Addition u/s 68 quashed for cash given by wife deposited by husband in his bank account

Addition u/s 68 quashed for cash given by wife deposited by husband in his bank account. In cash deposits, relationship of bank with customer is of debtor/creditor and not trustee/beneficiary

ABCAUS Case Law Citation:
ABCAUS 3226 (2020) (01) ITAT

Important case law relied upon by the parties:
CIT vs. Bhaichand H. Gandhi 141 ITR 67 (Mum.)

This appeal was filed by the assessee against the order of the CIT(A) in sustaining the addition u/s 68 of the Income Tax Act, 1961 (the Act).

The assessee was asked to produce copy of the Bank account as per the information collected from Annual Information Return (AIR). The assessee produced copy of the bank account. On going through the bank statement it was noticed that assessee made large cash deposits on various dates during the financial year.

The assessee was asked to explain the source of the cash deposits made during the year. According to the assessee, cash deposits in the bank account were cash given by the assessee’s wife who was also doing a business.

It was stated that his wife was not maintaining any current account with the bank for her business. She was depositing all her cash transactions in the savings bank account of the assessee.

The assessee was asked to produce book of accounts of his business as well as books of accounts of wife. The asssesse produced books of accounts of his business as well as books of accounts of business managed by his wife. A sworn statement was taken from the wife of the assessee clarifying the fact that she was not maintaining any current account with any bank for her business purpose. According to her whatever cash she received in her business was given to the assessee to be deposited in the savings account with Bank and it was accounted in her cash book.   

On verification of date-wise amount of cash deposited in the bank account and cash received from wife and their corresponding entries in the cash book of the assessee as well as the cash book of the wife few discrepancies/differences were noted.

The assessee was asked to explain the reason for difference arising out of the verification as above. The assessee failed to explain the difference in cash deposits in the bank account with his cash book and also unable to prove the source of deposits for the above difference.

Therefore, the Assessing Officer made an addition equal to the said difference to the Total Income as unexplained cash credit u/s 68 of the Act in the bank account of the assessee.

The CIT(A) confirmed the addition made by the Assessing Officer u/s. 68 of the Act by observing that during the appellate proceedings also the assessee had not produced any evidence to prove the source of the cash deposits.

The Tribunal opined that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of the debtor and creditor and not of trustee and beneficiary.

Applying the above principle, the Tribunal stated that the bank statements supplied by the Bank to its constituent is only a copy of the constituent’s account in the books maintained by the bank. It is not as if the Bank statements are maintained by the Bank as the agent of the constituent, nor can it be said that the pass book is maintained by the Bank under the instructions of the constituent.

Therefore, the Tribunal opined that in the instant case, the Bank statements supplied by the Bank to the assessee could not be regarded as a book of the assessee, nor a book maintained by the assessee or under his instructions.

As such, the Tribunal relying on the judgment of the Bombay High Court, held that the addition under section 68 of the amount entered only in the Bank statements was not justified.

Accordingly, the appeal of the assessee was allowed.

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