash deposits made by the society. The case pertains to the Assessment Years 2013-14 and 2014-15.

The Revenue, represented by the Income Tax Officer, had filed appeals against the CIT(A)'s orders dated 20th July 2023 and 25th July 2023. The appellant contended that the CIT(A) had erred in accepting the explanation provided by the respondent society regarding the source of the cash deposits, which amounted to Rs. 2,39,82,500. The assessing officer had initiated proceedings under Section 148 of the Income Tax Act, suspecting that income had escaped assessment. Subsequently, a best judgment assessment was conducted under Section 144 due to the failure of the society to file a return of income under Section 139(1).

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The Assessing Officer treated the cash deposits as unexplained income and also denied the deduction under Section 80P of the Income Tax Act. However, the CIT(A), while confirming the denial of the deduction, accepted the society’s explanation regarding the source of the deposits. The respondent explained that the deposits were from the business activities of a gas agency, medical store, and credit facilities provided to its members. Based on these submissions, the CIT(A) had granted relief to the society in relation to the unexplained cash credit.

In its order, the ITAT found that the CIT(A) had accepted the society’s explanation and evidence without seeking a remand report from the Assessing Officer, as required under Rule 46A of the Income Tax Rules. The ITAT observed that the CIT(A) should have provided the Assessing Officer with an opportunity to rebut the additional evidence submitted by the respondent. Therefore, the ITAT set aside the CIT(A)’s order and remanded the case for fresh review.

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The matter has been sent back to the CIT(A) for a fresh hearing, with directions to afford the Assessing Officer an opportunity to address the additional evidence and books of account submitted by the society. The appeals filed by the Revenue were partly allowed, and the matter is expected to be resolved in accordance with the provisions of the law.

To Read the full text of the Order CLICK HERE

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