2022 (2) TMI 424 - AT - Income Tax

Addition u/s 68 - addition of the cash deposited in the bank account - HELD THAT - We have given a thoughtful consideration to the issue before us and are persuaded to subscribe to the claim of the ld. A.R that as the bank account or bank passbook of an assessee cannot be held as his 'books of account', hence, no addition in respect of a simpliciter cash deposit made in the said account could validly be made under Sec.68 of the Act. Our aforesaid view is fortified by the judgment of CIT Vs. Bhaichand H. Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment order.
2. Validity of the assessment of saving bank account deposits as income.
3. Service of notice under sections 148 and 142(1).
4. Opportunity for the assessee to present their case.
5. Satisfaction recorded by the Assessing Officer (AO) for initiating proceedings under section 147.
6. Approval for initiation of proceedings granted by the designated officer.
7. Addition under section 68 of the Income Tax Act.
8. Merits of the addition in light of previous judicial decisions.

Detailed Analysis:

1. Legality of the Assessment Order:
The assessee contended that the assessment order was wrong, illegal, and against facts. The Tribunal found that the AO's assessment order, upheld by the CIT(A), was based on the unexplained cash deposits in the assessee's bank account.

2. Validity of the Assessment of Saving Bank Account Deposits as Income:
The AO assessed cash deposits of ?12,13,700 in the assessee's ICICI Bank account as unexplained investment under Section 68 of the Income Tax Act. The Tribunal held that the bank account cannot be considered as "books of account" maintained by the assessee, and thus, no addition under Section 68 could be made for cash deposits in the bank account. This view was supported by the Bombay High Court's judgment in CIT vs. Bhaichand N. Gandhi.

3. Service of Notice under Sections 148 and 142(1):
The assessee claimed that no notice under sections 148 and 142(1) was served. However, the Tribunal did not specifically address this issue, as the primary ground for quashing the assessment was the improper application of Section 68.

4. Opportunity for the Assessee to Present Their Case:
The assessee argued that no reasonable opportunity was provided during the assessment. The Tribunal did not delve into this issue, focusing instead on the improper use of Section 68.

5. Satisfaction Recorded by the AO for Initiating Proceedings under Section 147:
The assessee contended that the AO did not record proper satisfaction for initiating proceedings under Section 147. The Tribunal did not specifically address this issue, as the assessment was quashed on other grounds.

6. Approval for Initiation of Proceedings Granted by the Designated Officer:
The assessee argued that the approval for initiation of proceedings was granted mechanically. The Tribunal did not specifically address this issue due to the primary ground for quashing the assessment.

7. Addition under Section 68 of the Income Tax Act:
The Tribunal found that the AO's addition under Section 68 was unsustainable. The bank account cannot be considered as "books of account" maintained by the assessee, and thus, the cash deposits could not be added under Section 68. This was supported by the Bombay High Court's judgment in CIT vs. Bhaichand N. Gandhi and other similar cases.

8. Merits of the Addition in Light of Previous Judicial Decisions:
The Tribunal referenced several judicial decisions, including CIT vs. Bhaichand N. Gandhi, Mehul V. Vyas vs. ITO, and others, to support the view that a bank account is not "books of account" for the purposes of Section 68. Consequently, the addition of ?12,13,700 was deleted, and the order of the CIT(A) was set aside.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the assessment order and deleting the addition of ?12,13,700 made by the AO under Section 68 of the Income Tax Act. The Tribunal emphasized that a bank account cannot be considered "books of account" maintained by the assessee, thus invalidating the addition under Section 68. Other issues raised by the assessee were left open, as the primary ground for quashing the assessment was the improper application of Section 68.