Indian Tax Tribunal Overturns Demonetisation Cash Additions for Co‑operative Societies

The Income Tax Appellate Tribunal (ITAT) in Ahmedabad set aside a Section 69A addition against Shreyas Co‑op Credit Society Ltd, ruling that cash deposits made in old ₹500 and ₹1,000 notes during the November‑December 2016 demonetisation period could not be treated as unexplained merely because of their denomination. The Tribunal directed the Assessing Officer to examine whether the deposits were commensurate with the society’s sales and to produce evidence linking the cash to business receipts.

Separately, a two‑member bench of the ITAT in Bangalore held that Specified Bank Note (SBN) deposits received by The Somavamsha Sahasrarjuna Kshatriya Co‑operative Society before 31 December 2016 could not be regarded as unexplained cash credits under Section 68. The bench ordered the addition made by the Assessing Officer to be deleted, emphasizing that the cessation of legal tender status for SBN did not, by itself, justify an addition.

Both rulings clarify that the mere presence of old‑currency notes or SBN does not automatically trigger unexplained‑cash provisions; a direct correlation with legitimate business transactions is required.