2012 (6) TMI 566 - AT - Income Tax

Cash credit - addition u/s 68 - gift - held that - The addition could very well be justified even under section 69 of the Act. It is for the assessee to prove the sources of the credits in the bank account as the bank itself has acknowledged that the assessee has an asset in the form of credits in the passbook. It is only for this reason that the assessee ventured into furnishing the evidence in support of the claims of gifts stated to have been received by her. The assessee being found to be the owner of a particular asset is definitely under an obligation to disclose all the sources thereof to the satisfaction of the tax authorities. So, the quarrel whether it is section 68 or section 69 should not make a difference having regard to the subsisting obligation of the assessee to explain all the credits and sources of the investments found by the Revenue. In my view, the learned Judicial Member was unnecessarily in haste to get into the case laws without properly appreciating the facts of the case. It always happens whenever a judgment is appreciated without appreciating the facts that led to that particular decision. I am observing this because it was not the case of the assessee either before the AO or before the CIT(A) and the record that is produced by the assessee before the authorities and before the Tribunal is sufficient to indicate the fact relating to the maintenance of the books of account by the assessee, as discussecd by the learned Accountant Member. Therefore, in my view, deleting the addition only on the legal grounds without appreciating the facts on record does not bring proper result. - Decided against the assessee by three member bench.

Issues Involved:

1. Correctness of the assessment of total income.
2. Disallowance of deductions under various heads.
3. Disallowance of gifts received and addition under Section 68 of the Income Tax Act.
4. Charging of interest under Sections 234A, 234B, and 234C.
5. Initiation of penalty under Section 271(1)(c).
6. Legality of the assessment order.

Detailed Analysis:

1. Correctness of the Assessment of Total Income:

The appellant contended that the Commissioner of Income-tax (Appeals) erred in holding that the assessment was correctly made by the Income Tax Officer at a total income of Rs. 6,11,700/-. However, this ground was noted as general in nature and did not require separate adjudication.

2. Disallowance of Deductions Under Various Heads:

The appellant challenged the disallowance of deductions totaling Rs. 26,011/- under the heads of depreciation, insurance, interest on loan, and petrol expenses. However, this ground was not pressed during the hearing, leading to its dismissal.

3. Disallowance of Gifts Received and Addition Under Section 68:

This was the primary contentious issue. The appellant received two gifts of Rs. 2,00,000/- each from Shri Jay Singh Yadav and Shri Gajanand Goyal. The Assessing Officer (AO) added these amounts under Section 68 of the Income Tax Act, questioning the genuineness and creditworthiness of the donors.

- Shri Jay Singh Yadav: The donor was produced before the AO, and his statement was recorded. He confirmed the gift and provided details. However, the AO noted that the cash was deposited in the donor's bank account just three days before the gift. Despite the donor's explanation of receiving back petty loans, the AO disregarded his statement and added the amount under Section 68.

- Shri Gajanand Goyal: The appellant provided the donor's affidavit, PAN, income-tax and wealth-tax assessments, balance sheet, and statement of wealth to prove his identity and capacity. The donor was not produced before the AO due to being a victim of a bomb blast. The AO rejected the gift, citing unproven creditworthiness, and added the amount under Section 68.

The Commissioner of Income-tax (Appeals) upheld the AO's decision. The appellant argued that the gifts were genuine and that no addition could be made under Section 68 as the appellant did not maintain books of accounts in her individual capacity.

Judicial Member's Decision:
The Judicial Member concluded that Section 68 applies only to entries in the books of account, and a bank passbook is not considered a book of account. Therefore, the addition under Section 68 was not justified.

Accountant Member's Dissent:
The Accountant Member disagreed, stating that the appellant maintained books of account for her business and personal transactions. He argued that even if the bank account was not part of the regular accounts, the addition could be justified under Section 69, which covers unexplained investments.

Third Member's Decision:
The Third Member agreed with the Accountant Member, emphasizing that the appellant maintained proper books of account, and the gifts were reflected in her financial statements. He upheld the additions, stating that the obligation to explain the sources of credits in the bank account lies with the appellant.

4. Charging of Interest Under Sections 234A, 234B, and 234C:

The appellant contended that the Commissioner of Income-tax (Appeals) was wrong in confirming the AO's decision to charge interest under Sections 234A, 234B, and 234C. This ground was not pressed during the hearing, leading to its dismissal.

5. Initiation of Penalty Under Section 271(1)(c):

The appellant argued against the initiation of penalty under Section 271(1)(c). This ground was not pressed during the hearing, leading to its dismissal.

6. Legality of the Assessment Order:

The appellant claimed that the assessment order was bad in law and against the facts and circumstances of the case. This ground was noted as formal in nature and did not require separate adjudication.

Conclusion:

The appeal was dismissed based on the majority decision, with the Third Member agreeing with the Accountant Member's view that the additions under Section 68 were justified. The appellant's contentions regarding the disallowance of gifts and other grounds were not accepted, and the assessment order was upheld.

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