9911796707
TMI Blog2025 (4) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... together and are being decided by way of this consolidated order. With the consent of the parties, the cross-appeals for the assessment year 2016-17 is taken up as a lead case and the decision rendered therein shall apply mutatis mutandis to the cross-appeals for the assessment years 2017-18 and 2018-19. ITA no.1725/Mum./2023 (Assessee's appeal) ITA no.2076/Mum./2023 (Revenue's appeal) Assessment Year: 2016-17 3. In its appeal for the assessment year 2016-17, the assessee has raised the following grounds :- "The following grounds of appeal are independent of, and without prejudice to one another- 1. It is submitted that in the facts and the circumstances of the case, and in law, the approval granted under section 153D by the competent authority is mechanical and without application of mind. 2 It is submitted that in the facts and the circumstances of the case, and in law, the Assessing Officer erred in issuing a notice dated 27.12.2019 directing the appellants to get the accounts audited under section 142(2A) at the fag end of the assessment proceedings which were getting barred by limitation on 31.12.2019 and without disposing of the objections raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Disallowance of provision of standard asset Rs 50,00,000 5.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of provision of standard assets of Rs 50,00,000. 5.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of provision of standard assets without appreciating the facts of the case and hence, pray that the impugned disallowance of Rs 50,00,000 ought to be deleted. 6. Disallowance of prior period expenses Rs 1,10,14,122 6.1. The CIT(A) erred in sustaining disallowance made by the Assessing Officer of prior period expenses of Rs 1,10,14,122. 6.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of prior period expenses without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 1,10,14,122 is bad in law and ought to be deleted. 7. Disallowance under section 40A(3) of Rs 1,39,81,267 7.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer under section 40A(3) aggregating Rs 1,39,81,267 being the rent expenses incurred during the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/co-operative banks, for seven years were found, the AO considered it appropriate that the accounts of the assessee for the assessment years 2012-13 to 2018-19 be audited as provided in section 142(2A) of the Act. In response to the aforesaid show cause notice, we find that the assessee vide its reply dated 24/12/2019 though agreed that the examination of money trail is a complex investigation, however submitted that there are no complexities in its accounts which will require Special Audit. The assessee further submitted that it has provided various details to the Department during the ongoing assessment proceedings and has been fully co- operating with the Department. Accordingly, vide its reply the assessee prayed that no Special Auditor should be appointed. We find that after taking note of the assessee's submission, the AO passed the necessary directions on 27/12/2019 for audit of the accounts of the assessee under section 142(2A) of the Act. From the careful perusal of the aforesaid documents, forming part of the paper book, we find no merits in the submission of the assessee that the direction to get the accounts audited under section 142(2A) of the Act is mere tactics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 of the Act on 09/02/2016 by executing the warrant on the assessee on 09/02/2016. Subsequent to the search assessment conducted on the assessee on 09/02/2016, a second search action under section 132 of the Act was also carried out on the assessee on 26/05/2017 at the head office of the assessee at Ahmednagar along with branch offices at Mumbai, Ulhasnagar, and residences of key persons of the assessee, who handled the business affairs of the assessee. Simultaneously, survey actions under section 133A of the Act were also carried out at the branch offices of the assessee at Ahmedabad, Chennai, and Hyderabad. In response to the notice issued under section 153A of the Act, the assessee filed its return of income on 02/10/2018 declaring a loss of Rs.2,62,66,952. Thereafter, notice under section 143(2) as well as notice under section 142(1) of the Act along with a detailed questionnaire were issued and served on the assessee. On the perusal of the documents found during the course of the search, the AO vide detailed show cause notice dated 03/12/2019 noted that there is non-compliance in maintaining proper KYC documents, non-compliance in collecting KYC details from the depositors, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of credit entries contained in its books of account. Accordingly, the AO made an addition of the amounts credited in the accounts of the various account holders of the assessee under section 68 of the Act. It was also seen that the assessee had issued "at par cheques/demand drafts" as against the receipt of cash in the accounts of members, i.e., the assessee has collected cash in the accounts of its customers, deposited the same into its bank account and issued cheques/demand drafts to the customers as per their requirement. It was noted that, in some of the cases, the assessee has issued cheques/demand drafts by accepting cash from the customers without routing through their accounts maintained with the assessee. As regards, the at-par cheques/demand draft issued by the assessee, the AO held that the same have not been routed through the member's account, therefore it is not possible to identify