2022 (7) TMI 1501 - AT - Income Tax

Bank statements alone cannot justify unexplained cash deposit additions under section 68 without proper books of account

The ITAT Raipur held that additions under section 68 for unexplained cash deposits in bank accounts cannot be sustained based solely on bank statements. ... Addition u/s.68 - cash deposits n bank account of appellant unexplained - HELD THAT:- It is an admitted fact that the addition u/s 68 made by the AO and sustained by CIT(A) was on the basis of deposit entries in the bank statement of the assessee is in contradiction with the settled position of the law as decided in the case of CIT Vs. Bhaichand N. Gandhi [1982 (2) TMI 28 - BOMBAY HIGH COURT] wherein it is observed that a bank pass book or bank statement cannot be considered to be a ‘book’ maintained by the assessee for section 68 - Thus, we are of the considered view that the addition made by Ld AO u/s 68 of the Act is liable to be deleted. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete the addition made in this regard. Decided in favour of assessee. Issues:1. Addition of cash deposits in bank account under section 68.2. Non-applicability of provisions of section 68.Issue 1: Addition of cash deposits in bank account under section 68:The case involved an appeal by the assessee against the order of the ld. CIT(A)-1, Raipur, regarding the addition of Rs.4,65,000 out of the total addition of Rs.13,37,100 made by the AO under section 68 on account of cash deposits in the bank account. The assessee contended that the addition was arbitrary, baseless, and contrary to the evidence on record. The assessee explained that the cash deposits were gifts from the mother, supported by evidence such as bank entries, affidavit, and capital account details of the mother. The gifts were given for medical treatment and house repairs, funded partly from agricultural income. The assessee argued that the conditions of section 68 were satisfied, and the burden of proof was discharged with un-rebutted evidence. The assessee also criticized the lack of enquiry by the AO and CIT(A) into the donor's details, citing legal precedents to support the argument.Issue 2: Non-applicability of provisions of section 68:The assessee raised a legal ground regarding the non-applicability of section 68 in the case, emphasizing that the addition based on cash deposits in the bank account was not covered by section 68 as the assessee was not required to maintain books of account. The assessee relied on a specific case and legal precedent to support the argument that the bank passbook or statement could not be considered as books maintained by the assessee for section 68 purposes. The Tribunal analyzed the legal arguments, including judgments from previous cases, and concluded that the addition made under section 68 was not sustainable. The Tribunal highlighted that the bank account entries could not be equated with the books of the assessee, as per established legal principles. Consequently, the Tribunal directed the deletion of the addition made under section 68, as it did not meet the legal requirements for such an addition.In conclusion, the Tribunal allowed the appeal of the assessee based on the legal grounds raised regarding the addition of cash deposits in the bank account under section 68. The Tribunal emphasized the distinction between bank account entries and books maintained by the assessee, leading to the deletion of the addition. The decision was supported by legal precedents and a thorough analysis of the facts and legal provisions involved in the case.