2022 (9) TMI 1606 - AT - Income Tax

Disallowance of deduction claimed u/s. 80P proportionately - HELD THAT - We find merit in the prayer of the assessee since the issue of deduction u/s 80P(2)(a)(i) of the Act requires fresh examination in the light of decision rendered in the case of Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT , we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O for examining it afresh. Addition made u/s. 68 r.w.s. 115BBE - money deposited into assessee s bank during demonetisation period - AR submitted that it accommodated its members by extending its services by accepting the money deposited by them - HELD THAT -The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. Assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Ground allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of deduction claimed u/s 80P(2)(a)(i) of the Act.
2. Addition made u/s 68 r.w.s. 115BBE in respect of money deposited during the demonetization period.
3. Jurisdiction u/s 263 of the Act to revise the assessment order.

Detailed Analysis:

Disallowance of Deduction u/s 80P(2)(a)(i):
The assessee, a cooperative credit society, claimed a deduction u/s 80P(2)(a)(i) of Rs. 41,01,356/-. The AO disallowed this claim, treating the assessee as a cooperative bank under section 80P(4) and referencing the Supreme Court's decision in Citizen Co-operative Bank. The CIT(A) upheld this disallowance.

The Tribunal found merit in the assessee's argument that the issue requires re-examination in light of the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. It set aside the CIT(A)'s order on this issue and remanded it back to the AO for fresh examination based on the guidelines provided in the Mavilayi case.

Addition u/s 68 r.w.s. 115BBE:
The AO added Rs. 43,10,760/- to the assessee's income u/s 68 r.w.s. 115BBE, considering the deposits of Specified Bank Notes (SBNs) during the demonetization period as unexplained cash credits. The assessee argued that these deposits were made by its members and that it merely acted as an intermediary.

The Tribunal noted that the AO should have verified the cash book and confirmations provided by the assessee. It emphasized the importance of following the standard operating procedures issued by the CBDT for assessing such cases. The Tribunal remanded the issue back to the AO to verify the details and evidences provided by the assessee, directing the AO to consider the claim in accordance with the law and to grant the assessee a proper opportunity of being heard, including a physical hearing if necessary.

Jurisdiction u/s 263:
The PCIT invoked jurisdiction u/s 263 to revise the assessment order, arguing that the AO's order was erroneous and prejudicial to the interests of the revenue. The assessee contended that the assessment order had already merged with the appellate order and that there was no error warranting revision.

The Tribunal noted that since the issues arising from the original assessment proceedings were remanded back to the AO, the appeal against the 263 order became academic. It upheld the 263 order passed by the PCIT, keeping all contentions open.

Conclusion:
- The appeal in ITA No. 739/Bang/2021 was allowed for statistical purposes, with the issues remanded back to the AO for fresh examination.
- The appeal in ITA No. 361/Bang/2022 was dismissed as not pressed.
- The Tribunal emphasized the need for a proper opportunity of being heard and verification of evidences in line with the applicable instructions.