2022 (9) TMI 1607 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - cash deposited during the demonetisation period - HELD THAT - The assessee who is a registered Co-operative Credit Society cannot be considered to be the owner of the money, which only belongs to its members and same is retained by the assessee as its custodian. Further, from the perusal of the record we find that the assessee provided the details of cash deposited during the demonetisation period before the Assessing Officer in reply to the notices issued. From such reply filed by the assessee, forming part of the paper book, we find that assessee also provided name and address of the members who have deposited cash with the assessee during the year under consideration. Assessee has also provided the PAN number of some of its members. AO without commenting upon any of these details added the cash deposit made during the period of demonetisation as undisclosed income of the assessee. AO has wrongly made the addition under section 69A of the Act, in respect of the cash deposit made during the demonetisation period. Disallowance of deduction u/s 80P(2)(a)(i) - business of providing credit facilities to its members - HELD THAT - There is no allegation of Revenue that assessee doesn t satisfy the condition under section 80P(2)(a)(i). Only on the basis that return of income filed by the assessee was not in conformity with Rule 12 of the Income Tax Rules, 1962 and was filed beyond time, same was treated as invalid. In this regard, it is relevant to note that in order to claim deduction under section 80P, requirement to file the return of income on or before the due date specified u/s 139(1) of the Act is relevant only from assessment year commencing on or after 1st day of April 2018, as per section 80AC of the Act. Thus prior to its substitution by Finance Act, 2018 w.e.f. 01/04/2018, impediment provided under section 80AC was only confined to section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE - after the substitution vide Finance Act, 2018, section 80AC is now also applicable to provision of Chapter VI-A under the heading C. Deductions in respect of certain incomes , which includes section 80P of the Act. Additional restriction provided under section 80AC of the Act w.e.f. 01/04/2018, however, is applicable from assessment year commencing on or after 01/04/2018 i.e. assessment year 2018-19 and onwards. Thus, even after substitution, vide Finance Act, 2018, we are of the considered view that section 80AC is not applicable to the present case, as the year under consideration is assessment year 2017-18. Therefore, in absence of any other objection from the Revenue, in the present case, the assessee being a Cooperative Credit Society is entitled to claim deduction under section 80P(2)(a)(i) of the Act. AO is directed to delete the impugned addition and grant deduction under section 80P(2)(a)(i) of the Act to the assessee. Appeal by the assessee is allowed.

Summary

Issues Involved:
1. Adequate opportunity of being heard before passing order under section 144.
2. Validity of the return of income.
3. Addition of Rs. 27,82,985 under section 69A read with section 115BBE.
4. Disallowance of deduction under section 80P(2)(a)(i).
5. Confirmation of addition by the CIT(A) without considering detailed facts and misinterpretation of section 80AC.

Detailed Analysis:

1. Adequate Opportunity of Being Heard:
The assessee argued that the Assessing Officer (AO) erred in passing the order under section 144 without granting adequate opportunity of being heard, despite the details being furnished during the assessment. The Tribunal found that the AO issued notices under section 142(1) and 133(6) for furnishing details, which the assessee responded to. However, the AO did not find these details acceptable and proceeded with the order.

2. Validity of the Return of Income:
The AO treated the return of income as invalid because it was filed after the prescribed date under Rule 12 of the Income Tax Rules, 1962. The Tribunal noted that the return was filed on 08/08/2019, which was beyond the prescribed date of 22/02/2018, making it invalid.

3. Addition under Section 69A read with Section 115BBE:
The AO added Rs. 27,82,985 to the total income, including Rs. 18,07,000 as undisclosed income under section 69A and an estimated business income of Rs. 9,75,985. The Tribunal found that the actual cash deposit during the demonetization period was Rs. 17,90,500, not Rs. 18,07,000, and this amount was fully accounted for in the audited books. The Tribunal held that the provisions of section 69A apply only if the assessee is found to be the owner of the money, which in this case belonged to the members of the Co-operative Credit Society. Therefore, the addition under section 69A was incorrect.

4. Disallowance of Deduction under Section 80P(2)(a)(i):
The AO disallowed the deduction under section 80P(2)(a)(i) due to the invalid return. The Tribunal clarified that the restriction under section 80AC, which mandates filing the return on or before the due date specified under section 139(1), applies only from the assessment year 2018-19 onwards. Since the assessment year in question is 2017-18, the assessee is entitled to the deduction under section 80P(2)(a)(i).

5. Confirmation of Addition by CIT(A):
The CIT(A) confirmed the addition without considering the detailed facts submitted by the assessee and misinterpreted section 80AC. The Tribunal noted that the CIT(A) upheld the AO's decision based on the invalid return and the estimated business income. However, the Tribunal found that the CIT(A) failed to consider the correct interpretation of section 80AC and the valid deductions under section 80P(2)(a)(i).

Conclusion:
The Tribunal allowed the appeal by the assessee, directing the AO to delete the impugned addition and grant the deduction under section 80P(2)(a)(i). The order was pronounced in the open Court on 05/09/2022.