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TMI Blog2019 (7) TMI 1731X X X X Extracts X X X X X X X X Extracts X X X X ..... gned additions cannot be said to be business receipts. Merely because the assessee is running a business in which are found certain unexplained cash credits, it does not necessarily follow that such credits represent suppressed business receipts and there would be no error of law in regarding the unexplained cash credits as income of the assessee from some independent and unknown sources unless there are strong reasons for connecting the unexplained cash credits with known sources of income of the assessee, there would be no alternative to treating them as income from other sources. Reliance is also placed on the judgment of Deviprasad Viswanath Prasad [ 1968 (8) TMI 5 - SUPREME COURT ] wherein it was held that when the assessee pleads that the impugned cash credits came out of suppressed profit, it is for him to prove that it is so. If these receipts are allowed by treating as business receipts, then the assessee will be entitled to set off of business expenditure against these receipts which is not permissible. The assessee s business is to accept deposits and lend advance inter alia with other activities. Being so, we are inclined to hold that the assessee is not entitled for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. F. Section 80P clearly enables the co-operative society to claim gross total income and includes any income referred to in sub-section (2) as allowable deductions, As per clause (i) (a) of sub-section (2) a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is eligible for deduction. The claim of the appellant is fully justified going by the provision and decision rendered against the appellant is wholly unsustainable. G. The estimation of income alleging deposit receipts are unexplained income taxable under Section 68 of the Income Tax Act, 1961 is highly unreasonable and illegal. Since the said receipts form part of the banking activities, it would come under the purview of deduction under Section 80P. It can be seen that the deposit register maintained by the appellant, as per the instructions from the Registrar of Co-operative Societies would reveal the details of income and the allegation that it is unexplained is highly vitiated and unreasonable. 3. Ground Nos. A, B and D were not pressed as they were general in nature and hence, they are dismissed as not pressed 4. Regarding Ground Nos. C and F, the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered u/s 80P(2). It was submitted that the Supreme Court in the case of M/s. Totgars Cooperative Sales Society Ltd cited supra was dealing with the case where the assessee apart from providing credit facilities to its members was also marketing agricultural produces grown by its members and sale consideration received from the marketing of agricultural produces of its members was retained by the assessee in that case and was invested in short term deposits and therefore, such interest income is liable to be taxed only u/s 28 of the Act and not u/s 56 of the Act. It was submitted that such amount retained by the assessee's society was shown as a liability in the balance sheet and therefore, to that extent interest income cannot be attributable neither to the activity mentioned in section 80P(2)(a)(i) or u/s 80P(2)(a)(iii). Hence, it was submitted that the judgment of the Supreme Court, cited supra would not apply to them. Thus, it was argued before the CIT(A) that the interest income which was brought to tax as income from other sources cannot be sustained and need be deleted. 5.1 The CIT(A) observed that the assessee is basically a Cooperative Society and is obligated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety. An income, which is attributable to any of the specified activities in section 80P(2) of the Act, would be eligible for deduction. The word "income" has been defined under section 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in section 80P(2) of the Act". The CIT(A) observed that the assessee regularly invested funds not immediately required for business purposes and interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". According to the CIT(A), such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members and when the assessee provides credit facilities to its members, it earns interest income. From the above findings of the Supreme Court, cite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 23,83,514/- shall necessarily be deducted as ruled by the Karnataka High Court in the case of Totgars Co-op. Sale Society Ltd vs Income Tax Officer (231 Taxmaan 794) since the entire expenditure incurred by the assessee Society had already been debited in the profit and loss account and nothing had been left out so as to claim the same at later stage in the event of taxing portion of its income under the head income from other sources. It is not the case of the assessee that they have maintained two different sets of books of account i.e one for regular business income and another for income from other sources. It is also not the case of the assessee that they have informed to the authority concerned that they have debited in the profit & loss account only the expenditure incurred for earning the interest income which they have earned from giving loans and advances to its members and no part of the expenditure incurred for earning the interest income which the Assessing Officer has treated as interest income from other sources, has ever been debited to the profit & loss account. It has never been the case of the assessee that they have not at all claimed the expenditure c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is applicable to deduction u/s. 80P(2)(d) also. Thus, this ground of appeal of the assessee is partly allowed for statistical purposes. 9. The next ground Ground No. G is with regard to estimation of income as unexplained income taxable u/s. 68 of the Act. 10. The brief facts of the case are that on verifying the financial statement audited by the Co-operative Department, the Assessing Officer noticed that there was an increase in fixed deposits received by assessee in cash during the year under consideration to the tune of ₹ 2,95,51,858/-. The assessee was requested to furnish the details of such deposits received in cash to examine the correctness of the claim of interest paid. However, in the absence of the further details furnished by the assessee, the Assessing Officer relying on the decisions of the Hon'ble Supreme Court in the cases of A.Govindarajalu Mudaliar vs C!T and Kale Khan Mohammed Hanif vs CIT, brought to tax the said amount of ₹ 2,95,51,858/- u/s 68 of the Act as unexplained cash credits. 11. Before the CIT(A) , it was submitted that the assessee being a co-operative society was keeping proper books of account which were subjected to audit as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction u/s 80P(2)(a)(i) of the Act. According to the CIT(A), cash deposits received by the assessee during the year under consideration was nothing to do with the business income which alone can be considered for the exemption to be claimed u/s 80P(2)(a)(i), earned by the assessee and the unexplained cash credits which was brought to tax u/s 68 should necessarily be treated as income to be taxed but not as business income to be exempted u/s 80P(2)(a)(i). In view of all the above, the CIT(A) confirmed the decision of the Assessing Officer in making addition u/s 68 of the Act in the absence of explananation about the nature and source of the cash deposits received during the year under consideration. The CIT(A) relied on the latest decision of the Hon'ble High Court of Kerala in the case of CIT vs. Universal Empire Educational Society (393 ITR 502) wherein the income which was brought to tax u/s 68 of the Act in the absence of establishing the identity of the creditors, genuineness of the transactions and the credit worthiness of the creditors was confirmed. 12. Against this, the assessee is in appeal before us. 13. The Ld. DR relied on the order of the CIT(A). 14. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with regard to profit/grain derived from business and unless it is proved that it is from business, deduction u/s. 80P cannot be granted. The contention of the assessee is not acceptable in view of the clear provisions of section 80P of the Act and the impugned additions cannot be said to be business receipts. 14.2 This is because the source of income is income from other sources and the Department does not have to locate any particular source of income. It is pertinent to place reliance on the judgment of jurisdictional High Court in the case of G.M. Chenna Basappa vs. CIT (34 ITR 576) (AP) wherein it was held that addition on account of unexplained cash credits which is altogether is from an unknown source and they are legally sustainable additions. 14.3 The Hon'ble Supreme Court also held in the case of CIT vs. Orissa Corporation Pvt. Ltd. (159 ITR 78) held that although section 68 provides that the previous year for which the books of account are maintained may be taken as the previous year for assessing the cash credit, it does not further provide that cash credit should necessarily bo deemed to be the profit of the business for which the books are maintained. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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