2016 (10) TMI 692 - AT - Income Tax

Deposits from unexplained sources addition u/s 68 - Held that - The assessee does not maintain any books of account. Under these circumstances, no addition can be made u/s 68 of the Act. Even otherwise, the alternative contention of the assessee that the peak credit has to be taken into account by considering both the bank accounts has much force. On a perusal of the cash credit of the peak submitted by the assessee, the addition cannot be sustained. On this ground also the addition cannot be sustained. - Decided in favour of assessee

Summary

Issues:
Assessment of unexplained deposits under section 68 of the Income Tax Act without the maintenance of books of account.

Analysis:
The case involved an individual assessee who deposited a significant amount in two bank accounts during the year. The Assessing Officer (AO) added these deposits as unexplained sources under section 68 of the Act due to the absence of maintained books of account by the assessee. The CIT(A) upheld this addition, leading to the appeal before the ITAT.

Legal Precedents - Bombay High Court & Delhi High Court:
The ITAT, Delhi, referred to judgments by the Bombay High Court and Delhi High Court to support its decision. The Bombay High Court in CIT vs. Bhaichand H Gandhi clarified that a bank passbook is not a book maintained by the assessee or under their instructions, and thus, cash credits in the passbook not reflected in the assessee's cash book do not fall under section 68. Similarly, the Delhi High Court in CIT vs. Ms. Mayawati emphasized that a passbook cannot be equated to books of account, especially when the assessee does not maintain any books. These judgments highlighted the distinction between bank passbooks and maintained books of account.

ITAT Lucknow Judgment:
The ITAT Lucknow "B" Bench's decision in ITO vs. Kamal Kumar Mishra further clarified the applicability of section 68. It stated that the provisions of section 68 can only be invoked when a sum is credited in books maintained by the assessee. The judgment emphasized that a passbook issued by a bank does not qualify as the assessee's books for section 68 purposes. The judgment referenced the Supreme Court's stance on undisclosed income assessment and reiterated that a passbook is a record of the bank, not the assessee.

Peak Credit Consideration:
The ITAT also considered the assessee's argument regarding peak credit from both bank accounts. It found merit in the alternative contention, stating that upon reviewing the peak credit submitted by the assessee, the addition could not be sustained. The ITAT ultimately allowed the appeal of the assessee, highlighting the insufficiency of evidence to support the addition under section 68.

In conclusion, the ITAT, Delhi, ruled in favor of the assessee, emphasizing the importance of maintaining books of account for invoking section 68 of the Income Tax Act and citing relevant legal precedents to support its decision. The judgment underscored the distinction between bank passbooks and maintained books of account, ultimately leading to the allowance of the assessee's appeal.