2017 (12) TMI 1055 - AT - Income Tax

Addition u/s 68 - reopening of assessment - AIR information that the assessee had deposited cash in the Savings Bank account with Bank of India during the year - Held that - It has been held by various courts of law that cash credited in the bank book is not a book maintained by the assessee and the same cannot be treated as income u/s 68 of the Act. Assessing Officer does not get jurisdiction to assess the said deposit of the amount in the bank as income of the assessee u/s 68 of the Act. In that view of the matter, the addition so made by the Assessing Officer and confirmed by the ld. CIT(A) is directed to be deleted. Accordingly, the legal grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Validity of reassessment order under sections 144/147 of the Income Tax Act, 1961.
2. Legality of additions made by the Assessing Officer (AO) for unexplained cash deposits in the Savings Bank account.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Order under Sections 144/147:
The assessee contended that the reassessment order framed under sections 144/147 was invalid due to non-compliance with mandatory conditions under sections 147 to 151 of the Income Tax Act, 1961. The case was selected for scrutiny based on AIR information indicating that the assessee had deposited ?22,01,000 in a Savings Bank account. The notice under section 148 was issued but not served properly, leading to the assessment being made under section 144. The CIT(A) dismissed the assessee's challenge, confirming the AO's action.

2. Legality of Additions for Unexplained Cash Deposits:
The assessee argued that the addition of ?22,01,000 for cash deposits in the bank account was erroneous. The counsel for the assessee, Dr. Rakesh Gupta, cited various judicial precedents asserting that cash deposits in a bank passbook cannot be treated as income under section 68 of the Act. The ITAT referred to multiple case laws, including decisions from the Bombay High Court and Delhi High Court, which established that a bank passbook is not a book maintained by the assessee and thus, cash credits in such passbooks do not fall within the ambit of section 68.

The ITAT emphasized that the relationship between a banker and customer is that of debtor and creditor, and the passbook provided by the bank is merely a copy of the account in the bank's books, not maintained under the instructions of the assessee. Consequently, the addition made by the AO under section 68 was deemed unsustainable.

Conclusion:
The ITAT concluded that since the assessee did not maintain any books of account, the bank passbook could not be considered for invoking section 68. The reassessment order and the addition of ?22,01,000 were deemed invalid. The appeal of the assessee was allowed, and the addition was directed to be deleted.

Judgment Pronouncement:
The order was pronounced in the open court on 14.12.2017, allowing the appeal of the assessee in ITA No. 4036/DEL/2017.