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Facts
The Assessee's return was selected for scrutiny, and the AO observed cash payments of Rs. 5,42,000/- towards a credit card, which the Assessee claimed came from his wife's accumulated cash. Disbelieving this, the AO added Rs. 5,40,000/- to the Assessee's income under Section 68. The CIT(A) upheld the addition, prompting the Assessee to appeal to the ITAT with a delay.
Held
The Tribunal condoned the delay in filing the appeal. On merits, it held that an addition under Section 68 of the Income Tax Act cannot be made if the Assessee does not maintain any books of account, citing High Court judgments. Therefore, the addition made by the AO and sustained by the CIT(A) was deleted.
Key Issues
1. Condonation of delay in filing the appeal. 2. Validity of an addition made under Section 68 of the Income Tax Act when the Assessee does not maintain any books of account.
Sections Cited
250, 143(1), 142(1), 68, 271AAC, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDRA KUMAR CHOUDHRY
This appeal has been preferred by the Assessee against the order dated 04.12.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) 48, Mumbai (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
Vivek Varma 2. In the instant case, the Assessee by filing its return of income on dated 11.07.2017, declared total income at Rs. 4,23,250/- which was initially processed u/s. 143(1) of the Act and subsequently selected for scrutiny, which resulted into issuing statutory notices including u/s. 142(1) of the Act and therefore the Assessee filed the requisite details and documents. On perusing the same, the AO observed that the Assessee has made payment by cash towards Citi Bank credit card, amounting to Rs. 5,42,000/- deposited during the relevant months of the year under consideration and therefore he show caused the Assessee, who in response has claimed that the Assessee has repaid the credit card balance upto 03.11.2016 from the accumulated/cash balance available with his wife as the Assessee’s wife, pursues the profession of teaching various student from 5th to 9th standard for the past 2 years and has accumulated cash towards of Rs. 6,00,000/-, partly out of which amount of Rs. 5,23,000/- has been paid on various dates by the Assessee’s wife. As the annual income of the Assessee’s wife was lower than the taxable limit, therefore, the Assessee’s wife was not required to file any return of income and consequently, she filed no return of income.
The AO though considered the aforesaid claim of the Assessee, however, not being satisfied with the same mainly on the reason that the Assessee carries on the business successfully and shown turnover of Rs. 35,00,000/- and operates bank accounts and makes payments through the bank, therefore, it is unbelievable that the Assessee’s spouse instead of depositing cash in bank account, has kept cash of Rs. 6,00,000/- ideal at home. The Assessee has not specified the nature of payment, under which the spouse has given the money to the Assessee. In the absence of details, it is presumed that the Assessee has received loan from his spouse of
The Assessee being aggrieved against the said order, filed first appeal before Ld. Commissioner, however could not get succeeded, as the Ld. Commissioner dismissed the appeal filed by the Assessee and therefore, the Assessee being aggrieved has preferred instant appeal, however, with a delay of 175 days in filing of same, on which the Assessee has claimed that the impugned order was passed in the month of December, 2024 when the Assessee was suffering from high chest pain and was admitted to hospital and therefore, the Assessee was unwell for a period of 20 days and took some further time to regain due health. The Assessee also underwent the coronary angiography and due to resultant disruption, he could not take note of the impugned order and was under the impression that the matter was still pending with the CIT(A) for passing the order. However, on receiving the penalty order dated 24.06.2025 u/s. 271AAC of the Act, wherein the impugned was referred to, the Assessee became aware of the impugned order and therefore, immediately filed the instant appeal, without any delay. The delay occurred was neither intentional nor malafide but because of the aforesaid reason and therefore, lenient view may be taken and the delay may be condoned.
On the contrary, the ld. DR refuted such claim of the Assessee.
Having considered the reasons stated by the Assessee for condonation of delay, which are duly supported with duly sworn
Coming to the merits of the case, it is observed that in the absence of the relevant documents, as observed, the AO made the addition under consideration, mainly by observing that the Assessee has not specified the nature of payment, under which his spouse has given the money and in the absence of detail, the AO presumed that the Assessee has received loan from his spouse of Rs. 5,42,000/- by cash.
The Assessee before this Court has claimed that most of time, credit card has been utilized by his wife only, which can be verified from the credit card monthly statements. The Assessee is ready to produce the relevant details in order to show that most of things purchased were of lady’s item. Alternatively, the Assessee has claimed that the addition u/s 68 of the Act, in absence of books of account is unsustainable.
This Court observe from the record that admittedly the Assessee has not maintained any books of account. The Hon’ble Jurisdictional High Court in the case of CIT Vs. Bhaichand N Gandhi (1983) 141 ITR 67 (Bombay) has approved the proposition that a bank Passbook maintained by the bank cannot be regarded as a book of the Assessee for the purposes of section 68 of the Act.
9.1 As observed above, the Assessee in the present case, is not maintaining any books of account but still the Assessing Officer made the addition of Rs. 5,42,000/- under section 68 of the Act, Vivek Varma without meeting out the ingredients of section 68 of the Act. According to which, where any sum is found credited in the books of 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 income of the Assessee of that previous year. However, in this case as observed above, the Assessee has not maintained any books of account and therefore in view of judgement referred to above, the addition on this count itself, is liable to be deleted.
9.2 Coming further, this Court observe that though, the Ld. Commissioner sustained the addition on alternate section i.e. 69C of the Act by quoting judgment of Hon’ble Gauhati High Court in the case of Anand Ram Raitani v. CIT[1997] 223 ITR 544 (Gau.)., wherein it was held that “the A.O. before invoking the power u/s 68 of the Act must be satisfied that there are books of account maintained by the Assessee and the cash credit is recorded in the said books of account. Since the credits have not been recorded in the books of account, the addition u/s 68 of the Act is not valid. As the appellant is found to be in possession of the said amount of money, it can be fairly concluded that the addition should have been made u/s 69A of the Act”.
9.3 As observed above, the Hon’ble Jurisdictional High Court in the judgment referred to above, has not approved the addition sans book of account and therefore respectfully following the judgment of Hon’ble jurisdictional High Court, the addition under consideration on the alternative plea raised by the Assessee, is liable to be deleted. Thus, the same is deleted.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 28.11.2025.