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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
Per Shri D.S.Sunder Singh, Accountant Member :
This appeal is filed by the assessee and cross appeal filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur in Appeal No.10129/2018-19 dated 26.03.2019 for the Assessment Year (A.Y.)2011-12 and cross objections are filed by the assessee in support of the order of the Ld.CIT(A).
All the grounds of appeal are related to sustaining the addition of Rs.74,91,800/- out of the total addition of Rs.1,89,00,000/- made by the Assessing Officer (AO) u/s 68 of the Income Tax Act, 1961 (in short ‘Act’). In this case, the assessee filed the return of income admitting total income of Rs.32,53,980/- for the A.Y.2011-12. Subsequently, the assessment was reopened by issue of notice u/s 148 of the Act on 22.03.2018 and completed the assessment u/s 143(3) r.w.s. 147 of the Act on total income of Rs.2,21,53,980/- and made the addition of Rs.1,89,00,000/- u/s 68 of the Act.
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During the reassessment proceedings, the AO found that the assessee has made cash deposits in Andhra Bank, Brundavan Gardens
Branch, Guntur, during the period 01.10.2010 to 24.12.2010. It was further
found that the assessee has shown the receipts from sale of agricultural
land over and above the registered value of sale deeds and explained
before the AO that his son, Shri G.Kalyan Babu sold the agricultural lands
through unregistered sale deeds to M/s Ravichandra Textiles Pvt. Ltd. and the sale proceeds were deposited in the bank account. The AO furnished
the relevant details of sale of land in the assessment order as under :
Land extent and The value as per In the form of Through Sl.No. Remarks address sale deed cash cheques
Vacant land to the Rs.4,80,000/- Rs.4,80,000/- - The site was extent of 384 sq.yds held on the at Pedapalakaluru, name of the Guntur assessee
Agricultural lands Rs.17,00,000/- -- Rs.17,00,000/ Land is held on to the extent of A - the name of 8.50 cents at assessee’s son Ponnekallu Village, Sri Kalyan Babu Guntur
Agricultural lands Rs.16,74,000/- Rs.74,000 Rs.16,00,000/ Land is held on to the extent of RA The land extent of - the name of 9.37 cents at Ac 8.37 cents assessee’s son Ponnekallu Village, Sri Kalyan Babu Guntur Rs.2,00,000/- The land extent of Ac.1.00 cents Rs.2,00,000
Agricultural lands Rs.6,08,000 Rs.6,08,000 - Land is held on to the extent of A the name of 4.05 cents at assessee’s son Pedaparimi village Sri Kalyan Babu Village, Guntur
Agricultural land to Rs.4,46,000/- 1,35,000/- 3,11,000/- Land is held on the extent of A 2.97 the name of cents at assessee’s son Pedapanimi village, Sri Kalyan Babu Guntur
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The AO found that the assessee has made cash deposits of Rs.1,89,00,000/- in the bank account maintained by the assessee at Andhra Bank, Brundavan Gardens Branch A/c No.135910100008726. The deposits were made by Shri Prasad, Shri K.Venugopal Reddy and A.Kotaiah who are the employees of the assessee’s firm/company. The AO disbelieved the explanation of the assessee that the deposits represent the sale proceeds of agricultural land and treated the same as unexplained cash credits for the F.Y.2010-11 relevant to the A.Y.2011-12 and accordingly made the addition in the hands of the assessee u/s 68 and protectively in the hands of M/s Ravichandra Textiles Pvt. Ltd. The AO made the addition of Rs.2,88,26,250/- in the hands of M/s Ravichandra Textiles Pvt. Ltd the purchaser of the said agricultural land on protective basis.
Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition of Rs.1,14,08,200/- and confirmed the balance addition of Rs.74,91,800/-. Accordingly, the Ld.CIT(A) allowed the appeal partly. The Ld.CIT(A) observed that the property relating to agricultural land to the extent of 8.50 cents at Ponnekallu Village, Guntur and agricultural land of 9.37 acres at Ponnekallu Village, Gunur, both the lands were registered by the son of the assessee in 5 I.T.A. No.179/Viz/2019, 354/Viz/2019 & CO No.124/Viz/2019, A.Y.2011-12 Ghanta Punna Rao, Guntur
2010-11, therefore, the Ld.CIT(A) believed that the assessee would have received Rs.1,14,08,200/- comprising of advances from S.Masthan Rao, employee of M/s Ravi Chandra Textiles and K.Vijaya Bharati. Accordingly, allowed the sum of Rs.1,14,08,200/-, since the said sum of Rs.1,14,08,200/- was offered for working out the capital gains as observed by the Ld.CIT(A) in page No.13 of CIT(A)’s order and the balance addition of Rs.74,91,800/- was confirmed. For the sake of convenience, we extract relevant part of the order of the Ld.CIT(A) which reads as under : “The transaction being a cash transaction only the seller and purchaser will be privy to the said transactions. The buyer may deny the transaction as the same, is beneficial to it. A small time employee entering into an agreement worth crores of rupees is an indicator that he is only a name lender and face provider to hide the real person- behind transaction. In this case, it is the company, which has purchased the properties and got registered. The agreement holder, at the cost of repetition, is still an employee with said company, which lends credence to the belief that the real person behind the transaction is none other than the company. In view of these discussions, it is held that the appellant could have received Rs. 2.12 Cr during the year which is more than the amount which was disallowed by the AO. However, having regard to evidences, the appellant certainly received Rs. 1,14,08,200/- during the year and hence the balance amount i.e. Rs. 74,91,800/- (Rs.1,89,00,000 - 1,14,08,200) can only be treated as unexplained one. The appellant explained that during the year received Rs 52,50,000/- on account of agreement of sale of land situated at Pedaparimi village. The appellant could not produce any evidence even at the time of assessment with regard to this. However, the appellant has deposits in bank account having proximity to registration of properties. The properties were registered on 27-09-2010 and 07-12-2010 respectively. The circumstantial evidences lead to conclusion that the appellant received on money for these two lands also. If the same is accepted then the quantum of unexplained money will come down accordingly. However, as there is no evidence for receipt of money over and above registered amount, credence cannot be given to the assertion made by the appellant.”
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Against which the assessee is in appeal before this Tribunal. The department also filed cross appeal challenging the deletion of addition of Rs.1,14,08,200 and the assessee has filed cross objection. Both the appeals and cross objections are related to the addition made by the AO u/s 68 of the Act.
By the petition dated 24.02.2020, the assessee filed additional ground in cross objections challenging the validity of addition u/s 68 of the Act in respect of cash deposits in bank account. The additional ground raised by the assessee reads as under : “On the facts and in the circumstances of the case, whether the assessing officer erred in making addition u/s 68 of the Income Tax Act, 1961 in respect of unexplained credits in the bank account when the bank account is not a book of account?” The assessee argued that the additional ground is a legal ground and all the material facts are available in the assessment record, no fresh material or the enquiry is required for adjudication and hence requested to admit the additional ground. After hearing both the parties, we admit the additional ground.
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The Ld.AR supported the order of the Ld.CIT(A) stating that the Ld.CIT(A) rightly allowed the relief, since the said sum of Rs.1,14,08,200/- was also offered to capital gains tax.
The Ld.AR further stated that in the instant case, the assessee has explained the source stating that the deposits were made by his son on sale of agricultural lands and in support, unregistered sale agreements were also produced. The AO did not make out a case that the explanation offered by the assessee was false. Since the source was explained by the assessee, no addition can be made in the hands of the assessee.
Similarly, the Ld.AR vehemently argued that since there were no entries in the books of accounts, the AO is not permitted to make addition u/s 68 of the Act. Accordingly, argued that the order of the Ld.CIT(A) be set aside and delete the entire addition made by the AO and allow the appeal of the assessee as well as the cross objections.
The Ld.DR vehemently placed reliance on the orders of the AO and argued that the AO has conducted enquiries and made out a case that the assessee has no source to explain the deposits on thorough enquiry, therefore argued that the entire addition be confirmed.
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We have heard both the parties and perused the material placed on record. In this case, there is no dispute that the entire addition of Rs.1,89,00,000/- relates to the deposits made by the assessee in the bank account in the form of cash in Andhra Bank, Brundavan Gardens branch A/c No.135910100008726. It is also undisputed that the above cash deposits were not being credited in the books of accounts of the assessee. As per section 68 of the Act, only the credits made in the books of accounts of the assessee which are not explained to the satisfaction of the AO required to be brought to tax. In the instant case, there were no entries made in the books of accounts for invoking section 68 of the Act. Neither the AO nor the CIT(A) invoked the section 69 of the Act. The assessee explained the source of cash deposits as sale of agricultural lands by his son which was supported by sale agreements. However, there was huge difference in the consideration recorded in the sale deed and the consideration recorded in the sale agreements. The lands were stated to be sold by Sri G.Kalyan Babu to Sri Sikhakolli Mastan Rao, supervisor of M/s Ravichandra Textiles Pvt Ltd. for a consideration of Rs.1,53,00,000/- and Rs.1,71,00,250/- on 22.12.2010 and the sale proceeds were deposited in his bank account. The assessee explained the source, the receipt from his son from sale of agricultural land. The assessing officer has not conducted
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any enquiry to disprove the contention of the assessee or collected any information to controvert the submission of the assessee. The relevant details of his son Kalyana Babu who stated to have deposited the cash in the bank account are available in the sale deed or can be obtained from the assessee. Once the assessee explains the source, the burden shifts on the department unless the same is discharged. After having explained the source by the assessee the AO has failed to discharge the burden.
