No additions us 68-accounts not maintained us 44AF presumptive taxation. The section operates only where books are maintained and sum is found credited

No additions us 68-accounts not maintained us 44AF under presumptive taxation. The section operates only where books are maintained and a sum is found credited therein – ITAT

ABCAUS Case Law Citation:
956 2016 (06) ITAT
Assessment Year: 2006-07 to 2010-11
Date/Month of Judgment/Order: June, 2016

Brief Facts of the Case:
The present judgment encompasses seven appeals out of which two appeals were filed by Revenue and five of the appeals had been filed by assessee.

The grievance of the assessee was that the Assessing Officer had made additions u/s 68 on the basis of deposits by the assessee in his bank Accounts and the CIT(A) had allowed only part relief.

Before the Tribunal, the assessee took additional ground that the AO made addition u/s 68 whereas the assessee was not maintaining any books of accounts and therefore, the provisions of section 68 were not applicable and in view of various decisions of various Tribunals the Assessing officer was not justified in making addition u/s 68.  It was submitted that since issue raised was a legal one it should be allowed and being a legal ground ITAT allowed it.

The main contention of the assessee was that it was an undisputed fact that assessee was not maintaining any books of accounts and therefore, the addition u/s 68 could not have been made. The assessee placed reliance on the following case laws:

ITO, vs. Sh. Oam Parkash Sharma, in ITA No.2256/Del/2009
Sh. Amrjeet Singh Vs. ITO in ITA No.114(Asr)/2015
Sh. Yadwinder Singh Vs. ITO ITA No.508(Asr)/2014

ITAT observed that  that it was undisputed that assessee was not maintaining the books of accounts and had declared its income under the presumptive taxation provisions contained u/s 44AF of the Income Tax Act, 1961 and the findings recorded by the AO for all the years substantiate this fact.

Important Excerpts from ITAT Judgment:

The Hon’ble ITAT, Delhi Bench, in ITA No.2256/Del/2009 in its order dated 13.05.2011 under similar facts and circumstances has dismissed the appeal filed by Revenue by holding as under:

“9. Coming to the merits of the case, undisputedly, the addition of Rs.913000 was based only on some entries in the bank account of the assessee. The assessee was found not to have maintained any books of account. Now, as correctly observed by the CIT(A), the passbook/bank statement supplied by the bank to the assessee does not amount to a book of account of the assessee. It being only a copy of customers’ account in the books maintained by the bank, a bank does not act as an agent of its customer. It also cannot be said that banker maintains a passbook under the instructions of the account holder. The provisions of section 68 of the Act are, therefore, not attracted where the assessee does not maintain books of account. The CIT(A), in this regard, has rightly placed reliance on ‘CIT vs. Bhaichand H. Gandhi’, 141 I.T.R. 67(Bom.), ‘Sampat Automobile vs. ITO’, 96 TTJ(D)368, ‘Ms. Mayawati vs. DCIT’, 113 TTJ 178(Del.) and ‘Sheraton Apparels vs. ACIT’, 256 I.T.R. 20(Bom.). It is correct that since no books of account are maintained in the ordinary course of the business of the assessee, in the absence of any corroborative evidence to support action u/s 68 of the Act, no such addition is tenable.”

We further find that in the case of Sh. Yadwinder Singh vs. ITO, Ward- 2,(1), Bathinda in ITA 508/Asr/2015 passed by Hon’ble ITAT Amritsar Bench, vide its order dated 24.02.2016 is also similar. The similar facts and circumstances of the case vide para no.6 to 10 has held as under:

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7. So section 68 talks of any sum found credited in the books of an assessee maintained for any previous year. As per this section, if the assessee offers no explanation, the section would apply. But this explanation has to be with regard to any sum found credited in the books. This is amply clear from the use of the expression ‘about the nature and. source thereof ’ (‘thereof’ being the operative word). Then, in case the explanation offered by the assessee is not found by the AO to be satisfactory, the section can be invoked. This explanation, obviously, harks back to any sum found credited in the books. The words “the sum so credited’’ again relate to any sun found credited in the books “so credited”, here being the pregnant expression.

8. Thus, a plain reading of the section establishes that it operates only where books are maintained by assessee and a sum is found credited therein.

9. Now, in the present case, it remains undisputed that the. assessee has not maintained any books during the year. Thus, the provisions of section 68 of the Act are not at all attracted and they have been wrongly applied by the authorities below. This position has been duly recognized in ‘Sh. Om Parkash Sharma, Faridabad’ (supra). No contrary decision has been cited before this Bench.

10. In view of the above, the grievance of the assessee by way of the additional grounds taken is justified and is accepted as such. Due to such acceptance, since the provisions of section 68 of the Act are themselves held to be not applicable and mis- applied, nothing further remains to be adjudicated.”