ROOPAK JAIN,DELHI vs. ITO, NEW DELHI

The assessee is an individual and filed its return of income on 12.3.2012 declaring income of Rs.1,69,630/-. The assessee had deposited a total amount of Rs.39,76,168/- in two bank accounts during the year i.e., ICICI Bank Ltd. and Dena Bank Ltd. The AO inquired into the sources of these deposits and, thereafter, added the same as unexplained sources u/s 68 of the Act in his order passed u/s 143(3) on 3.3.2014. The assessee carried the matter in appeal without success.

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 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.”

Even otherwise, the alternative contention of the assessee that the peak credit has to be taken into account by considering both the bank accounts has much force. On a perusal of the cash credit of the peak submitted by the assessee, the addition cannot be sustained. On this ground also the addition cannot be sustained.

In the result, the appeal of the assessee is allowed.