Mere Acceptance of SBN During Demonetization cannot be Treated as Unexplained Cash Credit when Cooperative Society Acts as Intermediary: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench, held that cooperative societies accepting the Specified BankNotes (SBNs) during the demonetization period cannot be treated as unexplained cash credit when the society acts as an intermediary.

The appellant, Income Tax Officer filed an appeal against the order passed by Commissioner of Income Tax (Appeals) CIT(A).

The respondent, Chikhodara Sewa Sahakari Mandali Ltd, is a cooperative society registered under the Gujarat Cooperative Societies Act, having more than 1,937 members. The society was engaged in implementation of Kisan Credit Card (KCC) scheme, under this scheme, agricultural loans are provided to the farmers at concessional rates based on the size of their agricultural land holdings.

Under this scheme, funds were routed from NABARD to District Cooperative Banks, which in turn transferred the funds to the respondent society. The society acted as an intermediary for disbursement and recovery of loans from farmers.

During the demonetization period, the respondent accepted loan repayments from farmers in the form of Specified Bank Notes (SBNs) for ₹93,75,500.

The Assessing Officer (AO) treated the SBNs as unexplained cash credit and made an addition of ₹93,75,500 to the income of the respondent. Upon appeal, CIT(A) deleted the addition.

The counsel representing the appellant, Kamal Deep Singh, contended that the acceptance of demonetization currency was illegal and CIT(A) has erred in deletion of addition of ₹93,75,500.

Divatia, representing the respondent, submitted that the cash received by the respondent was fully explained and recorded and there was no benefit from the deposits. It was also submitted by the respondent counsel that no defect in the books of account was pointed out by the AO.

Siddhartha Nautiyal, Judicial Member and B.R.R. Kumar, Vice President, noted that the AO has not disputed the identity of the members, the genuineness of the transactions and the fact that the receipts were recorded in the regular books of account.

It was held by the tribunal that once the assessee has furnished complete details, the burden shifts to the Assessing Officer, and mere SBNs accepted during the demonetization period cannot be treated as unexplained income of the assessee when the source, purpose, and recipients are fully explained.

Accordingly, the appeal of the revenue was dismissed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates