2021 (5) TMI 98 - AT - Income Tax

Tribunal rules bank statement not valid as 'books of account' for Income Tax Act Section 68

The Tribunal ruled in favor of the assessee, holding that the addition of Rs. 4,03,000 under Section 68 of the Income Tax Act was not sustainable. The ... Addition u/s 68 - unexplained cash deposited in bank accounts - Treatment of Bank account / statement as books - HELD THAT:- We observe that credit in the ‘bank account’ of an assessee cannot be construed as a credit in the ‘books’ of the assessee, for the very reason that the bank account cannot be held to be the ‘books’ of the assessee. Though, it remains as a matter of fact that the ‘bank account’ of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the ‘books’ of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision of Section 68, and are of the considered view that an addition made in respect of a cash deposit in the bank account of an assessee, in the absence of the same found credited in the ‘books’ of the assessee maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68. The addition sustained by the ld. CIT(A) is in respect of the cash deposits in the bank accounts of the assessee, and not in any 'books' of the assessee for the year under consideration. In the backdrop of the aforesaid settled position of law, the addition made by the A.O in respect of the cash deposits in the bank accounts of the assessee by invoking Section 68 has to fail, for the very reason that as per the judgment in the case of CIT Vs. Bhaichand N. Gandhi [1982 (2) TMI 28 - BOMBAY HIGH COURT], a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for any previous year for the purpose of Section 68 - on this count itself the impugned addition made and sustained deserves to be deleted and we direct to delete the same. No such addition could have been validly made u/s 68 of the Act, therefore, we refrain ourselves to decide the other grounds wherein the assessee has assailed on merits the additions sustained by the ld. CIT(A) - Appeal of the assessee is allowed. Issues Involved:1. Addition of Rs. 4,03,000/- under Section 68 of the Income Tax Act, 1961 as unexplained cash deposited in bank accounts.2. Whether the bank statement can be considered as 'books of account' for the purpose of invoking Section 68 of the Act.Issue-wise Detailed Analysis:1. Addition of Rs. 4,03,000/- under Section 68 of the Income Tax Act, 1961:The assessee filed a return of income declaring a total income of Rs. 3,79,330/-. The case was selected for scrutiny, and the Assessing Officer (A.O.) made an addition of Rs. 4,03,000/- under Section 68 of the Act, treating it as unexplained cash deposits in the bank account. The assessee contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in upholding this addition, arguing that the source of the cash deposits was adequately explained.The assessee argued that he was not required to maintain books of account under Section 44AA of the Act, and thus, the A.O. could not invoke Section 68. The prerequisites for invoking Section 68 include:- Any sum found credited in the books of the assessee.- The assessee offers no satisfactory explanation about the nature and source of the sum.The assessee contended that the credit entries were in the bank statement, not in the books of account, and relied on the Bombay High Court's decision in Bhai Chand N. Gandhi, which held that a bank passbook is not a book maintained by the assessee.2. Whether the bank statement can be considered as 'books of account' for the purpose of invoking Section 68 of the Act:The Tribunal observed that the credit in the bank account of an assessee cannot be construed as a credit in the books of the assessee. The bank account is an account of the assessee with the bank, not a book of the assessee. The Tribunal referred to the Bombay High Court's decision in Bhaichand N. Gandhi, which established that a bank passbook cannot be regarded as a book of the assessee for the purposes of Section 68.The Tribunal also referred to several other cases, including Smt. Manshi Mahendra Pitkar and Smt. Madhu Raitani, which supported the view that a bank statement cannot be considered as a book maintained by the assessee. Therefore, the addition made by the A.O. in respect of cash deposits in the bank accounts of the assessee by invoking Section 68 was not valid.Conclusion:The Tribunal concluded that the addition of Rs. 4,03,000/- made by the A.O. under Section 68 of the Act was not sustainable, as the bank statement cannot be considered as 'books of account' for the purpose of Section 68. Consequently, the appeal of the assessee was allowed, and the impugned addition was deleted.Order:The appeal of the assessee is allowed, and the order was pronounced in the open court on 28th January 2021.