SMT.MANJUSHREE,BANGALORE vs. INCOME TAX OFFICER, BANGALORE

The assessee has raised the following grounds :

3. The only issue raises in this appeal by the assessee is whether in the facts and circumstances of the case the CIT (Appeals) is erred in confirming the addition made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 (in short 'the Act') on account of cash deposited in the bank account.

Before us, the learned Authorised Representative has submitted that when the assessee has explained the source of deposit as sale consideration of land amounting to Rs.46,99,500 and further the assessee also explained that there was opening balance of cash of Rs.6,23,364 as on 1.4.2010 apart from cash withdrawal from her bank account are more than sufficient to explain the source of the deposit in the bank. The learned Authorised Representative has further contended that the transaction of sale of agriculture land has not been Assessing Officer however because of the time gap the availability of cash with the assessee has denied.

The second leg of argument of the learned Authorised Representative is the provision of Section 68 cannot be applied in the case of deposit in bank account as it was not a credit in the books of accounts. The learned Authorised Representative has then relied upon the decision of the co-ordinate bench of this Tribunal dt.8.9.2016 in the case of Mrs. Farha Kausar Vs. ITO in and submitted that the Tribunal has held that Section 68 can be invoked only in the case of cash credit in the books of accounts. The bank passbook cannot be treated as books of accounts and therefore no addition can be made under Section 68 of the Act when there is no credit in the books of accounts. He has also relied upon the decision of Delhi Bench of Tribunal dt8.2.2013 in the case of Vijendra Kumar Jain & Sons (HUF) Vs. ITO in ITA No.1315/Del/2011. Thus the learned Authorised Representative has submitted that the provisions of Section 68 cannot be invoked in the hands of the assessee.

On the other hand, the learned Departmental Representative has submitted that the Assessing Officer has already allowed the source explained by the assessee to the extent of Rs.5 lakhs and further to the extent of Rs.3

Having considered the rival submissions as well as the relevant material on record, it is noted that the Assessing Officer has accepted the source of the deposit in the bank account to the extent of Rs.11,31,000 out of total deposit of Rs.37,93,000. Thus addition was made by the Assessing Officer of Rs.27,23,100 under Section 68 of the Act. The assessee explained the source of deposit as sale consideration of the agriculture land for Rs.46,99,500. The Assessing Officer did not accept the said explanation due to the reason that the agriculture land was sold in the year 2008 and there is no explanation why this cash was not deposited in the bank account prior to this year. Before the CIT (Appeals) it was submitted that apart from the sale consideration there was a cash balance of Rs.6,23,364 as on 1.4.2010 and there was cash withdrawals made by the assessee from her bank account. The CIT (Appeals) has not accepted this explanation because of the change of stand by the assessee. It is pertinent to note that the Assessing Officer has not disputed the sale of agriculture land on 23.6.2008 for a consideration of Rs.46,99,500. Therefore when this amount of sale consideration was not utilized by the assessee for any other purpose then merely because the assessee has not deposited this amount in the bank prior to this year cannot be a reason for denial of explanation. Accordingly, when the assessee was having sufficient cash with her as a sale consideration of agriculture land then the same cannot be ignored or denied as a source of deposit in the bank.

Further there is no dispute that this is a transaction of deposit in the bank therefore the issue of applicability of Section 68 arises in view of the various decisions of this Tribunal as well as the decision of Hon'ble Bombay High Court in the case of CIT Vs. Bhaichand N Gandhi 141 ITR 67. The co- ordinate bench of this Tribunal vide order dt.8.9.2016 in the case of Mrs. Farah Kausar Vs. ITO (supra) after considering a series of decisions on this point has held in paras 10 to 12 as under :

