1982 (2) TMI 28 - HC - Income Tax

Deposits create debtor-creditor relationship; bank passbook is bank's record, not assessee's books under section 68

Commissioner of Income-Tax, Poona Versus Bhaichand H. Gandhi

The HC upheld the Tribunal's conclusion that deposits in a bank create a debtor-creditor relationship and the bank passbook is merely the bank's record, ... Applicability of section 68 - Cash credit in the bank pass book not shown in the cash book - Inclusion of deposit made by the assessee in the bank - HELD THAT:- As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived. Issues involved: Determination of whether a cash credit in the bank pass book not shown in the cash book falls under section 68 of the Income-tax Act, 1961 and if a deposit made by the assessee in the bank is includible under section 68 for computing income.Summary:In the assessment proceedings for the year 1962-63, the Income Tax Officer (ITO) included Rs. 30,000 as cash credits in the assessee's books, treated as income from undisclosed sources. The assessee's explanation was rejected by the ITO and the amount was confirmed by the Appellate Authority (AAC). On further appeal to the Tribunal, it was argued that a deposit of Rs. 10,000 made by the assessee was not included in the assessee's maintained books but was shown in the bank pass book. The Tribunal accepted the contention that the bank pass book cannot be considered as a book maintained by the assessee under section 68 of the Income-tax Act, 1961. The Tribunal held that the pass book is a copy of the account maintained by the bank and not by the assessee, thus not falling under section 68. The Supreme Court precedent also supports assessing undisclosed income based on the ordinary financial year. Therefore, the Tribunal's decision was upheld, answering the questions in favor of the assessee.The relationship between a bank and its customer is that of debtor and creditor, not trustee and beneficiary. The pass book provided by the bank is a record of the customer's account in the bank's books, not maintained by the customer. The Tribunal's decision was justified in considering the pass book as not a book maintained by the assessee or under their instructions. Thus, the Tribunal correctly concluded that the cash credit in the bank pass book does not fall under section 68 of the Income-tax Act, 1961.The questions referred were answered affirmatively and negatively in favor of the assessee, respectively. The Commissioner was directed to pay the costs of the reference to the assessee.