Mutual Cooperative Society May Accept Deposits and Lend Loans to its Own Members: ITAT [Read Order]
ITAT held that the AO had overlooked the amount transacted by the cooperative society. The tribunal reiterated the functions of a mutual cooperative society.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, held that mutual cooperative societies may accept deposits and lend loans to its own members.
The assessee in the present case filed an appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]/National Faceless Appeal Centre (NFAC) for the Assessment Year 2012-13.
The case was reopened under Section 147 of theIncome Tax Act (the Act) and the assessee had not filed a return for AY 2012-13. The source of cash deposit was unexplained and a notice under Section 148 of the Act was issued. The case was transferred to the ACIT, New Delhi. In response, the assessee e-filed return on 15.10.2019 declaring total income NIL. The reasons for reopening the case were communicated on 18.10.2019. In response, the assessee submitted documents and supporting material.
It is to be noted that the assessee is a credit society whose business is to accept deposits from members and give various types of loans to members. The assessee was asked to submit details of loans and advances amounting to INR 3,91,71,181/- However, the Assessing Officer (AO) observed that the assessee had not provided identity proof or confirmations to prove the creditworthiness of the persons who had made these deposits, loans and advances. A show cause notice (SCN) was accordingly issued to the assessee on 26.12.2019.
Since no documentary evidence was provided for justifying the amount, the AO made the addition of INR 3,16,38,935/- towards unexplained term deposit liability and INR 1,51,25,143/- towards unexplained cash deposits.
Aggrieved with the order, the assessee appealed before the NFAC and filed submissions including additional evidences under Rule 46A of the IT Rules. A remand report was requested on 06.03.2024 and filed on 02.04.2024. After considering this report, the CIT(A) dismissed the grounds raised by the assessee as creditworthiness of the depositors have not been established. For this, bank statements had to be submitted as evidence.
Still aggrieved with the order by the CIT(A), the assessee appealed to the ITAT. The counsel for the assessee-appellant pressed on the certificate issued by the Registrar of Cooperative Societies which lists the members of the credit cooperative and highlight the workings of the society. The opposing counsel argued on points raised by the lower authorities.
The tribunal observed that the AO had overlooked the fact the appellant had only transacted to the extent of INR 94,78,185/- in the AY in question. ITAT confirmed the status of the society which had been registered since 2006. Finally, the two member bench of Vimal Kumar (Judicial Member) and S. Rifaur Rahman (Accountant Member) allowed the appeal on the grounds raised by the assessee.
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