2017 (3) TMI 799 - AT - Income Tax

Addition u/s 68 by the AO - CIT(A) confirmed the additions u/s 69 - nature of deposit / credited into the bank account - unaccounted money - Held that - The assessee is right when he says that the provisions of section 68 cannot be applied to amount credited in the bank account. Also further note from the same para that Ld. CIT(A) was wrong in observing that the provisions of section 69 would quite clearly apply to amounts deposited into the assessee s bank account, which was not under the grounds of appeal or cause of action. The provisions of Section 292B of the I.T. Act, 1961 are also not applicable because there is no mistake, the AO has made the addition u/s. 68 with the clear mind and after satisfaction. - Decided in favour of assessee

Summary

Issues involved:
1. Applicability of provisions of Sec. 68 and Sec. 69 of the Income Tax Act, 1961.
2. Applicability of Section 292B of the Income Tax Act, 1961.

Detailed Analysis:
1. The Assessee filed an appeal against the Order of Ld. CIT(A) regarding assessment year 2004-05, challenging the addition made by the AO under Sec. 68 of the Income Tax Act, 1961. The AO found discrepancies in the bank account transactions of the Assessee, where large amounts were deposited and withdrawn without proper explanation. The Assessee claimed that the deposits were made by purchasers of his land, but investigations revealed inconsistencies and forged documents. The AO concluded that the Assessee failed to prove the source of the deposits, adding back the amount to the Assessee's income under Sec. 68. The Assessee appealed, arguing against the applicability of Sec. 68 and Sec. 69 in this case.

2. The Assessee pressed grounds related to the applicability of Sec. 292B of the Income Tax Act, 1961, stating that no mistake was made by the AO in adding the amount under Sec. 68. The Assessee relied on a decision of ITAT, Mumbai, which held that bank passbooks cannot be considered as account books maintained by the assessee for the purpose of Sec. 68. The Tribunal found merit in the Assessee's argument, citing the Mumbai decision, and held that the addition made by the AO was not sustainable. The Tribunal also noted that the explanation provided by the Assessee was not disproved by the AO, and since the addition under Sec. 68 was not valid, the appeal of the Assessee was allowed. The Tribunal further clarified that the provisions of Sec. 292B were not applicable in this case as there was no mistake in the AO's decision under Sec. 68.

In conclusion, the Tribunal allowed the Assessee's appeal, ruling in favor of the Assessee based on the non-applicability of Sec. 68 and Sec. 69, as well as Sec. 292B of the Income Tax Act, 1961. The decision was influenced by a previous judgment of ITAT, Mumbai, which established that bank passbooks cannot be considered as account books maintained by the assessee for the purpose of Sec. 68. The Tribunal found that the Assessee's explanation was not adequately challenged by the AO, leading to the deletion of the addition made under Sec. 68.