2018 (7) TMI 1174 - HC - Income Tax

Addition u/s 68 - Held that - As noticing the fact that the assessees are Institutions in the Co-operative sector and taking note of its members who are from the general public as also from the marginalised sections, we are of the opinion that an opportunity could be afforded to the assessees to produce the details of deposits. To avoid any recalcitrant attitude by the assesses, we directed the learned Counsel to file an affidavit of undertaking, which has been done by the respective Secretaries in the three appeals before us. The affidavit categorically undertakes to produce the details of the deposits before the First Appellate Authority. Assessees would also produce any further details required by the First Appellate Authority or the Assessing Officer on a report being called for by the First Appellate Authority. The same shall be done within the time stipulated by the First Appellate Authority or the Assessing Officer on directions of the First Appellate Authority. In any event, we do not think that a blanket stay can be granted. Considering all and also the failure of the assessee s to produce the details at the first stage, we are of the opinion that the assessee s will have to make a deposit of 1% of the tax addition made under Section 68 of the Act within a period of one month from the date of receipt of a certified copy of this judgment. Writ appeals are disposed of with no observation on merits.

Issues:
1. Modification of interim order in a first appeal under the Income Tax Act, 1961.
2. Reduction of payment percentage from 50% to 20% in the conditional order.
3. Claim of impecunious circumstances and potential close-down by Cooperative Banks.
4. Treatment of deposits as unexplained cash credits under Section 68 of the Act.
5. Failure to produce details of depositors leading to adverse inference.
6. Argument for a blanket stay by the assessee's counsel.
7. Opposition to the blanket stay by the Standing Counsel.
8. Consideration of the appeal without requiring immediate payment.
9. Affidavit of undertaking to produce deposit details before the First Appellate Authority.
10. Requirement for the assessees to make a deposit of 1% of the tax addition within a specified period.

Analysis:
The judgment concerns the modification of an interim order in a first appeal under the Income Tax Act, 1961. The Cooperative Banks, as appellants, challenged the judgment of the Single Judge that reduced the payment percentage from 50% to 20% in a conditional order under Section 68 of the Act. The banks expressed concerns about their financial circumstances and the potential impact of paying substantial amounts. Assessments were conducted after issuing notices under Section 143 or Section 142 of the Act, where the banks failed to provide details of depositors, leading to the treatment of deposits as unexplained cash credits.

During the proceedings, the assessee's counsel advocated for a blanket stay and committed to furnishing all necessary details before the First Appellate Authority. It was argued that the lack of information provided earlier was due to ignorance. In contrast, the Standing Counsel opposed the blanket stay, alleging potential money laundering through Cooperative Banks and emphasizing the need for compliance with the demand raised, albeit subject to the appeal process.

The court considered the nature of the assessees as Cooperative Institutions serving the general public and marginalized sections. It directed the assessees to produce deposit details, with an affidavit of undertaking submitted by the Secretaries of the involved parties. The court mandated a deposit of 1% of the tax addition made under Section 68 within a month, without granting a blanket stay. The judgment emphasized the importance of producing necessary details promptly and allowed the appeal to proceed without being influenced by the earlier conditional order.

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