2023 (12) TMI 397 - AT - Income Tax

Unexplained cash credit u/s. 68 r.w.s. 115BBE - Addition being 50 percent of agricultural income in the absence of books of accounts - assessee claimed that he is not interested in showing higher income though the basic exemption limit is not fully exhausted by the assessee - HELD THAT - Agricultural income held by the assessee are cannot be doubted. However the Assessing Officer not satisfied with the evidences filed by the assessee treated 50% of the agricultural income are unexplained and invoked Section 68 r.w.s. 115BBE of the act which in our considered opinion, is not correct in law. The assessee has shown gross total income of Rs. 340 only for the Assessment Year and agricultural income of Rs. 28,65,563/-. Co-ordinate Benches of the Tribunal have held that any sum found credited in bank passbook could not be treated as an unexplained cash credit under section 68 of the Act, since the bank account of the assessee is not considered as part and parcel of the books of accounts. Thus the addition made by the Assessing Officer was deleted. The Bombay High Court in the case of CIT v Bhaichand N. Gandhi 1982 (2) TMI 28 - BOMBAY HIGH COURT has held that the pass book supplied by the bank to the assessee cannot be regarded as a book maintained by the assessee or under his instructions. Accordingly, the Tribunal is justified in holding that a cash credit for the previous year shown in the assessee's bank pass book issued to him by the bank but not shown in the cash book maintained by him for that year, does not fall within the ambit of section 68 of the Act. No hesitation in holding that the Lower Authorities are not legally correct in invoking section 68 of the Act, as against the agricultural income shown by the assessee. Therefore the additions made on this count is liable to be deleted.

Summary

Issues involved:
The judgment deals with the issue of addition of agricultural income as unexplained cash credit under section 68 of the Income Tax Act, 1961.

Issue 1 - Addition of Agricultural Income:
The appellant contested the addition of Rs. 14,32,782 as unexplained cash credit under section 68 of the Income Tax Act. The Assessing Officer had treated 50% of the agricultural income as unaccounted, leading to the addition. The appellant argued that the agricultural income was earned legitimately through cultivation on his own land and leased land, supported by agreements with landowners. The appellant highlighted the lack of additional evidence like bills and vouchers as the reason for the AO's disbelief. The ITAT upheld the addition, stating that 50% of the agricultural income was considered genuine, while the remaining amount was treated as unaccounted income. The ITAT found the AO's actions reasonable, emphasizing the importance of producing all relevant details and evidence during assessment.

Issue 2 - Legal Grounds for Appeal:
The appellant raised several grounds of appeal, challenging the decision of the Commissioner of Income Tax (Appeals) to uphold the addition of agricultural income as unexplained cash credit under section 68 of the Income Tax Act. The appellant argued that the decision was arbitrary, legally unsound, and unjust. The appellant also sought to introduce additional grounds during the appeal hearing.

Judicial Analysis and Decision:
Upon thorough consideration of the submissions, evidence, and relevant case laws, the ITAT found that the Assessing Officer's application of section 68 to the agricultural income was legally incorrect. The ITAT noted that bank passbook entries could not be treated as unexplained cash credits under section 68, as the bank account was not part of the assessee's books of accounts. Citing precedents from various High Courts, the ITAT concluded that the additions made by the Lower Authorities were unwarranted. The ITAT ruled in favor of the appellant, allowing the appeal and directing the deletion of the addition to the agricultural income.

Conclusion:
The ITAT ruled in favor of the appellant, holding that the addition of agricultural income as unexplained cash credit under section 68 was legally unfounded. The ITAT emphasized the importance of considering bank passbook entries and maintaining proper books of accounts in such cases. The appeal was allowed, and the addition was ordered to be deleted.