Section 68 additions not applicable to deposits in bank. Bank Pass Book-Statement not books of account – ITAT

Section 68 additions not applicable to deposits in bank. The bank Pass Book or bank statement are not books of account maintained by the assessee – ITAT 

ABCAUS Case Law Citation:
ABCAUS 1159 (2017) (03) ITAT

Important Case Laws Cited/relied upon:
Smt. Manasi Mahendra Pitkar vs. ITO
Bhaichand Gandhi [1983-(141)ITR -0067-BOM]

Brief Facts of the Case:
The Assessing Officer (AO) had the information that the appellant assessee had a bank account in which deposits and withdrawals were made. The assessee was asked to show cause as to why the above sums were not reflected in his return of income for the relevant Assessment Year.

During the course of the enquiry, the AO came to know that then Branch Manager of the bank had given his statement on oath before the District & Session Judge that both the TPOs were carried by assessee himself for deposit and Rs. 30 lakhs were withdrawn by him through cheque. In view of these facts, the AO had concluded that the version of the assessee that his bank account was credited by the purchasers was totally baseless and untenable. He concluded that since the sources of the money had not been satisfactorily explained by the assessee, it was nothing but an attempt to bring his unaccounted money into the main stream without paying any tax. He, therefore, added back the amount of Rs. 30,75,000/- to the income of the assessee u/s 68 of the Income Tax Act, 1961 (‘the Act’) and completed the assessment u/s 143(3).

On appeal, CIT(A), upheld the addition made u/s 68.

Contentions of the Appellant assessee:
It was submitted that the addition may be deleted, because the provision of section 68 under which the amount has been added by the AO are not applicable. It was stated that the CIT(A) was not justified to mention the applicability of provisions of section 69 of the Act which was not under the grounds of appeal or cause of action.

It was further submitted that the provisions of Section 292B of the Act were also not applicable because there is no mistake, the AO has made the addition u/s 68 with the clear mind and after satisfaction.

The assessee placed reliance on the decision in the case of  Smt. Manasi Mahendra Pitkar vs. ITO.

Observations made by the Tribunal:
The Tribunal noted that in the case of Smt. Manasi Mahendra Pitkar also the income tax authorities had made addition by treating the cash deposits in the bank account as unexplained cash credit within the meaning of section 68 of the Act. The assessee had raised legal point to the effect that the bank Pass Book was not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act.

From the findings given by the ITAT in the said case, it was observed that the Bombay High Court in had held the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act.

It was further observed that in the case of Smt. Manasi Mahendra Pitkar the ITAT had observed that the assessee was not maintaining any books – of account and section 68 of the Act had been invoked by the Assessing Officer only on the basis of the bank Pass Book. It was held that invoking of section 68 of the Act had to fail because as per the judgment of the Bombay High Court, the bank Pass Book or bank statement could not be construed to be a book maintained by-the assessee for any previous year as understood for the purposes of section 68 of the Act.

It was also noted that CIT(A) was wrong in observing that the provisions of section 69 would quite clearly applied to amounts deposited into the assessee’s bank account, which was not under the grounds of appeal or cause of action.

It was further found that the provisions of Section 292B were also not applicable because there was no mistake, the AO had made the addition u/s. 68 with the clear mind and after satisfaction.

Held:
The Tribunal opined that  the provisions of section 68 could not be applied to amount credited in the bank account. The addition was deleted

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