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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: Ms. MADHUMITA ROY& SHRI BHAGIRATH MAL BIYANI
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is directed against the order dated 03.10.2019 passed by the Ld.Commissioner of Income Tax (Appeals), Indore (in short ‘CIT(A)’),arising out of the order dated 28.12.2017passed by the Income Tax Officer-3(2), Indoreunder section 143(3)/147of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2010-11.
The addition on account of unexplained cash deposit in the bank to the tune of Rs.27,57,710/- under Section 68 of the Act is the subject matter before us.
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 2 - 3. None appeared on behalf of the assessee. On the other hand, the Ld. DR relied upon the orders passed by the authorities below.
Upon perusal of the record and the orders passed by the authorities below, it appears that the impugned addition has been made under Section 143(3) r.w.s. 147 of the Act on 28.12.2017 as the assessee did not submit any documentary evidence in respect of the source of cash deposits and the declaration signed by the parents of the assessee stating the fact of gifting Rs.5 Lakhs each to their daughters, being the assessee herein since doubted. The same was, in turn, confirmed by the First Appellate Authority. It also appears before the First Appellate Authority, the assessee submitted as follows:
“That the assessment order dated 28.12.2017 was passed u/s. 143(3) r.w.s. 147 of the Income tax Act. 1961 (hereinafter referred to as "the Act") wherein the assessment of total income was made as under:
Particulars Amount Commission Income Rs. 2,190/- Addition to Income on account of Rs. 27,57.710- unexplained Cash Deposit in Banks u/s 68 of the Act Total Income Assessed Rs.27,59,900/-
Regarding wrongAddition on account of Cash Deposited in Bank Accountsof Rs. 27.57.710/-: That the Ld. Assessing Officer (hereinafter referred to as "the Ld. AO") has made addition of cash deposited in the bank accounts of the assessee by treating the same as unexplained cash credits without giving any reasons thereof and without any basis u/s. 68 of the Act of Rs. 27,57,710/- to the income without any basis and without looking at the facts of the instant case and without appreciating the submissions made by the assessee during the course of the assessment proceedings which is not in accordance with the law. In the instant case, it can be observed that the assessee has utilized majority of the deposits towards making investments in various avenues including ICICI Bank Pure Gold, Post Office. The assessee has also transferred the funds to the broker ShareKhan which clearly indicates that the funds have been utilized for the purposes of making investments. In view of the above, it is of no doubt that the assessee had deposited the cash. kept, with her was deposited in the bank accounts for the purpose of making investments because investments were to be made by making payments through banking
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 3 - medium. Accordingly, in order to make the payments, the assessee deposited the cash kept with her in her bank accounts /or making investments. Thus, the cash deposits treated as income of the assesse u/s. 68 of the Act by the Ld. AO is not at all the income of the assessee but mere deposit of cash-in-hand in the banks. Further, as regards the source of the cash deposited, it is hereby submitted, that the cash deposited in the bank accounts of the assessee were made out of the following:
Particulars Amount (inRs.) Gift Recd. from Father Rs. 5,00,000/- Gift Recd, from Mother Rs. 5,00,000/- Accumulated Savings from previous years Rs. 12,00,000/- (including savings from household expenses) Exempt Income earned during the last 20 Rs. 7,00,000 years Total Rs. 29,00,000/-
Thus, the cash deposits has been made from the above sources, detailed explanation, of which are as under: 1. Rs. 6,00.000 re-deposited in ICICI Bank Account Of the above Rs.27,57,510 deposited in the bunk accounts, a sum of Rs. 6,00,000/- deposited in the ICICI Bank Account on 03.10.2009 is nothing but cash re-deposited in the bank account which was withdrawn earlier the same day (03.10.2009) only.Thus, the same cannot be treated as income u/s, 68 of the Act. 2. Rs.8,82,710/- deposited in ICICIBank Apart from the above mentioned Rs. 6,00,000/-, a sum of Rs. 8,82,710/- which, was deposited in the ICICI Bank was deposited from the gifts received by the assessee from her parents to the tune of Rs.10,00,000/-. Signed Declaration in this regard were submitted before the Ld. AO during the course of re-assessment proceedings. However, the Ld. AO did not accepted the signed declaration by ….. both thesigned declarations are in the same handwriting, and therefore do not justify the genuineness of the claim. In this regard, it is hereby submitted that merely because the declarations are written in the same handwriting, it cannot be concluded that the declaration is invalid. What makes a declaration valid, is the valid signature of the declarant, and not the handwriting in. which the declaration is written. It was never contended before the Id. AO by the assessee that the handwritings in both the declarations are different, but that the declaration is genuine as the same has valid signatures of the donors, i.e. the parents of the assessee, which was not questioned by the Ld. AO during the course of reassessment proceedings. Further, the ld. AO .failed to appreciate the genuineness of the gifts received, by the assessee. That the assessee received gifts from her 75 father (Age:75 yrs.) and her mother (Age:70 yrs.)and not from an outsider third-party. Further, the father of the assessee is a retired bankofficer, and is in good financial capacity to give the gifts to her daughter. This clearly establishes the identity and financial capacity of the donors and that the assessee has received the gifts from her parents and the cash has been received by her from her family members out of nurtured love and affection only and not from an outsider third-party. Bringing such a gift in the purview of income-tax is not justifiable, and such an addition is not sustainable and is liable to be deleted. When the relation of the donor and the assessee is established, the financial capacity of the donors have been established, it can be concluded the gifts received by the assessee are genuine. 3. Rs. 12,37,000/- deposited in Bank of India
