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2021 (9) TMI 1212 - AT - Income TaxAddition u/s 68 - Addition pertaining to cash deposits in bank account - HELD THAT - No dispute that the cash deposits were made in the bank account and there were no cash credits in the books of accounts. AO did not bring any material to show that the assessee has brought cash credits in the books of accounts for which the source was not explained. As per section 68, cash credits made in the books of accounts for which the assessee could not explain the source to the satisfaction of the AO, required to be brought to tax u/s 68 of the Act. In the instant case, the deposits were made in the bank account. As per the settled issue, the bank deposits required to be made addition u/s 69 but not u/s 68 of the Act. The bank passbook or bank statement does not amount to the books of accounts of the assessee. As in the case of Babbal Bhatia 2018 (6) TMI 1030 - ITAT DELHI held that the bank is different from books of accounts of the assessee and credit in the bank account of the assessee cannot be construed as credit in the books of accounts of the assessee - Tribunal in the case of Asha Sanghavi 2019 (11) TMI 868 - ITAT VISAKHAPATNAM has taken similar view and held that cash deposits made in the bank account cannot be brought to tax u/s 68. In the instant case, there is no dispute that the deposits were made in the bank account and there were no entries in the books of accounts. The deposits made in Bank account are not permissible to tax u/s 68 - addition made by the AO u/s 68 in respect of cash deposits made in the bank are unsustainable, accordingly deleted. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of additions made under Section 68 of the Income Tax Act concerning unexplained cash deposits in the bank account. 2. Whether the CIT(A) was correct in sustaining the addition of ?12,23,000 as unexplained cash deposits. 3. Correctness of the CIT(A) in confirming the addition of ?1,75,000 as unexplained cash credit for investment in a firm. 4. Whether Section 68 can be invoked for deposits made in the bank account. Issue-wise Detailed Analysis: 1. Validity of Additions Made Under Section 68 of the Income Tax Act Concerning Unexplained Cash Deposits in the Bank Account: The assessee argued that the Assessing Officer (AO) committed an error by invoking Section 68 for the addition related to unexplained cash deposits in the bank account. The Tribunal noted that Section 68 applies to unexplained cash credits recorded in the books of accounts, not bank deposits. The Tribunal cited various decisions, including the ITAT Delhi Bench in the case of Babbal Bhatia, which held that bank deposits should be considered under Section 69, not Section 68. The Tribunal emphasized that the bank passbook or bank statement does not amount to the books of accounts of the assessee. 2. Whether the CIT(A) Was Correct in Sustaining the Addition of ?12,23,000 as Unexplained Cash Deposits: The CIT(A) had confirmed the addition made by the AO, who found that the assessee made cash deposits of ?12,23,000 and was not satisfied with the explanation provided by the assessee. The Tribunal, however, held that since the deposits were made in the bank account and not credited in the books of accounts, the addition under Section 68 was unsustainable. The Tribunal referred to multiple decisions, including the Hon’ble Bombay High Court in CIT vs. Bhaichand H. Gandhi, which supported the view that bank deposits cannot be construed as credits in the books of accounts of the assessee. 3. Correctness of the CIT(A) in Confirming the Addition of ?1,75,000 as Unexplained Cash Credit for Investment in a Firm: The Tribunal did not specifically adjudicate on the merits of this issue, as it had already decided the appeal on the legal ground that the additions under Section 68 were unsustainable. The Tribunal focused on the legal aspect that Section 68 could not be invoked for bank deposits, thereby rendering the need to address individual merits unnecessary. 4. Whether Section 68 Can Be Invoked for Deposits Made in the Bank Account: The Tribunal held that Section 68 could not be invoked for deposits made in the bank account, as it applies only to credits in the books of accounts maintained by the assessee. The Tribunal cited various case laws, including the Hon’ble Supreme Court in Baladin Ram vs. CIT and the Hon’ble Jurisdictional High Court of Delhi in CIT vs. Ms. Mayawati, which clarified that a bank passbook or statement is not equivalent to the books of accounts of the assessee. The Tribunal concluded that the AO's addition under Section 68 was incorrect and unsustainable. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the additions made by the AO under Section 68 in respect of cash deposits made in the bank account were unsustainable. The Tribunal set aside the order of the CIT(A) and deleted the additions made by the AO. The Tribunal emphasized that bank deposits should be considered under Section 69, not Section 68, and that the bank passbook or statement does not amount to the books of accounts of the assessee.
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