Be that as it may, the assessee has raised cross objection challenging the addition made u/s 68 in respect of deposits made in the bank account. Since, the cross objection covers the entire assessment, we, first take up the cross objection filed by the assessee and adjudicate the same as under : As per section 68 of the Act, only the credits made in the books of accounts, that were not explained by the assessee required to be brought to tax. Since the deposits were made in the bank account, the same required to be taxed u/s 69, but not u/s 68 of the Act. This Tribunal in the case of Smt.Asha Sanghavi in ITA No.33/Viz/2019 held that the addition made in respect of bank deposits u/s 68 cannot be sustained and the bank statement or bank passbook cannot be considered to be the books of accounts maintained by the assessee. Accordingly deleted the addition. For 10 I.T.A. No.179/Viz/2019, 354/Viz/2019 & CO No.124/Viz/2019, A.Y.2011-12 Ghanta Punna Rao, Guntur
the sake of clarity and convenience, we extract relevant part of this Tribunal which reads as under :
“10. We have heard both the parties and perused the material placed on record. In the instant case, the AO made the addition of Rs.1,22,29,000/- representing cash deposits made in the bank account u/s 68 of the Act. Section 68 allows the AO to make addition for the sums credited in the books of accounts maintained by the assessee for which the assessee fails to offer satisfactory explanation with regard to source. In the instant case, the assessee is maintaining the books of accounts but did not make any entry in the books of accounts. The amounts were deposited in the bank accounts, but not made relevant entry. Hence, the Ld.AR argued that since the assessee did not make any entry in the books of accounts, the AO is not permitted to make the addition u/s 68. The issue with regard to deposits made in the bank account, whether to be brought to tax u/s 68 or not was considered by the coordinate bench of ITAT Mumbai in Mehul V.Vyas Vs. Income Tax Officer (supra) and held that the amounts found credited in the bank pass book or bank statement cannot be considered to be books maintained by the assessee in any previous year as understood for the purpose of section 68 of the Act. For the sake of clarity and convenience, we extract para No.8 of the cited order which reads as under :
“5. We have heard the Id. Authorized representatives of both the parties, perused the orders of the lower authorities as well as the material produced before us. We will first deal with the objection raised by the Id. A.R as regards the addition of Rs.10,53,000/- which was made by the A.O under Section 68 of the 'Act', in respect of the cash deposit in the bank account of the assessee We find substantial force in the contention of the Id. A.R that an addition under Section 68 can only be made where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee either offers no explanation about the nature and source as regards the same, or the explanation offered by him in the opinion of the assessing officer is not found to be satisfactory. That before adverting further, we herein reproduce the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: - "Cash Credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory, the sum so credited may be charged to income-tax as the 11 I.T.A. No.179/Viz/2019, 354/Viz/2019 & CO No.124/Viz/2019, A.Y.2011-12 Ghanta Punna Rao, Guntur
income of the assessee of that previous year.......... That a bare perusal of the aforesaid deeming section therein reveals that an addition under the said statutory provision can only be made where any sum is found credited in the books of an assessee maintained for any previous year. Thus, the very sine qua non for making of an addition under Section 68 presupposes a credit of the aforesaid amount in the 'books of an assessee' maintained for the previous year. We not being oblivious of the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature, thus confining ourselves within the realm of our juri iction, therein construe the scope and gamut of the aforesaid statutory provision by according a plain meaning to the language used in Sec.
