2023 (10) TMI 698 - AT - Income Tax

Cash deposited during the demonetization period unexplained - huge credits appearing in the bank accounts of the assessee - HELD THAT - As during the assessment stage, the assessee has submitted enough documents and evidences to prove the cash deposit, such as, Copy of PAN, Copy of bank account, Copy of first page (BDCC Bank Dena Bank account), Certificate of incorporation, Audit report for A.Y. 2017-18, Members list in Mandli and written submission to explain the source of the source. AO did not find any fault in these documents and evidences so submitted by the assessee, except to say that explanation of the assessee is not acceptable. AO has not refuted or discredited these evidences and documents. AO does not mention why he is not accepting these evidences. On the contrary, the AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Assessee-trust has received subscription/donation and the same was amount collected/received from its members. As stated that this Mandali has 3150 women members and each member has taken share of Rs. 100/- to Rs. 500/- according to their capacity. Thereafter, these savings are collected by the President and Secretary. The amount so collected is deposited in the Bank Account. Assessee (Mandli) provide loan facilities to its members @ 12% and the dividend is distributed to its member annually during the Annual General Meeting of every year. Therefore, based on these facts and circumstances, delete the addition. Assessee appeal allowed.

Summary

Issues Involved:
1. Adequate opportunity of being heard before finalizing assessment under section 144.
2. Addition under section 69A for cash deposits during the demonetization period.
3. Non-service of notices under section 142(1).
4. Time provided for adjournment request.

Summary:

Issue 1: Adequate Opportunity of Being Heard
The assessee argued that the CIT(A), NFAC, confirmed the assessment under section 144 without providing adequate opportunity for hearing. The assessment was finalized on 27.11.2019, although the limitation period expired on 31.12.2019. The Tribunal noted that despite the assessee submitting written submissions and documents during the assessment proceedings, the assessment was completed under section 144.

Issue 2: Addition under Section 69A
The CIT(A) confirmed the AO's addition of Rs. 41,31,910/- under section 69A, treating it as unexplained money deposited during the demonetization period. The assessee, a co-operative society for Tribal women, maintained that the cash deposits were from member savings, duly recorded in audited books of accounts. The Tribunal found that the AO accepted cash deposits of Rs. 29,99,200/- and other credits of Rs. 17,34,460/- as genuine but disputed the demonetization period deposits. The Tribunal held that the AO failed to provide cogent evidence to dispute the deposits and deleted the addition.

Issue 3: Non-service of Notices under Section 142(1)
The assessee contended that notices under section 142(1) were not properly served. The Tribunal noted the procedural lapses but focused on the substantive issue of unexplained cash deposits.

Issue 4: Time Provided for Adjournment Request
The assessee argued that only six days were given in response to an adjournment petition seeking a month. The Tribunal did not specifically address this procedural issue, focusing instead on the substantive merits of the case.

Conclusion:
The Tribunal allowed the appeal, deleting the addition of Rs. 41,31,910/- under section 69A, and emphasized that the AO did not provide sufficient reasons to reject the assessee's evidence and explanation regarding the cash deposits. The order was pronounced on 12/10/2023.