2017 (4) TMI 1421 - AT - Income Tax

Addition u/s 68 on account of cash deposited in the bank account - assessee explained before the AO that the cash belongs to her husband Sri Surendra Kumar out of his explained source and further submitted that her husband has received this amount from his father Sri Govindappa - Held that - Since all the parties are related to each other therefore, the authorities below doubted the genuineness of the transaction. Even otherwise, when the accounts in which this cash was found deposited is in the joint name of assessee and Mr. Surendra Kumar then explanation of the assessee that this amount belongs to her husband cannot be brushed aside without proper inquiry. Thus in view of the fact that the creditor though relative of the assessee accepted the transaction of advance of ₹ 12 lakhs then in the absence of conducting a proper enquiry of disproving the claim of the assessee the said explanation cannot be rejected on technical reasons. Further there is no dispute that this is a transaction of deposit in the bank therefore the issue of applicability of Section 68 arises in view of the various decisions of this Tribunal as well as the decision of Hon ble Bombay High Court in the case of CIT Vs. Bhaichand N Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT . - Decided in favour of assessee.

Summary

Issues:
- Whether the addition made under Section 68 of the Income Tax Act on account of cash deposited in the bank account is justified.

Analysis:
The appeal concerns the addition made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, due to a cash deposit of ?12 lakhs in the assessee's bank account that was not declared. The assessee claimed the cash belonged to her husband, received from his father, and challenged the addition before the CIT (Appeals). The CIT (Appeals) confirmed the addition, leading to the appeal before the Tribunal.

The assessee argued that the cash deposit was reflected in the balance sheet of her father-in-law, demonstrating the source of the funds. The Assessing Officer did not dispute the cash availability with the father-in-law but raised concerns about the lack of the statement of account in the husband's books of accounts. The Tribunal noted that the bank passbook cannot be considered as books of accounts, citing relevant case law, and emphasized the need for credit entries in the books for invoking Section 68.

The Departmental Representative supported the lower authorities' decisions, highlighting the insufficiency of the explanation and evidence provided by the assessee. However, the Tribunal found that the assessee had offered reasonable explanations and confirmations regarding the deposits in the bank passbook. It further referenced judgments stating that Section 68 cannot be invoked solely based on bank deposits without corresponding entries in the assessee's books of accounts.

Considering the submissions and relevant legal precedents, the Tribunal concluded that the addition made under Section 68 was unjustified. It emphasized the importance of maintaining books of accounts for invoking Section 68 and highlighted the need for proper inquiry before rejecting the assessee's explanation solely on technical grounds. The appeal was allowed, and the addition under Section 68 was deleted.

In summary, the Tribunal's decision revolved around the interpretation of Section 68 of the Income Tax Act, emphasizing the necessity of credit entries in the assessee's books of accounts for invoking the provision. The judgment underscored the distinction between bank passbooks and books of accounts, citing relevant case law to support the conclusion that the addition made based on bank deposits alone was unwarranted.