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2019 (7) TMI 657

..... r which source was not explained. The assessee is not a co-operative Bank having the meaning assigned to it in part V of the Banking Regulation act, 1949. The AO should have called for details of deposits and anyalysed identity, genuineness and creditworthiness of the same. Even if the benefit of section 80P(4) of the Act is available to Primary Agricultural Co-operative Society, this does not imply that eligibility u/s. 80P(2) automatically flows to the assessee which has to be established. Further, the accounts were not subjected to audit u/s 44AB. In the present case, the profit and loss account and balance sheet were not filed either by an accountant or under co-operative audit. The assessee was liable to file further report by an accountant in the prescribed format as per the provisions of section 44AB. It appears that all these aspects were not enquired into and no proper efforts were made to find out whether the assessee was eligible for deduction u/s. 80P(2). Without making any enquiry into these issues, the AO accepted the assessee’s claim. The failure on the part of the AO to make necessary enquiry rendered the assessment order erroneous which also resulted in loss .....

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..... e AOfor fresh consideration in accordance with the above direction. Thus, this ground of appeal of the Revenue is partly allowed for statistical purposes for both the assessment years. Unexplained credits u/s. 68 - HELD THAT:- It is the duty of the assessee to prove the identity of the depositors to the satisfaction of the AO. It is seen that the assessee has not furnished the details of names and addresses and PAN Nos. of the concerned depositors. In our opinion, the assessee has to fulfil the above requirements. However, we make it clear that the assessee, being a Co-operative Society, need not prove the creditworthiness and genuineness of the deposits, but it has to prove the identity of the depositors by furnishing proof of address and PAN details of the depositors to the satisfaction of the Assessing Officer as held by the Hyderabad Bench of the Tribunal in the case of ACIT vs. Citizen Co-operative Society Ltd. [2012 (9) TMI 756 - ITAT HYDERABAD] . Accordingly, we remit this issue to the file of the Assessing Officer with a direction to the assessee to furnish the identity of the depositors with PAN details before the AO and decide the issue in accordance with law. Thus, this .....

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..... before the Assessing Officer. In our opinion, non production of audit report in the prescribed format can be a reason for levying penalty u/s. 271B. Thus, this is a fit case for levying penalty u/s. 271B as the assessee has not given explanation regarding reasonable cause for not filing the audit report within the prescribed time limit. Accordingly, we confirm the penalty levied u/s. 271B. Thus, the appeal of the assessee dismissed. - I.T.A. No. 141/Coch/2019, I.T.A. No. 47/Coch/2019, C.O. No. 10/Coch/2019, I.T.A. No. 563/Coch/2018, S.P. No. 43/Coch/2018, I.T.A. No. 93/Coch/2018, S.P. No.06/Coch/2018 And I.T.A. No. 400/Coch/2018 - 26-6-2019 - SHRI CHANDRA POOJARI, AM AND GEORGE GEORGE K., JM For The Revenue : Smt. A.S. Bindhu, Sr. DR For The Assessee : Shri Amaljith P.J., FCA ORDER Per CHANDRA POOJARI, AM: These appeals filed by the Revenue and the assessee are directed against the different orders of the CIT(A), Trivandrum and pertain to the assessment years 2013-14 & 2014-15. The assessee has also filed Cross Objection in C.O. No.10/ Coch/2019 and Stay petitions in S.P. Nos.43 & 06/Coch/2018 for the assessment years 2013-14 and 2014-15. 2. First we shall take up the appea .....

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..... e at C-D (if any) subject to provisions of section 80AB. F. The assessee must be given opportunity of being heard before finalizing the computation and for furnishing relevant information adequate time within the statutory time limit under section 153 is to be granted. 2.2 The CIT also observed that as judicial discipline is vital, the decision in case of Chirakkal Servicce Co-operative Bank Ltd. vs. CIT (284 ITR 490) subject to final decision in SLP in admitted case of Karakulam SCB Ltd. for the assessment year 2008-09 is to be borne in mind by the Assessing Officer at the time of giving effect to this order. Against this, the assessee is in appeal before us. 3. We have heard the rival submissions and perused the record. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his pow .....

