2023 (8) TMI 1274 - AT - Income Tax

Unexplained u/s 68 - cash deposits during the demonetisation period - AO treating cash receipts u/s 68 and charging it u/s 115BBE at 60 percent tax with 25 percent surcharge which was brought by amendment on 15/12/2016 (retrospective amendment-after commencement of assessment year 2017-18) - HELD THAT - AO accepted that it was money deposited by the members and noted that the assessee had brought the entries in its books of account, therefore section 68 will apply and accordingly treated it as income u/s. 68. There is no doubt that the assessee has satisfied the identity of the deposits, who are members of the society and genuineness of the transactions because the amounts have been deposited in the members accounts only. If the AO had any doubts that the assessee has not satisfied the ingredients of section 68, he could have asked further details from the assessee, but the AO has not done the same, which clearly shows that the assessee has discharged its duty to satisfy the requirement of section 68. We further note that the SBNs have been deposited in the members accounts, accordingly, the assessee did not get any extra benefit as observed by the AO which was treated as income us 69A - In view of this, the provisions of section 68 is not applicable in the present facts of the case and the AO without discussing in detail has made addition u/s. 68 which is not proper. Therefore the addition is deleted. Appeal by the assessee is allowed.

Summary

Issues:
The main issue in this case is the addition of cash deposits during the demonetization period.

Details:
The appellant, a cooperative society, accepted cash deposits from members during demonetization. The Assessing Officer (AO) added the cash deposits as unexplained income under section 68 of the Income Tax Act, 1961, and taxed it at a special rate under section 115BBE. The AO contended that the society was not authorized to collect old currency notes (SBNs) as per government notifications. The AO did not seek further information despite the society providing details of depositors and transactions. The AO's addition under section 68 was upheld by the CIT(Appeals).

On appeal, the appellant argued that the cash deposits were collected in the ordinary course of business and deposited into members' accounts. The appellant complied with section 68 requirements by providing necessary details. The appellant also highlighted that it stopped accepting SBNs after relevant notifications were issued. The appellant relied on previous judgments to support its arguments.

The Tribunal noted that the society dealt only with its members and accepted cash deposits during demonetization for various accounts. The AO's addition under section 68 was deemed improper as the society satisfied the identity and genuineness of the deposits. The Tribunal found that the society did not gain any extra benefit from the deposits and deleted the addition under section 68.

Therefore, the appeal by the appellant was allowed, and the addition of cash deposits during demonetization was deleted.