the source of these cash receipts credited in the bank account. Accordingly, the AO held that the assessee has failed to explain the source of aforesaid credit entries contained in its books of account along with the identity, genuineness, and creditworthiness of the persons who claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5%, the learned CIT(A) computed the income @0.10%. As far as the failure to comply with the membership requirements, violation of byelaws, etc., the learned CIT(A) came to the conclusion that they do not impinge on the taxation aspect per se. As a result, the learned CIT(A) granted partial relief to the assessee. Being aggrieved, both the assessee as well as the Revenue is in appeal before us. 12. We have considered the submissions of both sides and perused the material available on record. In the present case, it is evident from the record that upon perusal of the documents found during the course of the search, the AO noticed that the assessee is not following the rules and regulations of KYC and other guidelines as stipulated by the Reserve Bank of India ("RBI"). Further, it was noticed that the assessee has blatantly violated and disregarded the bye-laws, Multi-State Co-operative Society Act as well as due diligence expected in a similar business. The AO further noted that the assessee is hardly following any objective as envisaged in its Memorandum. Further, on perusal of the KYC documents, and the documents pertaining to account opening, found during the course of search, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey in the normal course of its business, i.e. by way of deposits from its members or by way of repayment of loans by its members, etc. Further, it is not disputed that the assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into its bank account. It is worth noting that no material evidence was found during the search or in the post search enquiry, which could lead to the conclusion that the money deposited by its members belongs to the assessee. In the statements of members as well as employees, i.e. cashier/branch manager, of the assessee recorded during the course of search and survey action, relied upon by the AO, there is nothing to show that the money has been used or siphoned off for the benefit of the assessee. Even in the post search enquiry, no material or evidence was found which could lead to the conclusion that the money deposited belongs to the assessee. Further, it is evident from assessee's submissions noted in the assessment order that in respect of all the instances noted by the AO, wherein discrepancies were found in maintaining the KYC documentation and account opening form, the assessee furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in member's account or amount received for the issuance of at-par cheques/demand drafts belongs to the assessee. It is pertinent to note that for discrepancies in maintaining KYC documentation, account opening form, and violation of society bye-laws, action can be taken against the assessee under the relevant statute or by the concerned authority, such as RBI, however, the same cannot lead to an addition in the hands of the assessee under 68 of the Act. Even for the violation of the provisions of Rule 114B by the depositors in certain cases and Rule 114E by the assessee also cannot lead to the conclusion that the money deposited in the members' account belongs to the assessee. Further, since the assessee is receiving the money in the normal course of its business from its members, there is merit in the submissions of the assessee that the society may not be required to prove the creditworthiness of the member, when the money is deposited in the account of the member. However, the assessee is duty bound to ascertain the creditworthiness of the member at the time of giving loan to the members. 16. As noted earlier, that the learned CIT(A), after agreeing with various fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t undertakes activities similar te banking and a larger leeway has to be given as regards the ingredients of S.68 (of course, this depends on the facts of the case and it cannot be held as such in a blanket manner)." For the above said reasons, we hold that the provisions of section 68 will not get attracted in the facts and circumstances of the present case. 17. In support of the aforesaid conclusion, we may refer to following decisions of the Tribunal in respect of additions made under section 68 of the Act in the hands of the co-operative credit society :- (a) In the case of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha (ITA No.646/Bang/2021 dated 18-02-2022), the Tribunal considered the issue as to whether the demonetised currencies collected from the members and deposited into the bank account of the assessee could be assessed as unexplained cash credit u/s 68 of the Act. The Tribunal decided this issue as under: - "12. The last issue relates to addition made u/s 68 of the Act. The A.O. noticed that the assessee society has deposited "Specified bank notes" (demonetized notes) in the account maintained by it with CDCC Bank, Hosadurga as detailed below: - ........... