TMI Blog2024 (2) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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, in the post-search enquiry also no material or evidence was found which could lead to the conclusion that the money deposited belongs to the assessee. In the present case, it is not the plea of the Revenue that the credit in books of account or bank accounts of the assessee came to its knowledge pursuant to the material/documents found during the course of the search. For discrepancies in maintaining KYC documentation, account opening form, and violation of society byelaws, 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 the Act. Therefore, we are of the considered view that the material/documents found during the course of the search are not of such a nature which incriminates or militates against the assessee - material/documents found during the course of search also do not raise any doubt or suspicion against the assessee, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Societies Act, 2002 and is involved in the facility of providing credits and other banking facilities to its members. The assessee is also providing ATM card facility and RTGS facility to its members. The assessee has operations in Maharashtra, Gujarat, Madhya Pradesh, Andhra Pradesh, Karnataka, and Delhi and has around 100 branches across the country and is covered under the provisions of the Multi-State Co-operative Societies Act, 2002 and the byelaws framed by it. 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. The assessee operates different types of accounts, such as savings account, current account, recurring deposit account, loan account, daily collection account, and FDR account. As per the assessee, in order to open and operate any of the above accounts, a person has to first become a member of the society, either ordinary or nominal. Further, the main source of income is interest on loans advanced to its members. 5. For the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and various evidences gathered during the search and seizure action as well as the report of the Special Auditor, vide order dated 07/05/2021 passed under section 143(3) read with section 153A of the Act, came to the conclusion that the assessee is not a bank within the provisions of the Banking Regulation Act and therefore is not empowered to carry on the business of banking. It was further held that the assessee is a credit co-operative society, which is empowered to mobilise deposits and grant loans to its members only. The AO held that the assessee has indulged in the gross violations of not only the Co-operative Society Act, 2002 but also its own byelaws by deviating from the core principles and as asked in its Memorandum. The AO held that on perusal of documents found during the search and furnished during the assessment proceedings, it was found that the majority of the members of the assessee have not submitted their PAN cards and in numerous cases, photo identities are also not present in these documents. Further, the addresses that have been provided are incomplete in most of the cases, while there was no information regarding the source of income, contact detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to show that it has reasonably discharged its onus to explain the nature and source of any amount credited in its books of account. The learned CIT(A) further held that as regards the deposit slips it is quite inconceivable that the assessee, which claims to be a co-operative society, is unable to pinpoint the person making such deposits. After taking into consideration the discrepancies in KYC documentation as noted by the AO on the basis of the Special Auditor s report, the learned CIT(A) held that the assessee has not shifted the onus placed on it under section 68 of the Act. The learned CIT(A), drawing the analogy with Rule 114E, held that the assessee has failed to collect the PAN or report such transactions and therefore there is a failure on the part of the assessee to discharge its onus or shift its onus to the depositor, as regards the requirement of section 68 of the Act. It was further held that it would be unwise to hold that all such deposits are income of the assessee by considering the nature of business of the assessee. After considering various factors as noted in paragraph 7.43 of its order, the learned CIT(A) held that there is culpability on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Buildwell (P.) Ltd., [2023] 454 ITR 212 (SC), by observing as under:- 14. In view of the above and for the reasons stated above, it is concluded as under: i) to iii) .. iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 9. Therefore, it is now settled that in respect of completed/unabated assessments, no addition can be made in the absence of any incriminating material found during the course of search and seizure action. In the present case, from para 8.4 of the assessment order, it is evident that the evidence gathered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey action at the premises of the assessee in the present case constitute incriminating material. In para-25 of the aforesaid decision dated 06/02/2023, the coordinate bench of the Tribunal analysed the meaning of the expression incriminating material as under:- 25. Before we look into the relevant 'incriminating material' referred to by the Ld. CIT(A), it is first necessary to understand the meaning of the expression incriminating material or evidence. It is noted that there is no definition set out in the Act and therefore meaning of this term has to be discerned from its judicial interpretation made by different judicial forums. We understand that there can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary for the AO to establish that the information, document or material, whether tangible or intangible, is of such nature which incriminates or militates against the person in relation to whom it is found. Some common forms of incriminating material are for instance, where the search action u/s 132 of the Act reveals information (oral or documented) that the assets found from the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to straightaway treat such material to be 'incriminating' in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document or information is incriminating in nature, capable of justifying the additions in unabated assessments. 11. Therefore, it has been held that in order to constitute an incriminating material or evidence, it is necessary for the AO to establish that the information, documents, or material, whether tangible or intangible, is of such nature which incriminates or militates against the person in relation to whom it is found. The coordinate bench further observed that the nature of the evidence or information gathered during the course of the search should be of such nature that it should not merely raise doubt and suspicion but should be of such nature which would prima facie prove that the real and true nature of the transaction between the parties is something different from the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has duly recorded in its books of account the transactions of collections of money as well as deposits made into its bank account. The violation of 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, in the post-search enquiry also no material or evidence was found which could lead to the conclusion that the money deposited belongs to the assessee. It is further pertinent to note that during the assessment proceedings, the case of the assessee was subjected to Special Audit under section 142(2A) of the Act. However, the Special Auditor only highlighted the discrepancies in maintaining KYC documentation, account opening form and violation of society byelaws by the assessee, without reference to any material which could lead to the conclusion that the amount deposited in member s account or amount received for the issuance of at-par cheques/ demand drafts belongs to the assessee. In the present case, it is not the plea of the Revenue that the credit in books of account or bank accounts of the assessee came to its knowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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