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Facts
The assessee, engaged in the business of selling plastic scrap on a commission basis, appealed against an addition of Rs. 88,91,412/- made by the Assessing Officer under Section 68 of the Income Tax Act. The assessee claimed these amounts were from business proceeds and gifts, while the Assessing Officer treated them as undisclosed income.
Held
The Tribunal held that the bank passbook is not considered books of account for the purpose of Section 68. Since the assessee filed a return under Section 44AD, the initiation of proceedings under Section 68 was based on a non-existent provision as there were no proper books of account.
Key Issues
Whether the addition made under Section 68 for cash and cheque deposits in bank accounts is sustainable when the assessee has not maintained books of account and the bank passbook is not considered as such.
Sections Cited
143(3), 250, 68, 44AD
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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: Ms. MADHUMITA ROY & SHRI KHETTRA MOHAN ROY
O R D E R PER Ms. MADHUMITA ROY, JM:
The instant appeal, preferred by the assessee, is directed against the order dated 14.07.2022 (DIN & Order No. ITBA/NFAC/S/250/2022-23/1043847036(1), passed by the Ld. CIT(A)/NFAC, Delhi, arising out of the order dated 20.12.2016, Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:
“1. Because the action for initiation, continuation and conclusion of reassessment proceedings u/s 143(3) is being challenged on facts and law.
Because the action for passing order u/s 250 is being challenged on facts & law as the last hearing notice was issued on 14.03.2022 fixing the date of hearing on 21.03.2022 & order u/s 250 was passed on 14.07.2022. Thus, order passed u/s 250 is null & void as the same is passed after 90 days of hearing date.
Because the action is being challenged on facts and law for making addition of Rs 80,91,412/- u/s 68 overlooking the submission that assessee has done business as commission agent & received cash/cheque in bank out of sale proceeds on consignment sales. Alternatively, quantum of addition is disputed
4. Because the action is being challenged on facts and law for making addition of Rs 3,00,000/- u/s 68 overlooking the submission that the said amount is received from Father for making payment to caterer & other expenses of Sister's marriage which is substantiated by various documents.
Because the action is being challenged on facts and law for making addition of Rs 5,00,000/- u/s 68 overlooking the submission that the said amount is received from in laws as Gift to support assessee's business which is substantiated by various documents.
6. Because the action is being challenged on facts and law for making addition of Rs. 88,91,412/- by treating cash/cheque deposits in bank accounts as income u/s 68 whereas per assessee the said deposits in bank
7. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
3. The assessee in this appeal has assailed the sustenance of addition of Rs.
88,91,412/- made by the Assessing Officer under Section 68 of the Act.
During the year, assessee has done business as commission agent of sale of Plastic Scrap used for making Plastic Dana. Assessee being a small businessman takes rates from small vendors of plastic scrap & makes contact with factories who manufacture plastic dana within Delhi & outside Delhi. For this transaction of sale, assessee get commission from factories for providing plastic dana. Factory owner of plastic dana used to make payment to assessee through cash deposited in his account or through cheque as factory owner know only assessee & not small vendors. After receiving sale proceeds from Factory owner, assessee make payment to small vendors through cash after withdrawing cash from bank or through issuing cheques to said small vendors. Some of the deposits are as noted as below:
S. No. Account No. Cash Deposit Cheque Deposit Total 1 Saving Bank a/c no. 59,54,860 14,80,552 74,35,412 01880102477 2 Current a/c no. 8,66,000 5,90,000 14,56,000 072405500254 Total 88,91,412
5. Ld. CIT(A) has dismissed the appeal by holding as follows:
“I have carefully considered the submissions made by the appellant and additional evidences furnished by the appellant and view of AO in making assessment and his remand report on additional evidences. It is observed that appellant has undisputedly accepted that there is total sum credited Rs.88,91,412/- through cheque and cash mode in two accounts of the appellant. He has further stated that out of Rs.68,20,860/- deposited in cash Rs.5,00,000/- and Rs.3,00,000/- do not relate to his business and source of the same was explained to be gift from his father-in-law and cash withdrawal from his father's account. In order to decide whether the source and nature of sum credited to bank accounts as explained by the appellant is satisfactory or not, the following points are considered necessary:
(i) The appellant has stated that he had received a sum of Rs.5,00,000/-in cash from his parent in-laws and as evidence he has submitted copy of ITRs and Form 16 for A.Y. 2013-14 and 2014-15. The perusal of the same shows that both Shri Pradeep Kumar, father-in law is a govt. employee and Smt. Manorma, mother-in law is a bank employee and are bound by conduct rules which lays certain conditions to fulfil before making gift in cash to his would be son-in law. However, no confirmation from Shri Pradeep Kumar or Smt. Manorma has been brought to record which may establish that such a gift has been made by them. Also, no date of gift or occasion of gift has been mentioned by the appellant. Therefore, the appellant's claim that he had received gift of Rs.5,00,000/- from his in-laws is not found satisfactory although the evidence produced are sufficient to prove the identity and creditworthiness of the in-laws.”
It is in this context that the addition has been made under Section 68 which is reproduced as below:
Rahul Goel v. ITO Asstt. Yr: 2014-15 Cash credits. “68. 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 may61 be charged to income-tax as the income of the assessee of that previous year.”
The assessee has admittedly filed return under Section 44AD and as a natural corollary books of account ought to be maintained. It has been held in various judicial pronouncement that the bank pass book is not regarded as books of account. Therefore, the very initiation of Section 68 fails because there are no books. The addition made is under non-existent provision. Accordingly, we direct to delete the addition and the Ld. CIT(A)’s order is overturned in this aspect. As a result, appeal of the assessee is allowed.
Order pronounced in open court on 30.05.2025.