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 4 - The assessee has deposited the above from her accumulated savings in the bank account for the purpose of making investments in stock market which cannot be charged to income-tax. It is evident from the bank statement (Bank of India) -of the assessee that the same have been utilized for the purpose of making investments in stock market. Thus, the assessee was depositing the cash kept with her in the bank accounts for the purpose of making investments. 4. Deposit of Rs. 38.000 in Standard Chartered Bank The assessee has deposited Rs. 38,000 in the bank account from the cash-in-hand as mentioned in table above for the purpose of making investments in pure Cold by way of banking medium. It is evident from the bank statement (Standard Chartered Bank) of the assessee. Thus, the assessee was depositing the money from her past savings in the bank accounts for the purpose of making investments. In view of the above, it is clear that the Ld. AO has passed the Assessment Order without application of mind as what the Ld. AO has done is simply adding the cash deposited to the total income of the assessee without considering the explanations offered by the assessee during the course of proceedings. The Ld. AO, in its Assessment Order has only mentioned that the explanations offered by the assessee are not acceptable without giving any reasons of the same. Any addition made to total income without rejecting the claim of the assessee is not tenable and is liable to be deleted. And such a blanket Order treating all the deposits in the bank account as income u/s. 68 is liable to be quashed. Further, if the Ld. AO was not satisfied with the explanation and submissions made by the assessee, he should have informed the assessee that the explanations offered are not sufficient to substantiate the assessee claim's or should have instead issued a show cause notice before adding such a huge amount to the total income of the assessee. In the above circumstances, the assessee was under an impression that the explanations offered were accepted by the Ld. AO, however, the Ld. AO, did not considered the explanations and submissions made by the assessee and added a sum of Rs. 27,57,710/- to the total income of the assessee without granting sufficient opportunity of being heard. 1. Addition u/s. 68 cannot be made on the basis of Bank Passbook The Ld. AO has added to the total income of the assessee, a sum of Rs. 27,57,710/- merely on the basis of the bank statements submitted before the Ld, AO during the course of reassessment proceedings. However, the Ld. AO failed to appreciate that section 68 of the Act is applicable to the sums credit in the books of accounts of the assessee and not on the bank statements. ' Section 68 of the Act is as under: "Cash credits 68. 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 Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 5 - Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10." Further, as per CBDT Instruction dated 10.01.2018, section 68 of the Act can be invoked only when there is credit of a sum during the year in the books of accounts maintained by the taxpayer. The relevant extract of the said CBDT Instruction is as under(copy enclosed): "Assessing Officers should follow the sequence as noted below for applying provisions of 68 of the Act: Step 1: Whether there is credit of a sum during the year m the books of accounts maintained by the taxpayer."...... ...... "Enclosure: 1. Background Note to section 68 along with some important, case laws for reference: Background note to section 68 of the Act Section 68 of the Act reads as under: "....................................... " 1.1 From the reading of section 68, following conditions con be stated to be met for the applicability of section 68: i. Assessee has maintained 'books' ii. There has to be credit of amounts in the books maintained by the taxpayer of a sum during the year. iii. ...... iv. ...... If all the above conditions exist, sum so credited may be charged to tax as income of the taxpayer of that year. In the instant case of the assessee, the assessee has not maintained any books of accounts, thus, the preliminary condition to invoke section 68 is not satisfied. Accordingly, provisions of section 68 of the Act cannot be invoked in the instant case of the assessee. Since the provisions of Section 68 of the Act cannot be invoked in the very first place, the question of any additions u/s. 68 of the Act does not arises. Thus, in view of the above, the entire addition of Ks. 27,57,710/- u/s. 68 of the Act is liable to be deleted. Reliance in this regard is placed on the fat lowing: 1. The decision of Hon'ble Bombay High Court in the case of CIT v. Bhaichand H. Gandhi [141 ITR 67 (Bom.}] wherein it was held as under:.. 2. The decision of Hon'ble Mumbai Tribunal m the case of Smt. ManasiMahendraPitkar vs. ITO [2016I 73 taxmann.com 63 (Mumbai - Trib.} wherein it has held as under:.. 3. The decision of Hon’bleLucknow Tribunal in the case of ITO vs. Shri Kamal Kanvar Mishra (2013)[ITA No.398/LKW/2012 wherein it was held as under: 4. The decision of Hon'ble Mumbai Tribunal in the case of Mehul V. Vyas v. ITO, Mumbai [2017] 80 taxmann.com 311 (Mumbai Trib.) wherein it was held as under: Thus, 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 Section 68 of Income Tax Act, 1961. Accordingly, the addition ofRs. 27,57,710/- is bad in law and is liable to be deleted. 2. Charging, the interest u/s. 234A and 234B of the Act: That the Ld. assessing officer erred in charging the interest u/s. 234A and 234B of the Income-tax Act, 1961.