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A.R. submitted that the above said deposits were collected by the assessee prior to 14.11.2016 and it cannot be considered as violation of any of the Provisions of the Act. Accordingly, he submitted that the A.O. was not justified in invoking the provisions of section 68 of the Act. 14. I heard Ld. D.R. on this issue and perused the record. I notice that the A.O. has not doubted the submissions of the assessee that the above said amount of Rs.24,47,500/- represents collection of money in the normal course of carrying on of business of the assessee, i.e., it represents money remitted by the members of the assessee society towards repayment of the loan taken by them and also towards pigmy deposits, etc. The Ld A.R submitted that the assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into bank account. Thus, I notice that the assessee has explained the nature and source of the above said amount of Rs.24,47,500/-, which was in-turn deposited by the assessee society in its bank account and further, all these transactions have been duly recorded in the books of account. Hence, the above said deposits cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts, accordingly, the assessee did not get any extra benefit as observed by the AO in his order at para No. 06 which was treated as income us 69A of the Act. In view of this, the provisions of section 68 is not applicable in the present facts of the case and the AO without discussing in detail has made addition u/s. 68 which is not proper. Therefore the addition is deleted." (c) The Ahmedabad bench of Tribunal has expressed an identical view in the case of Shri Umiya Co-operative Credit Society Ltd vs. ITO (ITA No.277/Ahd/2022 dated 18-07-2024 by following the decisions rendered by the co-ordinate benches in the following cases: - (i) ITO vs. C D Patani Nagari Sahakari Pat Sanstha (ITA No.727/PUN/2022 dated 28-03-2023. (ii) Merchants Credit Co-op Society Ltd vs. ITO (ITA No.329/Bang/2023 dated 24.08.2023. (iii) Saidatar Co-operative Credit Society Ltd vs. ITO (ITA No.1613/M/21 dated 05-09-2022. 18. However, as evident from the record, the learned CIT(A) by applying the real income theory made the addition on account of commission by considering the commission charged by the assessee for cash deposits in remote branches. In this regard, it is pertinent to note that once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any basis in sustaining any addition in the hands of the assessee under section 68 of the Act. Accordingly, the addition made under section 68 of the Act and also the commission income estimated by learned CIT(A) are directed to be deleted. As a result, grounds no.3-4 raised in assessee's appeal are allowed, while grounds no.1-2 raised in Revenue's appeal are dismissed. 20. The issue arising in ground no.5, raised in assessee's appeal, pertains to disallowance of provision for standard assets. 21. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case, pertaining to this issue, are that during the assessment proceedings, it was noticed that the assessee has debited provision for standard assets amounting to Rs.50 lakh to the profit and loss account for the various years, as under: - Financial Year Amount 2011-12 40,50,000 2012-13 75,00,000 2013-14 2,00,00,000 2014-15 1,00,00,000 2015-16 50,00,000 2016-17 1,00,00,000 2017-18 40,00,000 22. It was further noticed that the assessee has not disallowed the aforesaid amounts while computing its income. Accordingly, the assessee was asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident that the same is specifically in respect of provision for bad and doubtful debts made by a scheduled bank, non-scheduled bank, co-operative bank other than a primary agricultural credit society, or a primary co-operative agricultural and rural development bank. Further, the Explanation to section 36(1)(viia) of the Act deals with the meaning assigned to non-scheduled bank, rural branch, scheduled bank, public financial institution, state financial corporation, state industrial investment corporation, co-operative bank, primary agricultural credit society, primary co-operative agricultural and rural development bank and NBFC, under various statutes. It is pertinent to note that co-operative bank, primary agricultural credit society, primary co- operative agricultural and rural development bank shall have the meaning as assigned to them in the Explanation to section 80P(4) of the Act. Further, NBFC shall have the meaning as assigned to it in section 45-I(f) of the Reserve Bank of India Act, 1935. 25. On the other hand, it is undisputed that the assessee is a co-operative credit society and is a registered Multi-State Co-operative Urban Credit Society established under the Mul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure is treated as current year's expenditure in the year of crystallisation and accordingly allowable as deduction in that year. This principle has been upheld by the Hon'ble jurisdictional High Court in CIT vs. Mahanagar Gas Ltd (2014)(42 taxmann.com 40)(Bom.), wherein it was observed as under: - "(e) We find that the liability in respect of work/services rendered in earlier years was crystallized only on receipt of the bill in the current assessment year. Moreover, the method adopted by the respondent assessees has been accepted by the revenue for the earlier assessment year and also while accounting for the income earned in respect of the work done in earlier years. In the circumstances, the Revenue is required to adopt consistent approach and allow the expenditure which was crystallized during the assessment year under consideration as done in the earlier years. This finding of fact has not been shown to be perverse. In view of the above, we see no reason to entertain Question B as the does not raise any substantial question of law as it is essentially a finding of fact arrived at by two authorities concurrently." 