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Income Tax Appellate Tribunal, DELHI BENCHES : “E” NEW DELHI
Before: SHRI J.SUDHAKAR REDDY, AM & SHRI C.M.GARG, J.M.
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER This is an appeal filed by the assessee directed against the order dt. 03.01.2011 of Ld.CIT(A), Rohtak for Assessment Year (A.Y.) 2007-08.
Facts in brief:- The assesseee is a property dealer and has declared income of Rs.99,700/- along with agricultural income of Rs.40,200/- for the A.Y. 2007-08, in its return of income filed on 6.6.2007. 2.1. The Ld.CIT(A) at page 1 of the paper book records that, no books of accounts have been maintained by the assessee. 2.2. During the course of assessment proceedings the A.O. observed certain credit entries amounting to Rs.16,12,694/- were found in the bank account of the assessee with HDFC bank. The Explanation given by the assessee was rejected by the A.O. and the amount of Rs.16,12,694/- was added u/s 68 of the Income Tax Act, 1961 (the Act). 2.3. On appeal the the Ld.CIT(A) granted part relief.
Further aggrieved the assessee is before us.
We have heard Shri Gautam Jain along with Shri Piyush Kumar Kamal, the Ld.Counsel for the assessee and Shri P.Damkanunjna, Ld.Sr.D.R. on behalf of the Revenue. On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of lower authorities, case laws cited, we hold as follows.
Admittedly the assessee does not maintain any books of accounts. The legal issue that arises for our consideration is whether an addition u/s 68 of the Act can be made when the assessee does not maintain any books of accounts.
The ITAT Lucknow “B” Bench of the Tribunal in the case of ITO vs. Kamal Kumar Mishra 143 ITD 686 Lucknow 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.”
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.”
8. Respectfully following the propositions laid down in the case law cited above, we have to necessarily hold that no addition can be made u/s 68 of the Act, as no books of accounts are maintained by the assessee and Bank Pass Book cannot be considered as the assessee’s books of accounts.
As we have adjudicated this ground on the legal issue, we do not go into merits of the case as it would be an academic exercise.
In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 11th August, 2016.