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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-3’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC-3’, NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER Sh. Yogesh Nigam vs. ITO, Ward no.44(1) C 1/682, Civic Centre Zade Home in Zade Garden New Delhi Palam Vihar, Gurgaon PAN: ABJPN 5924 E (Appellant) (Respondent) Appellant by : Sh. Ashwani Kr.Garg, Adv. Respondent by : Sh. F.R.Meena, Sr. D.R. ORDER This is an appeal filed by the Assessee directed against the order of the Ld. Commissioner of Income Tax (Appeals)- 34, New Delhi dated 21.03.2016 pertaining to the Assessment Year (A.Y.) 2005-06, wherein the Ld.CIT(A) confirmed the penalty levied under section 271(1)(C) of the Act made by the Assessing Officer (A.O.).
Facts in brief:- The assessee is a salaried employee. He is employed with the Association of State Road Transport Undertaking. His salary for the relevant A.Y. was Rs. 1,44,235/- i.e. about Rs.12,000/- per month. He has no other sources of income. He filed his return of income and 29.7.15 disclosing an income of Rs.1,01,810/-. During the assessment proceedings the return was picked up for scrutiny and it was noticed that the assessee had taken loan of Rs.7 lacs. On being questioned the assessee filed confirmation letters from the person who had given him the loans on the ground that the creditworthiness of these creditors was not established the amount was added under section 68 of the Act. On appeal the First Appellate Authority dismissed the appeal of the assessee. Thereafter the notice under section 271(1)(C) of the Act was given and penalty levied. The first appellate authority confirmed the penalty. Aggrieved the assessee is before us.
After hearing the rival contentions, I find that admittedly, the assessee does not maintain any books of account. Under these circumstances, no addition can be made u/s 68 of the Act as held in the following case laws:- i) The Hon'ble Bombay High Court in the case of CIT, Pune vs.Bhaichand H Gandhi141 ITR 67, held as follows:- "Income-Cash Credit-Bank Pass book is not a book maintained by assessee or under his instructions - cash credit for previous year shown in assessee's bank pass book - not shown in cash book of assessee for that year - cannot be treated as income of that previous year - I.T.Act, 1961 Sec.68. 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. 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. Hence, the pass book supplied by the bank to the assessee cannot be regarded as the book of the assessee, that is, a book maintained by the assessee or under his instructions. Therefore, a cash credit for the previous year shown in the assessee's bank pass book but not shown in the cash book maintained by the assessee for that year, does not fall within the ambit of S.68 of the Act and as such the sum so credited is not chargeable to tax as income of the assessee of that previous year." ii) The Hon'Ble Delhi High Court in the case of CIT vs. Ms.Mayawati reported in 338 ITR 563 (Del) held as follows:- "As the ITAT has come to the conclusion that Section 68 has no applicability to the facts of the present case as the assessee is not maintaining any books of accounts. If that be so Section 68does not apply in this case for the simple reason cheque received from Mr.Pankaj Jain has been deposited in her bank account in this regard. The ITAT was of the opinion that balance sheet/statement of the affairs cannot be equated to books of account because a pass book of the bank cannot be treated as a book of account of the assessee because this is proved by the banker, which is given to its customer and is only a copy of the customer‟s account in the books maintained by the bank. The bank does not act as an agent of the customer nor can it be said that the banker maintains the pass book under instructions of the customer (assessee) the relationship between the banker and customer is one of the debtor and creditor only. Therefore, a cash credit appearing in assessee‟s pass book relevant to a particular previous year, in a case where the assessee does not maintain books of account, does not attract the provisions of Section 68.
Keeping in view the above in the instant case neither the gifts relating to immovable property can be covered under Section 68 nor the gift of Rs.2 lacs received by the assessee can be covered under the provisions. In view of the ITAT all gifts satisfied the requirement of a valid and genuine gift. The assessee has fully explained the same and therefore it cannot be said the addition can be sustained even u/s 69 of the Income Tax Act. In this manner the ITAT has dismissed the appeal of the Revenue Department." iii). The ITAT Lucknow "B" Bench of the Tribunal in the case of ITO vs.Kamal Kumar Mishra 143 ITD 686 (Lucknow Trib.) at para 7 and 8 held as follows.
7. 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 bankmpassbook 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."
As I have held the addition itself cannot be made under section 68 of the act, the question of levy of penalty under section 271(1)(C) does not arise. On this ground alone this penalty has to be quashed. 4.1. As I have quashed the penalty on technical ground, I do not go into the arguments on merits made by the assessee and evidences produced by him to prove the creditworthiness of the persons who have given personal loans. In the result the appeal of the assessee stands allowed.
In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 18th January,2017.