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TMI Blog2024 (2) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... the Incometax Act, 1961 (the Act), was dismissed. 03. Both the appeals pertain to the same assessment year for different proceedings, one against regular assessment proceedings and another against reassessment proceedings. 04. In ITA No. 473/Mum/2022, assessee has raised following ground of appeal:- "1. The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the learned Assessing Officer in assessing the total income at Rs.25,58,92,800/- as against loss of Rs.47,84,871/- declared by the Appellant in the return of income. 2. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition on account o deposits accepted from its members of Rs.14,33,45,343/- under section 68 of the Income Tax Act 1961 (the Act), without appreciating that the appellant had offered an explanation about the source and nature of the said amount credited in its books. 3. The learned Commissioner of Income-tax (Appeals) erred in facts and in law in upholding the addition of Rs.14,33,45,343/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members. 4. the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in law in not appreciating that the re-assessment proceedings under section 147 were bad in law and the assessment order passed under section 147 r.w.s 143(3) of the Act ought to have been quashed. 4. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 164,33,51,753/- on the ground that the appellant had failed to establish the source of the source, i.e. source of money deposited by its members. 5. The learned Commissioner of Income Tax (Appeals) erred in facts and in law in upholding the addition of Rs. 16,43,352/- computed as a percentage of cash deposits accepted from members at Hyderabad branch, without appreciating that the commission charged by the appellant during its normal course of business was already included in its returned income. 6. The learned commissioner of Income Tax (Appeals) erred in facts and in law in relying on the statement of the managing director of the appellant recorded under section 131 of the Act without providing a copy thereof to the appellant, thereby grossly violating the principle of natural justice. " 06. Brief facts of the case shows that assessee is an association of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his comments, the learned Assessing Officer furnished remand report, wherein the complete list of deposits along with details of the KYC were stated to be not submitted. Subsequently, assessee submitted certain further details which were also sent to the learned Assessing Officer for remand report. During the remand proceedings, the learned Assessing Officer issued 40 notices under Section 133(6) of the Act, out of which only 2 replies were received and 14 notices return unserved. The remand report submitted by the learned Assessing Officer was also provided to the assessee. Mr. Sharad Sunil Kakde, CEO and Managing Director of the society submitted that the above cash deposited in the bank account at Hyderabad Bench is a fraud committed by one of the employee of the branch and FIR has been lodged against him. The assessee was further given an opportunity by learned CIT (A) to give the details about the various deposits received by the assessee as well as the cash deposited by the assessee. The assessee furnished ledger accounts and bank statements only. The learned CIT (A) also found instances that in the detail submitted by the assessee of the various cash deposits, the permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Authority as not known. The inspector sent could not trace the depositors. During the post search proceedings, the learned Assessing Officer found bankers from which NEFT or RTGS was made and who are the persons in whose favour the amount was sent. On examination of the statement of those entities where the funds are found to be transferred some of them are remitted directly as foreign remittances. The learned Assessing Officer stated that this is the complete modus operendi and connivance of the bank, assessee for tax evasion, summons u/s 131 were issued to the Sharad Kakde, Managing Director of the society. He was questioned about huge deposit of Rs.164 crores in Hyderabad Branch. He submitted that 3 employees of the society were involved in the above cash deposit scam and stated that FIR has been lodged against them. The learned Assessing Officer further issued summons under Section 131 of the Act to one of the key persons Shri Bajirao Shankar Panmand, chairman of the society. He reiterated what is stated by the Managing Director. The learned Assessing Officer identified 10 persons who have deposited 164 crores in cash at Hyderabad Branch and found that all these 10 persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee. Ld AR referred decision of Honourable Gujarat High court in case of The Commissioner of Income Tax Vs. Pragati Co. Op. Bank Ltd. Income Tax Reference No. 215 of 1993 29.06.2005 016. During the course of hearing, the assessee has raised additional ground that if any addition is made to the total income of the assessee, whole of such income is eligible for deduction under Section 80P(2)(a) of the Act. 017. The learned Departmental Representative supported the orders of the lower authorities. He submitted that assessee is one of the Multi State Co-operative Bank wherein huge cash is deposited at Hyderabad Branch in very few numbers of days. This cash was deposited only with the AXIS bank and from there the money was transferred to the different account and such accounts where the money deposited was also closed after the money transferred to different account. He further submitted that some of the money has gone to foreign countries. This shows that the assessee is one of the parties where the huge tax evasion has been made. He further submitted that when the bank has not maintained the KYC information of the depositors, it itself proves the connivance of the managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that date. In nutshell, the assessee's total balance sheet strength is Rs.14.70 corres. Looking to the amount deposited by members is very huge and unusual. 