Invalid reassessment order due to non-compliance, leading to deletion of unexplained cash deposits.

The ITAT found the reassessment order invalid due to non-compliance with mandatory conditions, leading to the deletion of the addition of Rs. 22,01,000 for unexplained cash deposits in the bank account. The appeal was allowed in ITA No. 4036/DEL/2017, and the addition was directed to be deleted.

---

---

Issues Involved:
1. Validity of reassessment order under sections 144/147 of the Income Tax Act, 1961.
2. Legality of additions made by the Assessing Officer (AO) for unexplained cash deposits in the Savings Bank account.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Order under Sections 144/147:
The assessee contended that the reassessment order framed under sections 144/147 was invalid due to non-compliance with mandatory conditions under sections 147 to 151 of the Income Tax Act, 1961. The case was selected for scrutiny based on AIR information indicating that the assessee had deposited Rs. 22,01,000 in a Savings Bank account. The notice under section 148 was issued but not served properly, leading to the assessment being made under section 144. The CIT(A) dismissed the assessee's challenge, confirming the AO's action.

2. Legality of Additions for Unexplained Cash Deposits:
The assessee argued that the addition of Rs. 22,01,000 for cash deposits in the bank account was erroneous. The counsel for the assessee, Dr. Rakesh Gupta, cited various judicial precedents asserting that cash deposits in a bank passbook cannot be treated as income under section 68 of the Act. The ITAT referred to multiple case laws, including decisions from the Bombay High Court and Delhi High Court, which established that a bank passbook is not a book maintained by the assessee and thus, cash credits in such passbooks do not fall within the ambit of section 68.

The ITAT emphasized that the relationship between a banker and customer is that of debtor and creditor, and the passbook provided by the bank is merely a copy of the account in the bank's books, not maintained under the instructions of the assessee. Consequently, the addition made by the AO under section 68 was deemed unsustainable.

Conclusion:
The ITAT concluded that since the assessee did not maintain any books of account, the bank passbook could not be considered for invoking section 68. The reassessment order and the addition of Rs. 22,01,000 were deemed invalid. The appeal of the assessee was allowed, and the addition was directed to be deleted.

Judgment Pronouncement:
The order was pronounced in the open court on 14.12.2017, allowing the appeal of the assessee in ITA No. 4036/DEL/2017.

---