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..... of the Act. It appears that all these aspects were not enquired into and no proper efforts were made to find out whether the assessee was eligible for deduction u/s. 80P(2) of the Act. Without making any enquiry into these issues, the Assessing Officer accepted the assessee s claim. The failure on the part of the Assessing Officer to make necessary enquiry rendered the assessment order erroneous which also resulted in loss to the revenue. The CIT had observed in his order that it is to be decided by the Assessing Officer after fresh examination . Hence, the order of the CIT cannot be held as erroneous. The CIT s approach was correct. Further, CIT had observed that no proper enquiry has been made that resulted in erroneous order and further it resulted in loss of revenue. Hence the Assessing Officer has to pass the order after hearing the assessee. Therefore, the CIT exercised his power conferred u/s. 263 of the Act in setting aside the assessment and remanded the case back to the file of the Assessing Officer to make enquiry into the issue and decide the same. As such, the CIT remitted the issue back to the file of the Assessing Officer for de novo consideration. 3.2 Being so, in .....

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..... ed in 397 ITR 1 (SC), wherein it has been held that if a co-operative society is violating the principle of mutuality in the garb of persons who actually are not real members and indulging in banking business per se that it cannot claim the benefit of section 80P(2)(a)(i). (vi) Whether on the facts and in the circumstances of the case, the order of CIT(A) is correct in not duly considering the following case laws (a) Sabargantha Zilla Kharid Vechar Sangh Ltd. (203 ITR 1027) (SC) (b) Perinthalmanna Service Co-operative Bank (363 ITR 68) (Kerala) (c) CIT Vs Kerala State Co-operative Marketing Federation (234 ITR 201) (Ker.) 4. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income-tax(Appeals), Trivandrum on the above points may be set aside and that of the Assessing Officer restored. 5. The facts of the case are that the assessee is a Co-operative Society engaged in banking business and filed its return of income for AY 2013-14 declaring total income for the year at Rs. Nil after claiming deduction under section 80P of the I.T. Act. The Assessing Officer denied the deduction claimed by the assessee u/s. 80P of the Act .....

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..... ed for statistical purposes. 6. The next issue for the assessment year 2013-14 is with regard to deduction u/s. 80P(2)(a)(i) of the Act. This issue was allowed by the CIT(A) in the light of the order of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited for AY 2009-10 in ITA No. 525/Coch/2014, order dated 20.07.2016 wherein it was held that the interest income earned from the investment in Treasury and Banks is part of the banking activity and therefore, the said income is eligible for deduction under section 80P(2)(a)(i) of the Act. 6.1 Against this, the Revenue is in appeal before us. The Ld. DR relied on the order of the Assessing Officer. 6.2 We have heard the rival submissions. With regard to the interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) of the Act is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investments made with cooperative banks and other scheduled banks. The co-ordinate bench of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited cited supra had held that such interest .....

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..... essee had not furnished the details of depositors. Therefore, the Assessing Officer treated the increase in deposits as unexplained credits u/s. 68 of the Act. 8.3 On appeal, the CIT(A), by placing reliance on the decision of the ITAT, Hyderabad in the case of Citizen Co-operative Society, 24 taxmann. com 347, held that the onus is on the assessee to prove the identity of the depositor and such onus can be discharged only by furnishing the proper proof of address and identity to the satisfaction of the Assessing Officer. In this case, the CIT(A) observed that the assessee had failed to furnish the details of depositors and therefore, had not proved the identity of the depositors. According to the CIT(A), the assessee had not discharged the onus cast on it to prove the identity of the depositors as required under the provisions of section 68 of the Act. Therefore, the CIT(A) confirmed the addition made by the Assessing Officer u/s. 68 of the Act. 8.4 Against this, the assessee is in appeal before us. The Ld. AR submitted that the provisions of section 68 are not applicable to the deposits received by the cooperative societies. 8.5 The Ld. DR relied on the order of the CIT(A) . 8.6 W .....

