2020 (12) TMI 13 - AT - Income Tax

Addition u/s 68 v/s 69 - deposits made in the bank account - AR argued that the addition made u/s 68 is unsustainable, since, the deposits were made in the bank accounts but not in the books of accounts - HELD THAT - AO found that the deposits were made in Savings Bank account with Andhra Bank and the same was not taken in to account in books of accounts, thus, it is clear that the deposits made in the bank account were not entered in the books of accounts. Therefore, the AO ought to have considered the addition u/s 69 instead of 68. As discussed earlier, the deposits made in the bank account are not to be taxed u/s 68 of the Act and the correct course of action is to tax the same is u/s 69 of the Act. On similar facts, this Tribunal in the case of Smt.Asha Sanghavi 2019 (11) TMI 868 - ITAT VISAKHAPATNAM held that the cash deposits required to be brought to tax u/s 69, but not u/s 68 of the Act. - Decided in favour of assessee.

Issues Involved:
1. Sustaining the addition of ?33,34,000/- under Section 68 of the Income Tax Act, 1961.
2. Admission of additional evidence by the Commissioner of Income Tax (Appeals).
3. Justification of the addition of ?33,34,000/- as unexplained cash credits.
4. Justification of interest charged under Sections 234A and 234B of the Income Tax Act.
5. Validity of addition under Section 68 for deposits in bank accounts.
6. Consideration of deposits already disclosed in the books of account.

Detailed Analysis:

1. Sustaining the Addition of ?33,34,000/- under Section 68:
The primary issue was the addition of ?33,34,000/- out of a total of ?37,34,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, towards unexplained cash credits. The assessee contended that the deposits were sourced from loans and gifts from family members, withdrawals from the capital account, and agricultural income. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed relief for ?4,00,000/- as agricultural income but confirmed the addition of ?33,34,000/- as unexplained cash credits.

2. Admission of Additional Evidence:
The assessee filed a petition for the admission of additional grounds, arguing that the provisions of Section 68 are not applicable to credits in a bank account as it cannot be regarded as a book of account of the appellant. The Tribunal admitted these additional grounds, recognizing them as legal grounds requiring no fresh enquiry or material.

3. Justification of the Addition as Unexplained Cash Credits:
During the assessment proceedings, the AO found cash deposits of ?37,34,000/- in the assessee's bank account. The assessee explained that these deposits were sourced from loans from friends and relatives, drawings from the capital account, and agricultural income. However, the AO did not accept this explanation and treated the entire sum as unexplained cash credit under Section 68.

4. Justification of Interest Charged under Sections 234A and 234B:
The assessee contested the interest charged under Sections 234A and 234B of the Income Tax Act, arguing that the AO's addition was unjustified. However, the Tribunal did not specifically address this issue as the primary focus was on the validity of the addition under Section 68.

5. Validity of Addition under Section 68 for Deposits in Bank Accounts:
The Tribunal examined whether the AO was justified in making the addition under Section 68 for deposits in the bank account. It was argued that Section 68 applies to credits in the books of accounts, not bank accounts. The Tribunal agreed, citing precedents that bank accounts cannot be considered books of accounts for the purposes of Section 68. Therefore, the addition should have been considered under Section 69, not Section 68.

6. Consideration of Deposits Already Disclosed in the Books of Account:
The Tribunal noted that the deposits were not recorded in the books of accounts but were made directly in the bank account. Since Section 68 pertains to credits in the books of accounts, the Tribunal held that the AO's addition under this section was unsustainable. The Tribunal referenced similar cases where additions for bank deposits were deemed unsustainable under Section 68 and should have been considered under Section 69.

Conclusion:
The Tribunal concluded that the addition of ?33,34,000/- under Section 68 was unsustainable as the deposits were made in the bank account, not in the books of accounts. The correct course of action would have been to consider the addition under Section 69. Consequently, the Tribunal deleted the addition and allowed the appeal of the assessee. The other grounds on merits were not adjudicated as the primary ground was resolved in favor of the assessee.

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