Unexplained cash credit provisions under Section 68 don't apply when deposits aren't recorded in assessee's books of account

The ITAT Raipur ruled in favor of the assessee regarding unexplained cash credit under Section 68. The assessee had made cash deposits in a joint bank account with her spouse, claiming these were from cash withdrawals and accumulated savings. The AO treated the bank statement as books of account and made additions. The ITAT held that since the cash deposits were not appearing in the assessee's books of account, Section 68 was not applicable. The tribunal found the AO's addition suffered from jurisdictional defect and vacated the disallowance entirely.

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Issues Involved:
1. Validity of assessment order due to improper service of notices.
2. Adequacy of opportunity provided by CIT(A) for the assessee to present her case.
3. Legitimacy of addition of cash deposits u/s 68 of the Act.
4. Treatment of cash deposits in a joint bank account as unexplained cash credits.

Summary:

Issue 1: Validity of Assessment Order Due to Improper Service of Notices
The assessee contended that the assessment order passed u/s 147 r.w.s. 144 on 20.09.2021 was invalid as all notices during the assessment proceedings were issued to an incorrect email ID, thus no notices were served to the assessee as per the law. The Tribunal noted that ample opportunities were provided by the AO to the assessee to represent her case, and natural justice was observed before completing the assessment proceedings. Therefore, this ground was dismissed.

Issue 2: Adequacy of Opportunity Provided by CIT(A)
The assessee argued that the CIT(A) passed the order on 15.05.2023, despite giving time until 19.05.2023 to file submissions. The Tribunal observed that the CIT(A) had called for a remand report from the AO regarding new evidence submitted by the assessee. The remand report indicated discrepancies in the assessee's income and lack of explanation for cash deposits. The Tribunal found that the assessee did not offer any explanation on the remand report and thus dismissed this ground.

Issue 3: Legitimacy of Addition of Cash Deposits u/s 68 of the Act
The assessee challenged the addition of Rs. 13,00,000/- made by the AO u/s 68 of the Act, arguing that the bank account statement cannot be treated as books of account. The Tribunal agreed with the assessee, citing the judgment of the Hon'ble High Court of Bombay in CIT Vs. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom.), which held that a bank passbook cannot be regarded as a book of the assessee. Consequently, the Tribunal vacated the addition of Rs. 13,00,000/- made by the AO u/s 68 of the Act.

Issue 4: Treatment of Cash Deposits in a Joint Bank Account
The assessee contended that the cash deposits in the joint bank account with her husband should not be treated as unexplained cash credits. The Tribunal noted that the sources of cash deposits were explained as cash withdrawals and accumulated savings. Given the decision on Issue 3, the Tribunal did not further address this issue.

Conclusion:
The Tribunal allowed the appeal of the assessee, vacating the addition of Rs. 13,00,000/- made by the AO u/s 68 of the Act due to the improper assumption of jurisdiction. The other grounds were dismissed as the assessee was provided with ample opportunities to present her case. The order was pronounced in open court on 05th January 2024.

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