29. In the present case, we find that the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregate of payments exceeding Rs.20,000 is made to a person in a day by way of a mode other than prescribed by the section. Further, the first proviso to section 40A(3) of the Act provides the exception to the aforesaid provision in such cases and under such circumstances as prescribed in Rule 6DD of the Income Tax Rules, 1962 ("the Rules"). 34. In the present case, there is no dispute amongst the parties that the amount credited in member's accounts is qua the rental expenditure paid by the assessee. From the record, it is evident that the AO has considered the withdrawal by the member in cash from its accounts to be against the very purpose of section 40A(3) of the Act. However, as noted above, the provisions of section 40A(3) of the Act only impose restrictions on the payer while claiming deduction of expenditure incurred in a mode other than provided under the section and does not impose any impediment on the recipient. Thus, we find no merits in the findings of the AO that withdrawal by the member in cash from its account is against the very purpose of section 40A(3) of the Act. The AO has made the disallowance under section 40A(3) of the Act also on the basis that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dlords have opened savings/current accounts with the assessee, we are of the considered view that the rent payments so credited to the accounts of the landlords do not violate the objective of introducing section 40A(3) of the Act. Therefore, the disallowance of rental payment under section 40A(3) of the Act is directed to be deleted. As a result, ground no.7 raised in assessee's appeal is allowed. 36. The issue arising in ground no.8, raised in assessee's appeal, pertains to disallowance of deduction under section 80P of the Act. 37. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, it was observed that assessee has claimed deduction under section 80P of the Act. It was further observed that the assessee has not admitted members in compliance with the provisions of its bye-laws and has earned income from providing services to non-members, i.e. by issue of "at par cheques" in lieu of cash. It was further noticed that persons/entities, who are not ordinary members, have also operated accounts in the assessee society. Accordingly, the assessee was asked to explain as to why the claim of deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any other law for the time being in force in any State for the registration of co-operative societies ;" 39. In the present case, the assessee is a co-operative credit society and is a registered Multi-State Co-operative Urban Credit Society established under the Multi-State Co-operative Societies Act, 2002 and is involved in the activities of a credit co-operative society, viz., accepting deposits from its members and providing credit facilities to them. The assessee has two types of members, namely, ordinary and nominal members. The ordinary members have the right to vote and are subscriber to the shares of the assessee. On the other hand, nominal members are admitted on payment of fees of Rs. 100 and don't have voting rights. On the basis that the assessee has transacted with non- members, i.e. with persons who were not entitled to be members as per the bye-laws, persons who have been admitted as member without compliance of bye-laws or in violation of bye-laws, persons who have been claimed to be nominal members, the lower authorities have denied the deduction claimed under section 80P of the Act by the assessee. We find that as per section 26 of the Multi-State Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Citizen Co-operative Society Ltd v/s ACIT, [2017] 397 ITR 1 (SC), in support of its conclusion that the co-operative society which has failed to abide by its bye-laws, regulations and provisions of the respective Co-operative Society Act, is not eligible for the deduction under section 80P of the Act. The relevant observations of the Hon'ble Supreme Court, in this regard, are reproduced as follows :- "25. So far so good. However, it is significant to point out that the main reason for disentitling the appellant from getting the deduction provided under Section 80P of the Act is not sub-section (4) thereof. What has been noticed by the Assessing Officer, after discussing in detail the activities of the appellant, is that the activities of the appellant are in violations of the provisions of the MACSA under which it is formed. It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002 expressly permits loan to non- members under section 66(2) on the security of his deposit. The said section reads as follows :- "66. Restriction on loans .- (1) A multi-State co-operative society, other than a co-operative bank, shall not make a loan to a member on the security of his share or on the security of a non-member. (2) Notwithstanding anything contained in sub-section (1), a multi-State co- operative society may make a loan to a depositor on the security of his deposit." 45. Since the assessee has given loans as per the provisions of the Multi- State Co-operative Societies Act, 2002, therefore this fact also distinguishes the present case from the facts available in Citizen Co-operative Society Ltd (supra). 