2014 (10) TMI 1004 - AT - Income Tax

Unexplained cash credits u/s 68 - As per AO identity of creditors, capacity of creditors to advance the money and genuineness of transaction were not proved during the assessment proceedings - CIT-A deleted the addition - HELD THAT - When the member of co-operative society deposits money in his account maintained with the co-operative society, the money does not become unexplained cash credit of the society, unless the identity of the member is not proved. In the case on hand no such evidence has been gathered by the AO. On the other hand the assessee has given evidence as to the identity of the member. The factual finding of Ld. CIT(A) could not be controverted by the DR. Hence, we have to uphold these factual findings of Ld. CIT(A) In view of the above discussion and in view of the fact Ld. Departmental Representative could not controvert the factual recording made by the first appellate authority and as the assessee has filed all necessary evidence before the revenue authorities, we uphold the order of first appellate authority and dismiss this ground of revenue. Disallowance u/s 80P as against the denial of deduction u/s 80P(2)(i) - AO rejected the claim for the reason that the books of accounts have been rejected by him - CIT(A) has reversed this decision - HELD THAT - Under these circumstances we uphold the finding of the first appellate authority that deduction u/s 80P(2)(i) is to be granted. - Decided against revenue

Summary

Issues:
1. Addition of unexplained cash credits under section 68 of the Income Tax Act, 1961.
2. Rejection of deduction under section 80P(2)(i) of the Income Tax Act, 1961.

Issue 1: Addition of Unexplained Cash Credits under Section 68:

The appeal was against the Commissioner of Income Tax (Appeals) order deleting the addition of Rs. 3,00,63,000 made on account of unexplained cash credits under section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) found cash deposits in the bank accounts of the cooperative society but the society failed to explain the source of the deposits, including the identity of creditors, capacity of creditors, and genuineness of the transactions. The AO treated the unexplained cash deposits as income under section 68. However, the first appellate authority deleted the addition based on the society's explanation and evidence provided. The President of the society filed an affidavit denying the AO's allegations, and after considering all arguments and evidence, the Commissioner of Income Tax held that the source of cash deposits was adequately explained. The society, being a thrift & credit cooperative society, received cash from members against various transactions, and the AO's discrepancies were adequately addressed. The Commissioner concluded that the addition under section 68 should be deleted, and the factual findings were upheld as the society provided evidence of the members' identities.

Issue 2: Rejection of Deduction under Section 80P(2)(i):

The AO rejected the society's claim for a deduction under section 80P(2)(i) due to the rejection of its books of accounts. However, the first appellate authority reversed this decision, allowing the deduction under section 80P(2)(i) to be granted. The books of accounts were accepted, and the factual findings made by the first appellate authority were not challenged by the revenue. As a result, the appeal of the revenue was dismissed, upholding the order of the first appellate authority regarding the deduction under section 80P(2)(i).

In conclusion, the appellate tribunal upheld the first appellate authority's decision to delete the addition of unexplained cash credits under section 68 and allow the deduction under section 80P(2)(i) for the cooperative society. The factual findings and evidence provided by the society supported the conclusions reached by the authorities, resulting in the dismissal of the revenue's appeal.