025. In the original assessment proceedings, the learned assessing officer has made an addition under section 68 of the income tax act of Rs. 143,345,343/- wherein the deposits have been accepted by the assessee from its members but could not give the complete name, address and permanent account number of such members. Before the learned CIT - A assessee furnished additional evidences which were sent to the assessing officer for comment and enquiry, the AO stated that complete list of depositors along with the details of the KYC documents were not submitted. The finding was that that the documents of 'Know your customer' were not properly filled and were not supported with proper documents and no physical verification of the address was made. The AO issued several [40] notices under section 133 (6) at the details submitted by the assessee, out of which 26 notices did not reply and only 2 out of them replied to such notices. The balance 14 notices issued returned back unserved. Therefore, the learned CIT - A also conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomer norms. The balances of 14 notices were received back. The learned AO did not say that whether the addresses to which this notices were served were not correct, it has changed, or the parties have left or for any other reasons. It is the claim of the assessee that the members of it are residing in rural areas and most of them are farmers having agricultural income, some of them are small shopkeepers. It is also not the finding of the AO that that the members had only account for which the addition is made. Those members may also have the accounts in the nature of other deposits such as savings, current deposits or fixed deposits. Further, with respect to 26 accounts, the addition is sustained by the learned CIT - A in the hands of the assessee is also not justified. No reason is given by the learned CIT - A to confirm the action of the AO with respect to the full amount of Rs. 14.33 crores when those parties were served notices and 2 of them have replied to such notice. According to this, the addition made by the learned AO and confirmed by the learned CIT - A cannot be sustained. However, the learned assessing officer is further required to examine with respect to the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early shows that they have earned this commission income in the books of society. Accordingly we direct the learned assessing officer to delete the addition of Rs. 2,961,985/-. Accordingly, ground number 7 of the appeal is allowed. 029. Ground number 8 is with respect to the statement of the managing director of the assessee recorded under section 131 of the act which was not provided to the assessee. This is with respect to ground number seven of the appeal. As the ground number seven of the appeal has already been allowed in favour of the assessee, ground number 8 becomes infructuous and hence dismissed. 030. Accordingly ITA number 473/M/2022 for assessment year 2016 - 17 is partly allowed as indicated above. 031. Now we come to the appeal in ITA number 2145/M/2022. Ground number 1 of the appeal is general in nature, no arguments were advanced, therefore, same is dismissed. 032. Ground number 2 - 4 of the appeal is with respect to the addition of Rs. 1,643,351,753/- on account of the cash deposited by 10 members of the society during a short span and the details furnished by the assessee of KYC norms is inadequate or incorrect. 033. The fact shows that assessee opened a bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the forms were different to that of the PAN data and 360° profiling of the mobile numbers. The mobile numbers were found to be inactive. Therefore it is clearly established that the assessee has not followed the due diligence procedure for collecting necessary information from the members while opening the accounts with the assessee society. The assessee society has also not carried out any verification before opening of the account of those members. All the summons issued under section 131 of the act returned by the postal authorities as the persons are not known. It is not the case that the addresses are incomplete or the persons have left, the remark was that those persons are not known. The inspectors deputed of the investigation wing who also could not trace the members. It was also found some funds have been ultimately transferred were remitted directly as foreign remittances. Further, as the assessee society was not having facility of RTGS, it was done through other banks in Hyderabad. The assessee was asked to produce these parties, assessee failed to. It is surprising that the assessee has accepted cash of Rs. 196 crores from those persons and it does not know where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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