2006 (4) TMI 356

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....es on civil contract business from a place called Gangolli. He has bank account with Syndicate Bank, Vederahalli. Besides, he has also bank accounts at Udupi and Mangalore. He is being assessed to income-tax by the ITO, (Ward-II), Udupi. In the course of the assessment for the assessment year 2000-01, the Assessing Officer noticed that the son of the assessee had directly deposited cash in various bank accounts of the assessee totalling to Rs. 14,33,000. He referred the matter to the Additional Commissioner who levied the penalty after hearing the assessee. The assessee carried the matter in appeal and CIT(A) gave partial relief to the extent of Rs. 3.3 lakhs and confirmed the balance. 3. The Ld. A.R. appearing for the assessee submitted....

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....sufficient bank balance to meet the immediate financial commitment, the son has deposited the money. The CIT(A) has examined the books of account and the bank statement of the assessee and has come to this conclusion. Such circumstances amount to reasonable cause. [Refer Industrial Enterprises v. Dy. CIT [2000] 73 ITD 252 (Hyd.), Mrs. Rupali R. Desai v. Addl. CIT [2004] 88 ITD 76 (Mum.)(TM)]. 4. On the other hand, the D.R. has submitted that even though the assessee has not accepted the cash deposit, the same has been accepted by the banks in cash as the agent of the assessee. It is well-settled that the action of the agent is binding on the principal as if the principal has himself acted. The expression "any other person" appearing in s....

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....an agent. The money deposited with a bank belongs to it and it can deploy the money in whatever manner it wants. Any profit or loss on such deployment belongs to the bank and not to the customer. The bank is not required to render any accounts to the customers in this regard. The customer is entitled only to the balance standing to the credit of his account. The fundamental principle of banking law is that the relationship between the bank and its customer is like a debtor and creditor. The bank may act as the agent of the customer under a special contract. In the case on hand no such special contract is shown to exist. It follows that the bank has accepted the deposits in question as a banker and not as the agent of the assessee. If this b....