46. We may also gainfully refer to a subsequent decision rendered by Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. v/s CIT, Calicut, [2021] 431 ITR 1 (SC), wherein, the Hon'ble Supreme Court, after considering the definition of the term "members" in Kerala Co-operative Societies Act, 1969 held that unlike the Andhra Pradesh Act, which was considered in the case of Citizen Co-operative Society Ltd (supra), "nominal members" are memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case, it is evident from the record that the lower authorities also alleged that the assessee has earned income from providing services to non-members, i.e. by issue of "at par cheques" in lieu of cash. However, it is pertinent to note that the demand draft or at par cheques are also issued at the instructions of the member and the amount is debited/credited from/to the member's account. Therefore, it was a transaction which was carried out at the behest of the member in the accounts of the member maintained with the assessee society. Thus, we are of the view that the same cannot be treated as providing services to non-members. At this stage, it is pertinent to note that the following observations of the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. (supra), rendered in context of deduction under section 80P of the Act :- "33. .Once it is clear that the co-operative society in question is providing credit facilities to its members, the fact that it is providing credit facilities to non-members does not disentitle the society in question from availing of the deduction. The distinction between eligibility for deduction and attributability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer erred in issuing a notice dated 27.12.2019 directing the appellants to get the accounts audited under section 142(2A) at the fag end of the assessment proceedings which were getting barred by limitation on 31.12.2019 and without disposing of the objections raised by the appellants. Thus, the aforesaid direction of the Assessing Officer to get the accounts audited under section 142(2A) is nothing but mere tactics to extend the period of limitation which the Courts have held as bad in law. 3. Addition under section 68 of the Act for aggregate cash deposits and credit transactions but excluding the remote deposits. 3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 5,06,72,196, estimated at the rate of 0.15 per cent of Rs 3,378.14 crores being the aggregate cash deposits and credit transactions but excluding the remote deposits of all the account holders in the appellant-society against the addition of Rs 4,665.97 crores made by the Assessing Officer. 3.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ought to be deleted 7. Disallowance of prior period expenses Rs 60,11,035 7.1. The CIT(A) erred in sustaining disallowance made by the Assessing Officer of prior period expenses of Rs 60,11,035 7.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of prior period expenses without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 60,11,035 is bad in law and ought to be deleted 8. Disallowance under section 40A(3) of Rs 2,37,52,201 8.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer under section 40A(3) aggregating Rs 2,37,52,201 being the rent expenses incurred during the year under reference. 8.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the disallowance of rent expenses under section 40A(3) without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 2,37,52,201 is bad in law and ought to be deleted. 9. Enhancement of income by the CIT(A) of Rs 1,17,890 9.1. The CIT(A) erred in enhancing the assessment by making disallowance of Rs 1,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's appeal, and ground no. 1-2 raised in Revenue's appeal pertains to addition under section 68 of the Act on account of cash deposits and credit transactions. Since a similar issue has already been decided in assessee's and Revenue's appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, grounds no.3-4 raised in assessee's appeal are allowed, while grounds no. 1-2 raised in Revenue's appeal are dismissed. 56. The issue arising in ground no.5, raised in assessee's appeal, pertains to disallowance of provision for standard asset. Since a similar issue has already been decided in assessee's appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, ground no.5 raised in assessee's appeal is dismissed. 57. The issue arising in ground no.6, raised in assessee's appeal, pertains to disallowance of provision for gratuity. 58. We have considered the submissions of both sides and perused the material available on record. During the assessment proceedings, the AO noted that the assessee had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure under section 40A(3) of the Act. 62. We have considered the submissions of both sides and perused the material available on record. During the appellate proceedings, upon perusal of the details filed by the assessee in respect of expenditure incurred in cash, the learned CIT(A) noted that the cash expenses of Rs.1,17,890 are in respect of the assessment year 2017-18, while Rs.7,22,961 are in respect of the assessment year 2018-19 (as against assessment year 2013-14 and the assessment year 2014-15, respectively, stated by the AO). Accordingly, the learned CIT(A) directed the AO to delete the addition for the assessment years 2013-14 and 2014-15. During the appellate proceedings, the assessee was asked as to why the enhancement in respect of section 40A(3) of the Act disallowance be made for Rs. 1,70,890 for the assessment 2017-18 and Rs. 7,22,961 for the assessment year 2018-19. As per the assessee, it has passed the consolidated single entry for expenses paid to different parties in the books of accounts as per the details maintained for the expenses incurred for shifting of branches. Further, it is the plea of the assessee that if the individual expenses are considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs 1,041.50 crores made by the Assessing Officer. 