2016 (9) TMI 605 - AT - Income Tax

Unexplained cash credit u/s 68 - cash deposits made in the joint bank account of assessee husband and wife - bank Pass Book is not an account book maintained by the assessee so as to fall within the ambit of section 68 - Held that - In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of section 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass Book is not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation where any sum is found credited in the books of an assessee . The Hon ble Bombay High Court in the case of Shri Bhaichand Gandhi (1982 (2) TMI 28 - BOMBAY High Court ) has approved the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act . Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon ble Bombay High Court in the case of Shri Bhaichand Gandhi(supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. - Decided in favour of assessee

Issues:
1. Treatment of cash deposits in joint bank account as unexplained cash credits under section 68 of the Income Tax Act, 1961.
2. Application of legal precedent regarding bank pass book as an account book.
3. Rejection of explanation provided by the assessee for cash deposits.
4. Admissibility of additional ground of appeal based on legal issue.
5. Assessment of evidence and credibility of explanations provided by the assessee.

Issue 1: Treatment of Cash Deposits
The judgment involves appeals related to cash deposits in a joint bank account being treated as unexplained cash credits under section 68 of the Income Tax Act, 1961. The husband's amount was assessed substantively, while the wife's was assessed protectively. The husband's appeal was taken as the lead case. The husband explained the deposits were for his wife's costly medical treatment due to multiple sclerosis. The Assessing Officer rejected the explanation, invoking section 68. The CIT(A) partially allowed relief but confirmed a balance as unexplained. The Tribunal held that the invoking of section 68 based solely on bank pass book entries was not justified, citing a Bombay High Court judgment. The addition was directed to be deleted.

Issue 2: Application of Legal Precedent
The assessee relied on the legal position established by the Bombay High Court in Bhaichand Gandhi's case regarding the bank pass book not being considered an account book maintained by the assessee under section 68. The Tribunal agreed that section 68 applies only when an amount is found credited in the assessee's account books, not just the bank pass book. As the assessee did not maintain account books, invoking section 68 solely based on the pass book was deemed incorrect, leading to the deletion of the addition.

Issue 3: Rejection of Assessee's Explanation
The Assessing Officer rejected the explanation provided by the assessee regarding the source of cash deposits, stating lack of corroborative evidence. The CIT(A) partially allowed relief but upheld a portion of the addition. The Tribunal noted that the explanation was disbelieved without credible evidence of its fallacy. While formal corroborative evidence was lacking, the circumstances of cash deposits and their utilization were apparent from the record. The Tribunal emphasized that section 68 is a rule of evidence and held the addition unsustainable based on the legal position and lack of credible infirmity in the explanation.

Issue 4: Admissibility of Additional Ground
The assessee raised an additional ground of appeal based on a legal issue, citing a jurisdictional High Court decision. The Tribunal admitted the additional ground for adjudication, emphasizing that the necessary facts were on record, and both sides were heard on its merits. The additional ground was found to involve a pure point of law and was admitted following relevant judicial precedents.

Issue 5: Assessment of Evidence and Credibility
The Tribunal assessed the credibility of the explanations provided by the assessee for the cash deposits. While formal corroborative evidence was lacking, the Tribunal noted that the circumstances surrounding the deposits and their utilization were apparent from the record. The Assessing Officer failed to disprove the explanations provided by the assessee. The Tribunal emphasized that section 68 is a rule of evidence and held the addition unsustainable based on the legal position and lack of credible infirmity in the explanation.

In conclusion, the Tribunal allowed the appeals, directing the deletion of the additions made under section 68 of the Income Tax Act, 1961, based on the legal position regarding the bank pass book and the lack of credible infirmity in the assessee's explanations for the cash deposits.

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