2021 (2) TMI 611 - AT - Income Tax

Assessment of trust - Liability of member - Protective addition in the hands of the assessee society - addition for unexplained investment u/s 69 of the Act made by the Ld. A.O for the unexplained cash deposited in the bank account of the society - HELD THAT - Firstly the action of Ld. CIT(A) deleting the protective addition made in the hands of the society was not justified since the transactions of cash deposits and cheque issuance were carried out through banking account of the registered co-operative society running for last many years ignoring the fact that the society is a separate legal entity having its Permanent Account Number, secondly Ld. CIT(A) erred in confirming the substantive addition in the hands of the President of the society Mr. Manish Kothari who was merely an office bearer appointed by the Board Members of the society providing honourable services and there is no iota of evidence to show the nexus of the alleged transaction carried out through bank account held in the name of the society with any of the office bearer and thirdly as regard to quantum of addition to be confirmed in the hands of the assessee society the same should be higher of the two amounts namely service charge @₹ 100 per lakh (0.1%) of the alleged cash deposited in the bank account or the yearwise peak balance of all the bank accounts of the society . This exercise should be carried out at the end of the Ld. A.O in order to make necessary addition in the hands of th society. In the result common issue raised by the revenue in the case of the assessee society through partly allowed. Unexplained investment u/s 69 - cash deposit in the bank account of the society of which the assessee is holding the post as President - HELD THAT - As already dealt with this issue and have held that firstly the addition if any to be made for the alleged cash deposits in the bank account of the society are to be made only in the hands of the society and not in the hands of the office bearer namely Shri Manish Kothari since the society is a seperately legal entity having its Permanent Account Number and working under the registered bye laws since last many years. Secondly we have held that the alleged transactions of cash deposits and corresponding entries of cheque issued were not in the nature of any business activity but it was a mere facilitation services being provided by the society to its members and other persons in lieu of service charge at ₹ 100/- per lakh and thirdly the addition for the alleged cash deposits should be higher of the two namely peak bank balance during the year or the services charged at ₹ 100 per lakh on the alleged cash deposit during each of the year. In view of our above findings we hereby hold that all the additions made on substantive basis in the hands of the assessee u/s 69 of the Act for unexplained cash deposits deserves to be deleted. We accordingly order so and delete the impugned addition made by Ld. A.O for unaccounted investment made u/s 69 in the hands of assessee namely Manish Kothari. Addition made on the basis of loose paper found during the course of survey at the assessee s premises - survey conducted at the office premises of the society u/s 133A - HELD THAT - issues raised by the assessee in the grounds of appeal for Assessment Year 2012-13 to 2015-16 are restored to Ld. CIT(A) for afresh adjudication after affording proper opportunity of being heard to the assessee and directions are also given to the assessee to not to take uncessary adjournments and should file necssary documents in support of its contention with regard to the impugned additions. In the result appeals of the assessee for Assessment Year 2012-13 to 2015-16 are partly allowed for statistical purposes. Loose papers relied to make addition of element of income i.e. brokerage - No addition seems to be called for however in the set aside proceedings Ld. CIT(A) may decide in accordance with law after giving reasonable opportunity of being heard to the assessee to confirm the addition for the relevant assessment year to which the transaction pertains and also decide whether the addition should be made for the amount mentioned in the alleged document or the element of income i.e. brokerage as contended by Ld. Sr. Counsel for the assessee. Addition on account of brokerage/commission - HELD THAT - We observe that the additions were made on the basis of statement given during the course of survey and Ld. A.O applied brokerage of 3% on the transaction appearing in the loose papers. Assessee has contended that his share of income is hardly 0.67% to 1% as there are three brokers namely one to represents the seller, second who represents the buyer and third the appellant who on behalf of the broker and buyer communicates with the broker of the seller. Though there seems merits in the contention of the Sr. Counsel for the assessee but since we have already set aside the similar issue raised in Ground No.4 for Assessment Year 2008- 09 we deemed it proper to set aside this common issue of computation of brokerage/ commission also to Ld. CIT(A) to decide about the final rate of brokerage to be applied which can range anywhere between 0.67% to 3%.

Summary

Issues Involved:
1. Legality of reopening assessments for multiple assessment years.
2. Substantive addition for unexplained investment under Section 69 of the Income Tax Act.
3. Additions based on documents found during the survey under Section 133A.
4. Calculation of brokerage/commission income.
5. Consequential interest under Sections 234A and 234B.

Detailed Analysis:

1. Legality of Reopening Assessments:
The assessee challenged the reopening of assessments for AY 2008-09 to 2015-16. However, the legal ground challenging the reopening was not pressed by the assessee. Consequently, this issue was dismissed as not pressed.

2. Substantive Addition for Unexplained Investment:
The substantive additions made under Section 69 were based on cash deposits in the bank accounts of a cooperative society, Shree Vardhman Sakh Sahakarita Maryadit. The Tribunal held that:
- The cooperative society is a separate legal entity with its own PAN and should be taxed for the cash deposits in its bank accounts.
- The addition should be the higher of either the service charge at ?100 per lakh (0.1%) of the cash deposited or the year-wise peak balance in the society's bank accounts.
- The substantive additions in the hands of the society’s president, Shri Manish Kothari, were deleted.

3. Additions Based on Documents Found During Survey:
The Tribunal examined various documents impounded during the survey and made the following observations:
- Assessment Year 2008-09:
- Loose Paper BF-2: No addition was warranted as the transactions fell in FY 2014-15. The issue was set aside for fresh adjudication.
- Loose Paper BF-5: Dates on the document did not pertain to AY 2008-09. The issue was set aside to determine the correct assessment year and the quantum of addition.
- Loose Paper BF-8: The addition of ?19,854 was confirmed as it was not pressed by the assessee.
- Assessment Years 2009-10 to 2011-12:
- Additions were made based on the brokerage/commission income calculated at 3%. The Tribunal noted that the actual brokerage rate could be between 0.67% to 1% and set aside the issue for fresh adjudication to determine the correct rate.

4. Calculation of Brokerage/Commission Income:
The Tribunal observed that the brokerage rate applied by the AO at 3% was disputed by the assessee, who claimed the rate should be between 0.67% to 1%. The issue was set aside for fresh adjudication to determine the accurate brokerage rate.

5. Consequential Interest Under Sections 234A and 234B:
The Tribunal noted that the issues relating to interest under Sections 234A and 234B were consequential and did not require separate adjudication.

Conclusion:
The Tribunal's decision involved setting aside several issues for fresh adjudication, particularly those related to the correct assessment year for certain transactions and the accurate calculation of brokerage/commission income. The substantive additions made under Section 69 in the hands of Shri Manish Kothari were deleted, and the focus was shifted to taxing the cooperative society as a separate legal entity. The appeals were partly allowed for statistical purposes.