Addition u/s 68 for cash deposit entries in bank statement upheld though assessee did not maintain books

Addition u/s 68 of the Income Tax Act towards entries of cash deposit in bank statement upheld even though assessee was not maintaining any books of accounts.

In a recent judgment, ITAT Delhi has upheld addition made u/s 68 of the Income Tax Act towards entries of cash deposit found in bank statement where assessee was not maintaining any books of accounts.

ABCAUS Case Law Citation:
5063 (2026) (03) abcaus.in ITAT

In The instant case, the issue was whether an addition can be made u/s 68 of the Income Tax Act, 1961 (the Act) where assessee did not maintain any books of accounts and the bank statement reflecting the cash deposits cannot be held as books of accounts maintained by the assessee.

The AO had information that the assessee had made cash deposits in his savings bank account. Further the AO noted that the assessee had not filed his return of income.

NMS Notice in this regard was issued to the assessee by the AO and the AO noted that no reply was filed by the assessee in response to the said NMS notice. Thereafter, the AO observed that the source of cash deposits remained unexplained by failure on the part of assessee by not filing his return of income.  Accordingly notice under Section 148 of the Act was issued to the assessee after duly recording reasons and with the prior approval of the Pr. Commissioner of Income Tax.

The assessee did not file any return of income in response to the said notice under section 148 of the Act and further the Assessee did not respond to various notices under section 142(1) of the Act including the show cause notice. In absence of any reply from the assessee the AO passed the assessment order under section 144 r.w.s. 147 of the Act by treating the amount of cash deposit as unexplained and income from undisclosed sources and added it under section 68 of the Act. The addition was confirmed by CIT(A).

Before the Tribunal, the assessee raised an additional ground that the CIT(A) erred in confirming the addition of cash deposited in the bank account under section 68 made by the AO without appreciating the fact that the assessee was not maintaining books of accounts and bank statement can not be held as books of accounts maintained by the assessee, thus the ingredients of section 68 is not satisfied.

The Tribunal observed that the additional ground taken was not acceptable in view of the decision of Hon’ble Punjab and Haryana High Court wherein it was held that where Assessing Officer after considering facts and circumstances of case and assessee’s response, made a justified addition but inadvertently or wrongly mentioned wrong provision – Simply for this reason assessment order could not be set aside – Appellate Authority could uphold addition under appropriate section since error had not prejudiced assessee in any manner.

The Tribunal further observed that Co-ordinate Bench of ITAT Delhi had an occasion to deal with a similar issue where assessee was not maintaining any books of account and the deposits were found only in the assessee’s bank statement and it was argued by the assessee that it could not considered as the books of account of the assessee and, therefore, Section 68 was not applicable. The Co-ordinate Bench dismissed the argument and observed that though Section 68 of the Act may not be strictly applicable since the assessee was not maintaining any books of accounts and the bank statement cannot be considered as the assessee’s books of account on the basis of the judgment of the Supreme Court, it is the onus of the assessee to explain the cash received by him and if there is no explanation or acceptable evidence to prove the nature and source of the receipt, the amount may be added as the assessee’s income on general principles and it is not necessary to invoke Section 68, nor is it necessary for the income-tax authorities to point out the source of the monies received. Even if Section 68 is not applicable, the cash deposit in the bank can be asked to be explained by the assessee under Section 69 or Section 69B of the Act.

Therefore, in view of the above legal position, the additional ground was dismissed.

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