We are of the considered view that a credit in the 'bank account' of an assessee cannot be construed as a credit in the 'books of the assessee', for the very reason that the bank account cannot be held to be the 'books' of the assessee. Though it remains as a matter of fact that the 'bank account' of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the 'books' of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision, viz. Sec. 68, and are of the considered view that an addition made in respect of a cash deposit in the 'bank account' of an assessee, in the absence of the same round credited in the 'books of the assessee' maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68. That our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bombay) wherein the Hon’ble High Court has held as under: - "As the Tribunal has pointed out, 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. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book
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maintained by the assessee or under his instructions. In our view, the Tribunal was justified In the conclusions at which it arrived." We find that the aforesaid view of the Hon'ble juri ictional High Court had thereafter been followed by a 'SMC of the ITAT Mumbai bench in the case of Smt. Manshi Mahendra Pitkar Vs. ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Trib.) wherein it was held as under: - I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of sect/on 68 of the Act The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fail within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation "Where any sum is found credited in the books of an assessee ........... ". The Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved 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. Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or bank statement cannot 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. Therefore, on this account itself the impugned addition deserves to be deleted. I hold so" We further find that a similar view had also been arrived at in a 'third member' decision of the Tribunal in the case of Smt. I.T.A. No.179/Viz/2019, 354/Viz/2019 & CO No.124/Viz/2019, A.Y.2011-12 Ghanta Punna Rao, Guntur
taxamann.com 610 (Lucknow Trib.) Thus in the backdrop of the aforesaid facts of the case read in light of the settled position of law, we are of the considered view that the addition made by the A.O in respect of the cash deposit of Rs.10,53000/-(supra) in the bank account of the assessee by invoking Section 68 has to fail for the very reason that as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for any previous year, as understood for the purpose of Section 68 of the Act. Therefore, on this count itself the impugned addition Rs.10,53,000/- deserves to be deleted.
While delivering the decision, the Coordinate Bench relied on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand N.Gandhi (supra). Similar view was taken by the coordinate Bench of ITAT, Delhi in the case of Smt Babbal Bhatia in TS-306-ITAT-2018. In the instant case, though the assessee has maintained the books of accounts, the cash deposits made in the bank account were not found credited in the books of accounts. The entire transactions were made outside the books of accounts. In the absence of any finding with regard to cash deposits recorded in the books of accounts of the assessee, the addition made by the AO u/s 68 in respect of cash deposits made in the bank account are unsustainable. During the appeal hearing, the Ld.DR did not bring any other decision to support the revenue’s contention that the cash deposits made in the bank account to be brought into the purview of section 68 of the Act. The case law relied upon by the Ld.DR in the case of Sachdeva (supra) though related to sale of jewellery and the failure of the assessee to prove the genuineness of sale, it was not related to the addition u/s 68. The case law relied upon by the Ld.DR is distinguishable and does not help the Revenue’s case. Since the facts are identical to the decision of Mehul V.Vyas (supra), respectfully following the view taken by the coordinate bench of ITAT, Mumbai, we hold that the addition made by the AO u/s 68 in respect of cash deposits made in the bank account is unsustainable, accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO. Accordingly, the appeal of the assessee is allowed. “ I.T.A. No.179/Viz/2019, 354/Viz/2019 & CO No.124/Viz/2019, A.Y.2011-12 Ghanta Punna Rao, Guntur
that the AO is not permitted to make addition u/s 68 in respect of deposits made in the bank accounts. Since the facts are identical, respectfully following the view taken by the coordinate bench of ITAT in the case supra, we hold that the AO is not permitted to make addition in respect of bank deposits u/s 68 of the Act. Accordingly, we set aside the orders of the Ld.CIT(A) and delete the addition made by the AO. Thus the cross objection of the assessee on legal issue of challenging the addition u/s 68 is allowed and the appeal of the Revenue is dismissed.
Since we have held that the AO is not permitted to make addition u/s 68 and deleted the addition, the appeal of the assessee also stands allowed.
In the result, the appeal and cross objection filed by the assessee are allowed and the appeal of the Revenue is dismissed. Order pronounced in the open court on 23rd November, 2020. (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 23.11.2020 L.Rama, SPS
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आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Circle-2(1), Guntur 2. निर्धाऩरती/ The Assessee– Ghanta Punna Rao, 3rd Floor, Varandas Apartments, 1/3, Navabharat Nagar, Guntur
The Pr.Commissioner of Income Tax, Guntur
The Commissioner of Income Tax (Appeals)-1, Guntur 5. तिभागीयप्रतितिति, आयकरअिीिीयअतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्डफ़ाईि / Guard file आदेशािुसार / BY ORDER ////
Sr. Private Secretary ITAT, Visakhapatnam