In the case of Kamal Kumar Mishra in it is held as under : The aforesaid provisions of section 68 of the Act can only be invoked 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 Income-tax Officer, satisfactory. In that eventuality, the said sum so credited may be charged to income- tax as the income of the assessee of that previous year. Meaning thereby maintenance of books of the assessee, in which credit entry so found, is a condition precedent for invoking the provisions of section 68 of the Act. Now the question arises whether the passbook issued by the bank with regard to the accounts of the assessee can be termed to be the books of the assessee for the purpose of section 68 of the Act. This issue was examined by the Hon'ble Bombay High Court in the case of CIT vs. Bhaichand N. Gandhi (supra) and while answering the question i.e. whether on the facts and circumstances of the case, the Tribunal was justified in holding that cash credit for the previous year shown in the assessee's bank passbook 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 Act and as such the sum so credited is not chargeable to income tax as the income of the assessee of that previous year, their Lordships of the Hon'ble Bombay High Court categorically held that passbook supplied by the bank to the assessee could not be regarded as book of the assessee, that is, a book maintained by the assessee or under his instruction. The relevant observations of the Hon'ble Bombay High Court are extracted hereunder:- "In Baladin Ram v. CIT [1969] 71 ITR 427, it has been held by the Supreme Court that it is now well settled that the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year. Even under the provisions embodied in s.68 of the said Act it is only when any amount is found credited in the books of the assessee for any previous year that the section will apply and the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory. 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." In the case of Anand Ram Ratiani vs. CIT (supra), the Hon'ble Gauhati High Court has also held that perusal of section 68 of the Act shows that in relation to expression "books", the emphasis is on the word "assessee" meaning thereby that such books have to be the books of the assessee himself and not of any other assessee. In that case, the books of account of the partnership firm were not treated as those of the individual partner and accordingly the additions made in the hands of the individual partners on the basis of the books of the partnership firm was deleted. In the instant case, it is an undisputed fact that the assessee has not maintained any books of account and whatever credit entries are found by the Assessing Officer, it was from the bank accounts of the assessee in which deposits were made at different point of time. Even the passbook issued by the bank cannot be termed to be the book of the assessee as per the judgment of the Hon'ble Bombay High Court CIT vs. Bhaichand N. Gandhi (supra). Therefore, provisions of section 68 of the Act cannot be invoked on various deposits/credits found recorded in the bank account of the assessee in the absence of books of the assessee maintained for that previous year. The ld. CIT(A) has adjudicated the issue in the light of the aforesaid judgment and has held that provisions of section 68 of the Act cannot be invoked. Besides, he has also examined the additions made by the Assessing Officer through grounds No.1 to 6 on merit also and has noted that in each and every case the assessee has furnished plausible and reasonable explanations with respect to the deposits found recorded in the bank passbook of the assessee and on merit also the ld. CIT(A) did not find any justification in the additions made by the Assessing Officer. Though we are of the view that provisions of section 68 of the Act cannot be invoked on the deposits made in the bank account of the assessee, yet we have examined the veracity of the additions made by the Assessing Officer on certain deposits by invoking the provisions of section 68 of the Act and we find that before the ld. CIT(A) the assessee has furnished reasonable and plausible explanations along with confirmation with regard to the different deposits. Since the ld. CIT(A) has adjudicated the issue on merit also in the light of the explanations and confirmations placed before him, in a proper perspective and we find no infirmity therein, we confirm the same. Accordingly, finding no merit in the Revenue's appeal, we dismiss the same. In the result, appeal of the Revenue and Cross Objection of the assessee are dismissed.

Respectfully following the decision of the Tribunal in the case of Kamal Kumar mishraa (supra), we allow the appeal of the assessee.”

A similar view has been taken by the Delhi Bench of Tribunal in the case of Vijendra Kumar Vs. ITO (supra) in paras 7 & 8 as under :

As regards the decision of Hon'ble Allahabad High Court in the case of Smt. Renu Aggarwal Vs. ITO (supra) the said decision is on the question of dismissal of the application of the assessee under Section 254(2) and not on applicability of Section 68. Therefore the Hon'ble High Court though made an observation that in case Section 68 is not applicable the provisions of Section 69 would be applicable, however, the question before the Hon'ble High Court is only with regard to the jurisdiction of the Tribunal under Section 254(2) of the Act in the proceedings of order giving effect to the Third Member forming the majority view.