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Facts
The assessee filed a return of income and during scrutiny, it was found that Rs. 30,83,300/- was deposited in cash in the assessee's bank account. The assessee failed to provide a plausible explanation for the source of these funds.
Held
The Tribunal held that Section 68 of the Income-tax Act, 1961, is applicable only when sums are found credited in the books of account maintained by the assessee. Since the assessee had not maintained any books of account, Section 68 was not applicable.
Key Issues
Whether Section 68 of the Income-tax Act, 1961, is applicable when the assessee has not maintained any books of account.
Sections Cited
68, 143(1)
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Income Tax Appellate Tribunal, “K(SMC
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SUNIL KUMAR SINGH, HON’BLE
| आयकर अपीलीय अधिकरण न्यायपीठ, म ुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “K(SMC)” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SUNIL KUMAR SINGH, HON’BLE JUDICIAL MEMBER I.T.A. No. 3919/Mum/2024 (Assessment Year: 2016-17) Mahesh Subhash Shukla, Income Tax Officer (IT), F201, Goodwill Paradise, Plot No. Vs Mumbai 24, Sector-15, Kharghar, Navi Mumbai, Thane, Maharashtra [PAN: BPQPS5231H] अपीलार्थी/ (Appellant) प्रत्यर्थी/ (Respondent) Assessee by : Shri Kirit Sheth Revenue by : Shri P. Sudhakar Naik, Sr. DR सुनवाई की तारीख/Date of Hearing : 03.09.2024 घोषणा की तारीख /Date of Pronouncement: 05.09.2024 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM
This appeal by the assessee is preferred against the order of ld. CIT(A)-58, Mumbai dated 24.06.2024 pertaining to Assessment Year 2016-17. 2. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 30,83,300/- made by the AO u/s 68 of the Act and further erred in enhancing the sum of Rs. 8 lakhs without appreciating that the assessee had not maintained any books of account therefore, provisions of Section 68 of the Act are not applicable.
I.T.A. No. 3919/Mum/2024 Mahesh Subhash Shukla 2 3. Briefly stated the facts of the case are that the assessee filed a return of income on 16.01.2017 declaring total income of Rs. 15,850/-. The return was processed u/s 143(1) of the Act and later on selected for limited scrutiny under CASS. 4. During the scrutiny assessment proceedings and on perusal of the AIR information the AO came to know that the assessee had deposited Rs. 30,83,300/- in cash in his ICICI Bank Account. The assessee was asked to explain the source and on receiving no plausible reply the AO made addition of Rs. 30,83,300/-. 5. The assessee carried the matter before the ld. CIT(A) and strongly contended that the provisions of Section 68 are not applicable because the assessee has not maintained any books of account. The contention of the assessee did not find any favour with the ld. CIT(A) who not only confirmed the addition but also issued a show cause notice for enhancement of addition of Rs. 8 lakhs and completed the appellate proceedings by confirming the addition of Rs. 30,83,300/- and enhancing by the sum of Rs. 8 lakhs. 6. Before us the Counsel reiterated that the provision of Section 68 of the Act does not apply because the assessee has not maintained any books of account. In support of his contentions strong reliance was placed on several judicial decisions placed in the case law paper book. Per contra the ld. DR strongly supported the findings of the AO. 7. We have given a thoughtful consideration to the orders of the Authorities below. The provisions of Section 68 starts with “where any sum is found credited in the books of an assessee maintained for any I.T.A. No. 3919/Mum/2024 Mahesh Subhash Shukla 3 previous year”. The emphasis is on the sum found credited in the books therefore, if the assessee has not maintained any books of account, then the provisions of Section 68 are not applicable. The Hon’ble Jurisdictional High Court of Bombay in the case of Bhaichand N. Gandhi 141 ITR 67 was seized with the following substantial question of law:-
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that a cash credit for the previous year shown in the assessee's bank pass book issued to him by the bank but not shown in the cash book maintained by him for that year does not fall within the ambit of section 68 of the Income-tax Act, 1961, and as such the sum so credited is not chargeable to income-tax as the income of the assessee of that previous year? (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the deposit of Rs. 10,000 made by the assessee on January 20, 1961, in the bank was not includible under section 68 of the Income-tax Act, 1961, in computing the income of the assessee for the assessment year 1962-637" 8. 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 maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived.”
I.T.A. No. 3919/Mum/2024 Mahesh Subhash Shukla 4 9. Similar view was taken by the coordinate bench in the case of Mehul V. Vyas Vs. ITO 164 ITD 296 (Mumbai), Smt Manshi Mahendra Pitkar Vs. ITO 160 ITD 605 (Mumbai), Asha Soni Vs. DCIT in ITA No. 99/RPR/22 and Jaipur Bench decision in the case of Dr. Vishan Swaroop Gupta Vs. ITO in ITA No. 13/JP/2020. 10. It would be pertinent to refer to SOP issued by CBDT vide order dated 10.01.2018 for applying the provision of Section 68 of the Act and in the background note appended to the said SOP at point 1.1 from the reading of Section 68 following conditions can be stated to be met for the applicability of Section 68(1) of the Act (i) assessee has maintained ‘books’; (ii) there has to be credit of amounts in the books maintained by the taxpayer of s sum during the year and for the meaning of the term books – the term ‘books of account’ was inserted by the Finance Act, 2001 w.e.f. 01.05.2001- book/ books of account includes ledgers, day-books, cash books, account books and other books whether kept in the written form or as print-outs of data stored in a floppy disc, tape or any other form of electro-magnetic data storage device. 11. Considering the fact that the cash was found to be deposited in the bank and since the assessee has not maintained any books of account therefore, in our considered opinion and in the light of the judicial decisions discussed hereinabove provisions of Section 68 are not applicable and therefore no addition could have been made by the AO u/s 68 of the Act which deserves to be deleted and the enhancement made by the ld. CIT(A) again u/s 68 of the Act also deserves to be deleted.
I.T.A. No. 3919/Mum/2024 Mahesh Subhash Shukla 5 12. We accordingly, direct the AO to delete the impugned additions. 13. Appeal of the assessee is allowed. Order pronounced in the Court on 05th September, 2024 at Mumbai. ( SUNIL KUMAR SINGH) ACCOUNTANT MEMBER Mumbai, Dated: 05/09/2024 *AK KEOT, Sr. PS
आदेश की प्रततलिपि अग्रेपषत /Copy of the Order forwarded to : अिीिार्थी / The Appellant 1. 2. प्रत्यर्थी / The Respondent 3. संबंधित आयकर आयुक्त / Concerned Pr. CIT 4. आयकर आयुक्त ) अिीि ( / The CIT(A)- पवभागीय प्रतततनधि ,आयकरअपीलीयअधिकरण, म ुंबई /DR,ITAT, Mumbai, 5. 6. गार्ड फाई/ Guard file.
आदेशानुसार/ BY ORDER,