Bank passbook / Statements not books of account and hence no addition u/s 68

Bank passbook / statements not books of account of assessee and hence no addition can be made u/s 68 of the Income Tax Act, 1961

ABACUS Case Law Citation
ABCAUS 3381 (2020) (09) ITAT

Important case law relied upon by the parties:
Baladin Ram v. CIT [1969] 71 ITR 427
CIT vs. Bhaichand H Gandhi (1983) [53 CompCas 400 (Bom)]
Arun Kumar Muchala 399 ITR 256

Bank passbook / Statements not books of account 

In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining the addition u/s 68 / 69B of the Income Tax Act, 1961 (the Act).

The assessee was a retired government employee. The source of income consisted of salary and other sources.

The case of the assessee was reopened on account of ITS information that during the year under consideration, the assessee had deposited huge amount of cash in his savings bank account and having made time deposits with the bank.

As per the data available on the ITD System, no return of income was filed by the assessee for the relevant assessment year.

During the re-assessment proceedings, the assessee was asked to file details of cash deposited in the savings bank account.  

The assessee explained that the cash deposits had been made out of cash given by father and family members as financial support. It was also stated that cash was also contributed from sale of some of the silver utensils and jewellery of the mother.

The Assessing Officer (AO) accepted the reasons given by the assessee for the entire sum except which was claimed to have been sourced from the sale of silver utensils and jewellery by the mother of the assessee, on the ground that the vouchers were not produced.

The AO made the addition u/s 68 for the sources of the cash not excepted as above.

CIT (A) upheld the order of assessing officer placing reliance on the judgment of the Hon’ble High Court.

The Tribunal observed that the CIT(A)’s reliance upon the decision of the Hon’ble High Court was misplaced.  In the said decision, the assessee had taken cash deposits and unsecured loan and in that context the High Court had held that when the assessee was doing business he could not plead that assessee had not maintained books of accounts, and section 68 would not be applicable. 

The Tribunal further observed that in the instant case, it was not at all the case of the revenue that assessee was doing any business and it was supposed to maintain books of accounts. 

The Tribunal noted that the Hon’ble Supreme Court has held that even under the provisions  embodied  in section 68 of the Act, it is  only when any amount is found credited in the books of the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory.

Further, the Hon’ble High Court had pointed out that it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book 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 pass book is 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.

The Hon’ble High Court had upheld that  Pass book supplied by the bank to the assessee could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions.

Therefore in view of the decisions of the Hon’ble Supreme Court and Hon’ble High Court the Tribunal held that since the assessee was not required to maintain books of accounts and addition under 68 for sums found in bank statement was not sustainable

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