2.2. The CIT(A) erred in treating the appellants as facilitator of alleged accommodation entries given by the deposit holders relying on the alleged discrepancies observed by the Assessing Officer and special auditor in KYC documentation maintained by the appellant-society. without bringing any documentary evidences on record to support such allegation and entirely on surmises, suspicion and conjectures. 2.3. The impugned action of the CIT(A) in sustaining the addition on estimation basis is erroneous inasmuch as, the same is not in accordance with the provisions of section 68 of the Act. 3. Addition under section 68 of the Act for aggregate demand draft/ at par cheque issued by the appellant-society 3.1. The CIT(A) erred in sustaining the addition under section 68 of the Act at Rs 13,21,839, estimated at the rate of 0.10 per cent of Rs 132.18 crores being the aggregate demand draft/ at par cheques issued by the appellant-society on receipt of cash from the account holders against the addition of Rs 132.18 crores made by the Assessing Officer. 3.2 The CIT(A) erred in treating the appellants as facilitator of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in making the impugned disallowance without appreciating the facts of the case and hence, pray that impugned disallowance of Rs 7,22,961 is bad in law and ought to be deleted. 8. Addition under section 68 of Rs 48,16,43,092 8.1. The CIT(A) erred in sustaining the addition made by the Assessing Officer under section 68 of the Act aggregating Rs 48,16,43,092, being the unilateral action of the appellants in considering said amount as receivable from banks where appellant-society has maintained their bank accounts. 8.2. It is submitted that in the facts and in the circumstances of the case and in law, the CIT(A) sustained the addition made by the Assessing Officer without appreciating the facts of the caseand hence, pray that impugned addition of Rs 48,16,43,092 is bad in law and ought to be deleted 8.3. The CIT(A) erred in sustaining the disallowance without providing sufficient of being heard and hence, pray that impugned addition of Rs 48,16,43,092 is bad in law and ought to be deleted 9. Disallowance of deduction under section 80P 9.1. The CIT(A) erred in sustaining the disallowance made by the Assessing Officer of deduction under section 80P claimed by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, ground no.4 raised in assessee's appeal is dismissed. 70. The issue arising in ground no.5, raised in assessee's appeal, pertains to disallowance of prior period expenses. Since a similar issue has already been decided in assessee's appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. With similar directions, ground no.5 raised in assessee's appeal is allowed for statistical purposes. 71. The issue arising in ground no.6, raised in assessee's appeal pertains to disallowance of rental expenditure under section 40A(3) of the Act. Since a similar issue has already been decided in assessee's appeal for the assessment year 2016-17, therefore the findings/conclusions rendered therein shall apply mutatis mutandis. As a result, ground no.6 raised in assessee's appeal is allowed. 72. The issue arising in ground no.7, raised in assessee's appeal, pertains to enhancement of income made by the learned CIT(A) by disallowing the expenditure under section 40A(3) of the Act. Since a similar issue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the society has made a unilateral claim which Axis Bank Ltd has not accepted. Accordingly, the assessee submitted that the same could not be routed through the profit and loss account. The assessee further submitted copies of a FIR against Axis Bank Ltd and Criminal Writ Petition against Axis Bank before the Hon'ble Bombay High Court Bench, Aurangabad. 75. The AO, vide order dated 10/05/2021 passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the assessee has failed to explain the reasons and rationale of crediting the reserve and surplus account. It was further held that since the assessee has failed to explain the nature and source of credit appearing in the books to the satisfaction of the AO, the provisions of section 68 of the Act are clearly applicable in the facts of the present case. The AO held that the cryptic reply of the assessee without any documents does not in any way support the case of the assessee but indicates that the assessee for reasons best known to him intends not to part with the information called for by the AO. Accordingly, the AO made an addition of Rs.48,11,75,861, being the aggregate net amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Hon'ble Bombay High Court, Aurangabad Bench. During the hearing, the learned AR referred to the copies of the Civil Suits, as well as the police complaint filed against the Axis Bank, forming part of the paper book. Accordingly, it was submitted that it is only reversal of book entries which would not generate any income, and the claim of the assessee is only a unilateral claim which the banks have also not accepted till date. We find that the aforesaid documents referred by the learned AR were not considered by the lower authorities and the learned CIT(A) did not grant further opportunity to the assessee to furnish additional evidences in support of its claim. It is also not evident from the record that the lower authorities have examined the submission of the assessee that certain wrong entries have been reversed by the Axis Bank. 77. We may explain the legal principles governing this issue. In the ordinary course, the amounts illegally taken from the bank account of the assessee would be shown in the books of account as "Amount recoverable from Axis Bank" in the Assets side of Balance Sheet. When any part or whole of the amount is recovered from the bank, then the abo ..... 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