2024 (5) TMI 1175 - AT - Income Tax

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 ... Unexplained cash credit u/s. 68 - assessee failed to explain nature and source of the cash deposits in the bank account - bank account statement treated as books of account - as submitted by AR that as it was a case of simplicitor cash deposits in the bank account that was jointly held by the assessee and her husband - as per assessee it has been sourced out of cash withdrawals/accumulated savings, therefore, no addition of any part of the said amount was called for in the hands of the assessee - HELD THAT:- As in the present case, the cash deposits are not in the nature of cash deposits appearing in the “books of account” of the assessee, therefore, we find substance in the claim of the Ld. AR that the addition of the said amount could not have been made u/s. 68 of the Act. As the very basis for making the impugned addition by the A.O suffers from a jurisdictional defect as had been looked into in the case of CIT Vs. Bhaichand H. Gandhi [1982 (2) TMI 28 - BOMBAY HIGH COURT] thus we vacate the disallowance - Decided in favour of assessee. 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 NoticesThe 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 ActThe 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 AccountThe 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.