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2024 (1) TMI 849 - AT - Income TaxUnexplained cash credit u/s 68 r.w.s. 115BBE - assessee not maintaining books of accounts - HELD THAT - As evident from the material available before us that the assessee has not maintained any books of accounts, neither she was required to maintain books of accounts as prescribed under the provisions of I.T. Act. Since her source of income are only salary, house property and other sources. It is also a fact that the addition on account of unexplained cash credit has been made u/s 68 r.w.s. 115BBE by the Ld. AO, which has been further affirmed by the Ld. CIT(A) without observing that the addition should not have been made u/s 68. Contention of the revenue based on judgment of Smt. Gloria Eugenia Rynjah Banerji 2023 (8) TMI 1418 - ITAT DELHI cannot be subscribed to as following the judicial discipline we are bound to follow the ratio of law and analogy drawn by H Bhaichand N. Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT which has not been considered while decision was offered by the tribunal. Thus wherein the addition u/s 68 was proposed on the basis of entries in the Bank Passbook, which cannot be treated as books of accounts of the assessee, therefore, the contention of the Ld. AR that addition u/s 68 cannot be made when no books of accounts are maintained by the assessee is worth concurring which is well supported by the analogy and well settled principle of law drawn by Hon ble Bombay HC in the case of Bhaichand N. Gandhi (supra). Thus addition made u/s 68 in case of the assessee, who is not maintaining books of accounts is bad in law and thus, is liable to be vacated. Decided in favour of assessee.
Issues Involved:
1. Addition of Rs. 35,00,000/- under Section 68. 2. Applicability of Section 68. 3. Validity of the assessment order. 4. Scope of "Limited Scrutiny." Issue 1: Addition of Rs. 35,00,000/- under Section 68 The assessee contested the addition of Rs. 35,00,000/- made by the AO under Section 68, arguing that the loans were genuine and supported by documentary evidence. The AO treated the loans from M/s Mission Dealmark Private Limited and M/s Starlink Iron & Steel Private Limited as unexplained cash credits. The Tribunal noted that the assessee provided confirmations, bank statements, and financial statements of the lenders. The AO conducted an enquiry through PDIT (Inv.) & DDIT (Inv.), Kolkata, which yielded no adverse findings. The Tribunal found that the burden cast on the assessee was discharged, and reliance was placed on the judgment in CIT vs Orissa Corporations (P) Ltd. (1986) 159 ITR 78 (SC). Issue 2: Applicability of Section 68 The assessee argued that Section 68 was not applicable as no books of accounts were maintained. The Tribunal referred to several judicial pronouncements, including CIT vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bom.), which held that a bank passbook is not considered a "book" for the purposes of Section 68. Consequently, the addition made under Section 68 was deemed invalid. Issue 3: Validity of the Assessment Order The assessee contended that the assessment order was illegal and violated principles of natural justice. The Tribunal did not separately adjudicate this issue, as the addition under Section 68 was already vacated based on the non-maintenance of books of accounts. Issue 4: Scope of "Limited Scrutiny" The Tribunal observed that the case was selected for "Limited Scrutiny" to examine cash deposits and transactions in property. However, the AO made additions based on unsecured loans, which were not within the scope of the "Limited Scrutiny." The Tribunal referenced judgments that emphasized the AO's jurisdiction should be confined to the issues specified in the "Limited Scrutiny" notice. Conclusion: The Tribunal vacated the addition of Rs. 35,00,000/- made under Section 68, ruling that the assessee did not maintain books of accounts, and thus, Section 68 was inapplicable. The appeal was allowed, and other grounds were left open for not requiring separate adjudication. The judgment was pronounced in the open court on 10/01/2024.
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