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

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, ... Cash credit - books of the assessee - bank pass book as book of account - section 68 of the Income-tax Act, 1961 - previous year for assessment of undisclosed income - debtor-creditor relationship between banker and customerCash credit - books of the assessee - bank pass book as book of account - section 68 of the Income-tax Act, 1961 - Whether a cash credit reflected only in the bank pass book, and not in the assessee's own cash book, falls within the ambit of section 68 as a sum 'found credited in the books of an assessee maintained for any previous year' - HELD THAT: - The Tribunal held, and this Court agrees, that a bank pass book supplied by the bank to its customer is merely a copy of the customer's account as recorded in the bank's books and is not a book maintained by the assessee or under his instructions. The relationship between banker and customer is one of debtor and creditor, not trustee and beneficiary; consequently the pass book cannot be treated as a book of account of the assessee for the purposes of s. 68. Section 68 applies only where a sum is found credited in books maintained by the assessee for a previous year; amounts appearing solely in a bank pass book do not satisfy that statutory condition and therefore cannot be charged as income of that previous year under s. 68.The cash credit shown only in the bank pass book does not fall within section 68 and cannot be charged as income of the relevant previous year.Previous year for assessment of undisclosed income - section 68 of the Income-tax Act, 1961 - Whether the deposit of Rs. 10,000 shown in the bank on January 21, 1961, is assessable under section 68 as income of the previous year (Samvat year 2017) or must be treated with reference to the ordinary financial year - HELD THAT: - Relying on the settled principle (as stated in Baladin Ram v. CIT) that undisclosed income not appearing in books maintained by the assessee can only be assessed with reference to the ordinary financial year, the Court accepted the Tribunal's conclusion that the deposit appearing in the bank pass book could not be treated as credited in the assessee's books for Samvat year 2017. Since s. 68 applies only where a sum is found credited in the assessee's books for a previous year, the deposit shown in the bank pass book is not includible as income of that previous year under s. 68.The deposit of January 21, 1961 is not includible under section 68 as income of the previous year Samvat year 2017; any assessment of undisclosed income would pertain to the ordinary financial year.Final Conclusion: Both questions are answered in favour of the assessee: a bank pass book is not a book of the assessee for the purposes of section 68, and the deposit shown only in the pass book is not chargeable as income of the stated previous year; costs awarded to the assessee. 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.