2022 (2) TMI 1030 - AT - Income Tax

Addition u/s 68 - addition of the cash deposits in the assessee s savings bank account with Axis Bank - HELD THAT - We are persuaded to subscribe to the contention advanced by the ld. A.R that as the bank account or bank passbook of an assessee cannot be held as his 'books of account', therefore, no addition in respect of a simpliciter cash deposit made in the said bank account could be validly made under Sec.68 to the I.T. Act. Our aforesaid observations is duly fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT We are of the considered view that as the bank account of an assessee cannot be held to be the 'books' of an assessee maintained for any previous year, thus, no addition under Sec. 68 of the Act could have validly been made in respect of a simpliciter deposit made by the assessee before us in her bank account. Thus addition made by the A.O under Sec.68 cannot be sustained, and is liable to be vacated - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the jurisdiction assumed by the Assessing Officer (AO) for making the addition of ?44.25 lacs under Section 68 of the Income-tax Act, 1961.
2. Merits of the addition of ?44.25 lacs as unexplained cash credit under Section 68 of the Act.

Detailed Analysis:

1. Validity of Jurisdiction Assumed by the AO:
The primary issue addressed was whether the AO had the jurisdiction to make an addition of ?44.25 lacs under Section 68 of the Income-tax Act, 1961. The assessee argued that the bank account or bank passbook cannot be considered as "books of accounts" for the purposes of Section 68. It was contended that no addition could be validly made under this section based on the bank account entries alone. The assessee relied on the judgment of the Hon’ble High Court of Bombay in CIT Vs. Bhaichand N. Gandhi (1983) 143 ITR 67 (Bom), which held that a bank passbook is not a book of the assessee maintained for any previous year. The Tribunal agreed with this contention, stating that the statutory provision of Section 68 presupposes a credit in the "books of the assessee" maintained for the previous year. Since the bank account is not considered as such, the addition under Section 68 could not be sustained.

2. Merits of the Addition as Unexplained Cash Credit:
On the merits, the assessee had explained the source of the cash deposits amounting to ?44.25 lacs as being from various sources, including gifts received from her father and father-in-law, interest income from loans and advances, and marriage gifts. The CIT(A) did not accept these explanations, citing a lack of supporting evidence such as gift deeds and details of the loans. The Tribunal, however, did not delve into the merits of these explanations in detail, as the primary ground for their decision was the jurisdictional issue discussed above. The Tribunal concluded that since the bank account cannot be considered the "books of the assessee," the addition under Section 68 was invalid, and thus, the addition of ?44.25 lacs was deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and deleting the addition of ?44.25 lacs made by the AO under Section 68 of the Income-tax Act, 1961. The decision was primarily based on the jurisdictional ground that a bank account or passbook cannot be considered as "books of accounts" for the purposes of Section 68, following the precedent set by the Hon’ble High Court of Bombay in CIT Vs. Bhaichand N. Gandhi.

Order Pronounced:
The order was pronounced in the open court on the 21st day of February, 2022.