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..... of Kerala Sponge Iron Ltd. (79 taxmann. com 350) wherein it was held that unexplained income assessed under section 68 of the Act cannot be treated as business income and consequently, no deduction u/s. 80P of the Act can be allowed for the unexplained income assessed u/s. 68 of the Act. 9.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that the income assessed under section 68 of the Act is to be treated as business income and accordingly, deduction u/s. 80P is to be allowed. 9.4 We have heard the rival submissions and perused the record. The contention of the learned AR is misplaced. According to the AR, the additions made u/s. 68 of the Act are to be considered as income from business so as to grant deduction u/s. 80P of the Act. The only dispute before us is with regard to granting of deduction u/s. 80P of the Act for the resultant income on account of additions u/s. 68 of the Act. The income resulting on account of addition u/s. 68 of the Act cannot be considered as income derived from business though it is income of the assessee. Even if the addition is made u/s. 68, it does not necessarily follow that such credit represents business income of the as .....

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..... ned 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. 9.7 Reliance is also placed on the judgment of Supreme Court in the case of CIT vs. Deviprasad Viswanath Prasad (72 ITR 194) 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 carrying on of export activities in granite slabs and not dealing in unexplained credits. Being so, we are inclined to hold that the assessee is not entitled for deduction under section 80P of the Act on account of addition u/s. 68 of the Act. This ground of appeals of the assessee is dismissed. 9.8 The assessee has also submitted that the assessment was not made within the time specified u/s. 153 as the assessment order wa .....

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..... e co-operative bank cannot be considered as business income. 10.3 We have heard the rival submissions and perused the record. As discussed in paras 6.2 and 6.3, this issue is remitted to the file of the Assessing Officer on similar directions. 11. Ground No. 6 is with regard to provision for bad and doubtful debts. 11.1 The facts of the case are that the assessee claimed that they are eligible for deduction u/s. 36(1)(viia) for provision of bad and doubtful debts. This cannot be allowed since as per the list of rural branches furnished by the assessee, none of the branches of the bank/society are situated in the villages where the population is less than 10,000. Hence, it was held that the assessee was not eligible for deduction u/s. 36(1)(viia) of the Act. It was further observed that neither any provision for bad and doubtful debts in the books of account was created nor made any claim in the return of income filed. According to the Assessing Officer as per section 36(2)(v) of the Act, no deduction shall be allowed unless the assessee debits the amount on such debt in that previous year to the provision for bad and doubtful debts. The AO relied on the judgment of the Supreme Cour .....

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..... No. 400/Coch/2018 : A.Y. 2014-15: Assessee s Appeal 14. The only ground in this appeal is with regard to levy of penalty u/s. 271B for non-filing of audit report by an accountant within the prescribed format. 14.1 The facts of the case are that the return for the year under consideration was belatedly filed on 20/03/2015 but without filing the audit report as required u/s. 44AB of the Act. The assessee was required to file the audit report within the stipulated time limit i.e. on 30/09/2014. In the absence of such audit report, the Assessing Officer levied penalty u/s. 271B of the Act. According to the Assessing Officer audit report along with Form 3CA is required to be filed u/s. Rule 6G(1) of the I.T. rules which provides that in the case of an assessee who carries on business and is required under any other law to get his accounts audited, the report of such audit of accounts of the assessee is required to be furnished u/s. 44AB of the Act. In the absence of satisfactory explanation from the assessee, the Assessing Officer levied penalty u/s. 271B of the Act. 14.2 On appeal, the CIT(A) confirmed the order of the Assessing Officer by observing that the assessee had failed to get .....

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..... ction 44AA read with Rule 6F books of accounts to be maintained by different class of business are prescribed. Section 44AA and Rule 6F is silent about the books of accounts need to be maintained by the assessee. When books of accounts itself are not prescribed levy of penalty for not getting the accounts audited is not valid. For this proposition, the Ld. AR relied on the decision of the ITAT Cochin Bench in the case of K.V Ramachandran vs. DCIT Circle 1(1) Kannur. 2013 SB SOT 264 (Cochin Trib). Further, he relied on CBDT Circular No. 3/2009 dated 21/05/2009 wherein it was stated that audit report u/s. 44AB should not be attached with the return. As per the Circular, the assessee should retain the report with himself and it need to be furnished only if the Assessing Officer request the assessee to furnish it. The Circular also states that no penalty u/s. 271B shall be imposed for not furnishing the audit report within due date. 14.5. The Ld. DR relied on the order of the CIT(A). 14.6. We have heard the rival submissions and perused the record. The Ld. AR submitted that in this case the assessee is a co-operative society. As per proviso to section 44AB, if a person is required unde .....

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