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 Tribunal determined that a bank statement cannot be considered as 'books of account' for invoking Section 68. Consequently, the appeal was allowed, and the addition was deleted.

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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.

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