2018 (11) TMI 1550 - AT - Income Tax

Addition u/s 68 - unexplained Cash deposits in bank - Held that - Section 68 can be applied only where, there are sum found credited in books of account maintained by assessee. No doubt passbook /bank statement, are maintained by a bank for its customers. Thus in our considered opinion, we agree with proposition advanced by AR of non applicability of section 68 in case of cash credit found in saving bank account. Further observed that AO applied section 68 and made additions in hands of assessee, as unexplained cash credits, to such amount, which has been found deposited by assessee in his saving bank account. To our mind in present facts of case section 69 should have been initiated by Ld.AO. It is unfortunate that Assessing Officers blindly apply provisions, which can be fatal to the interest of Revenue. However as a Tribunal, we are not competent to make addition u/s 69A of the Act, by virtue of the decision of Hon ble Allahabad High Court in case of Smt. Sarika Jain vs. CIT 2017 (7) TMI 870 - ALLAHABAD HIGH COURT - we allow additional ground raised by assessee, only because addition u/s 68 is not sustainable in present facts of case. - Decided in favour of assessee.

Summary

Issues:
1. Incorrect addition under section 68 for cash deposits in bank.

Analysis:
The appellant challenged the addition made under section 68 for cash deposits in the bank account. The Assessing Officer (AO) had called upon the appellant to explain the source of the cash deposits, which the appellant claimed was from the sale of agricultural land. The AO, however, made the addition under section 68 as income from undisclosed sources. The appellant then appealed to the Commissioner of Income Tax (Appeals) [CIT (A)], who upheld the AO's decision.

Upon further appeal, the appellant argued that since they were not maintaining any books of account, the addition under section 68 was not valid. The appellant's representative referred to the definition of "books of account" under section 2(12A) of the Income Tax Act and cited various decisions of the Tribunal in support of their argument.

On the other hand, the Senior Departmental Representative (DR) contended that bank accounts could be considered as "account books" and "other books" under the definition of "books of account." The DR argued that since the appellant failed to explain the source of the cash deposits, the AO was justified in invoking section 68.

After hearing both parties, the Tribunal noted that the appellant did not maintain any books of accounts and that the cash deposits were explained as sale proceeds of agricultural land. The Tribunal agreed with the appellant's argument that section 68 could only be applied when sums are found credited in the books of account maintained by the assessee.

The Tribunal further observed that in the present case, section 69 should have been initiated instead of section 68 by the AO. Citing a decision of the Allahabad High Court, the Tribunal allowed the additional ground raised by the appellant and deleted the addition made under section 68. Consequently, the other grounds raised by the appellant were dismissed as infructuous, and the appeal was allowed in favor of the appellant.