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TMI Blog2019 (12) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... r income, and if he intended to do so, a fresh notice u/s 148 was necessary. 3. That the Ld. CIT(A) has erred in law as much as on the facts of the case by confirming the unwarranted addition made by the Ld. A.O. by holding the Daily deposit Agents' Commission expenses for Rs. 95,032/- as disallowable. 4. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary. 5. It is, therefore, prayed that the unwarranted additions made by the Ld. A.O. and erroneously upheld by the Ld. CIT(A) of Rs. 3,95,032/- may kindly be deleted." 2. The facts giving rise the present appeal are that the case of the assessee was reopened on the basis of AIR information regarding cash deposits in the savings bank account of the assessee society. Thereafter, after issuing the requisite notice u/s 148 of the Income Tax Act, 1961 (hereinafter called as 'the Act') was passed vide order dated 28.6.2016, thereby the A.O. made addition of Rs. 50,000/- u/s 43B of the Act in respect of unkeshan fees disallowance of Rs. 95,032/-, commission paid to Shri Manoj Jain and an amount of Rs. 3 lakhs on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. In our opinion the assessee cannot be escaped from the deeming provision of section 68 from discharging its onus merely on the basis that the assessee was in the initial stage of development of business. The assessee failed to comply with the KYC norms which could have taken in the case of the assessee to be the charging of the onus by the assessee. The assessee cannot be saved from the clutches of the provisions of section 68 by taking the shelter that manpower of the society engaged for this business was not fully equipped and properly trained and due to which there had been lapses in complying with KYC norms. The decision of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC) in our opinion will not apply in the present case as in that case the money was given by the shareholders for a consideration, i.e., against the allotment of the shares. This is a case where deposits have been received by the assessee to whom it is to be repaid on demand or after the expiry of fixed period. We therefore, confirm the addition under section 68. To that extent we confirm the order of the Commissioner of Income-tax (Appeals). Now the question arises whether the income so added will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been earned by the assessee in its normal course of business activities and therefore he took the view that there is no case even prima facie to consider the claim of deduction under section 80P(2)(a)(i) of the Income-tax Act. We have gone through the decision of the Supreme Court in the case of India Leather Corporation P. Ltd. [1997] 227 ITR 552 (SC) as relied by the Commissioner of Income-tax (Appeals). In this case Supreme Court took the view that "it is no doubt true that the words "attributable to" have a wider meaning than the words "derived from". But at the same time it cannot be ignored that normally the word "attributable" implies that "for a result to be attributable to anything it must be wholly, or in material part, caused by that thing". (see : Stroud's Judicial Dictionary, 5th edition, volume I, page 223). A casual connection is necessary. In order that income can be said to be attributable to manufacture or processing of goods for the purpose of the Explanation to section 104(4) of the Act the earning of the income must be directly connected with manufacture or processing of goods. It is also necessary that a material part of the said income should have been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional income. We have gone through the decision of the Pune Bench in the case of Shri Mahavir Nagari Sahakari Pat Sanstha Ltd. v. Deputy CIT [2002] 74 TTJ (Pune) 793 as relied by the assessee, the headnote of this judgment reads as under : "Deduction under section 80P(2)(a)(i)-Providing credit facility to members-Loans to members only-As per definition of a 'member' given in Maharashtra Co-operative Societies Act members include nominal members also who are admitted as per the bye-laws of the society-Assessee giving loans only to its members-Therefore, it satisfied the conditions laid down under section 80P(2)(a)(i) and was entitled to deduction cash credit, even if taxed, would be considered as income from the same business, i.e., providing credit facilities to the members, and accordingly, it would also be entitled to deduction under section 80P-Bye-laws do not take the character of the statute-Violation of bye-laws by the assessee could not lead to the automatic conclusion that the assessee was not a co-operative society-Government auditor or the Registrar has not held that the assessee has ceased to be a co-operative society nor have they cancelled the registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in respect of the activity similar or same, which is being undertaken by the assessee society. Now the issue would be whether the disallowances made in respect of bad debts and commission payment claimed by the assessee would qualify for deduction u/s 80P of the Act or not? In respect of the bad debt, the assessee is required to demonstrate that the debt which is claimed is in the nature of profit & gains and business attributable to such activity. In the present case, the assessee had made provision for bad debt. If the assessee had not done this provision, this amount would have not been deducted from the profit & loss account. Therefore, in my considered view, this amount is certainly attributable to the profit & gains of the assessee society. Further, disallowance of payment of commission. The commission is claimed as business expenditure, deducted from the profit & gains account. Therefore, this would also be in the nature of profit & gains of the assessee society. Therefore, I am of the considered view that in the light of the decision of the coordinate bench rendered in the case of ACIT Circle-4 Vs. Buldana Urban Co-operative Credit Society Ltd. (supra), the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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