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 6 - In view of the. above, additions of Rs. 27,57,710/- alongwith /merest u/s. 234A and 23^13 arc wrong, without any basis and without looking to the facts of the case. Hence, needs to be deleted. It is hereby further submitted before your goodself that the assessee has filed a letter before the Ld. AO on 26.04.2018 requesting the Ld. AO to issue the copy of satisfaction note recorded u/s. 151 of the Act for issuing a notice u/s, 148 of the Act. The same is not provided to the assessee till date. In such circumstances, we request your goodself to kindly grant us a fresh date of hearing whereby we can furnish the same before your goodself once it is received by the assessee."
A remand report was sought for and on 09.08.2019, the Ld. AO submitted the remand report denying the claim of the assessee. The assessee again filed the reply against the remand report. Before the First Appellate Authority, the assessee’s main contention is this that the Ld. AO reopened the assessment on borrowed satisfaction, which was further rejected by the Ld. CIT(A). The case made out by the assessee for reopening of assessment by the ITO having no jurisdiction is also not found to be acceptable before us and we, therefore, straightway dealing the matter on merit. The impugned addition is consisting of following components:
(i) The deposit of Rs.6 Lakhs in ICICI Bank. According to the assessee, the same was deposited out of the earlier withdrawal and the same cannot be treated under Section 68 of the Act.
(ii) The next component is the amount of Rs.8,82,710/- in the account of ICICI Bank, which has been claimed to have been out of Rs.10Lakhs received as gift from the parents of the assessee. In support of the same, signed declaration to that effect was duly filed before the Ld. AO. However, the contents, mainly the signature was not seem to be genuine by the Ld.AO. The assessee’s contention is this that the assessee’s father was retired Bank Officer and having good financial capacity to gift the amount to her and since the said gifts have been received out of natural love and affection of the parents and not from outsiders, the addition is not sustainable.
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 7 -
(iii) The deposit of Rs.12,37,000/- from her accumulated savings in the bank account for the purpose of making investment in stock market has been added by the Ld. AO. In fact, the same had been claimed to have been deposited from the cash kept with her in the Bank Accounts for the purpose of making investment.
(iv) The deposit of Rs.38,000/- in the bank account from the cash in hand for the purpose of making investment in pure gold through banking channel is also part of the addition.
Upon careful reading to the entire orders, it appears that merely on the basis of the AIR information, the case was reopened and addition has been made under Section 68 of the Act on account of unexplained cash credit in the Bank Accounts. However, from the orders passed by the authorities below, it doesn’t appear that any inquiry has been made by them whether the cash has been deposited from the withdrawn amount earlier. The signed declaration in regard to the amount of gift made by the parents to the assessee have been doubted. No enquiry has been conducted by the Revenue to verify this fact. On the contrary, the admitted fact that the father of the assessee being a retired Bank Officer cannot be denied. The creditworthiness of the donor cannot be doubted without enquiry. We neither found any enquiry in regard to the source of deposit of amount of Rs.1,23,70,000/- made by the assessee in the concerned bank account. It is the duty cast upon the revenue authorities to make enquiry before making any addition under Section 68 of the Act in regard to the explanation rendered by the assessee about the nature of source of the sum so credited. The same is not visible in the case in hand. Whereas the Bank statement established the fact of making investment in stock market by the assessee,
ITA No.983/Ind/2019 (Smt. Archana Chandokvs.ITO) Asst.Year.–2010-11- 8 -
no enquiry in respect of deposit of Rs.38,000/- in the Bank Account from the cash in hand made by the Revenue is evident on record. Thus, the addition made in the hands of the assessee without making any enquiry under Section 68 of the Act, is, therefore, found to be not sustainable. The same is, therefore, quashed.
In the result, assessee’s appeal isallowed
This Order pronounced on 10/11/2022
Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; Dated 10/11/2022 S. K. Sinha, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. िवभागीय�ितिनिध, / DR, ITAT, Indore गाड�फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,
(Sr. Private Secretary) ITAT, Indore 1.Date of dictation on 04.11.2022 2.Date on which the typed draft is placed before the Dictating Member 09.11.2022 3.Date on which the approved draft comes to the Sr.P.S./P.S. 4.Date on which the fair order is placed before the Dictating Member for pronouncement 5.Date on which the fair order comes back to the Sr.P.S./P.S 6.Date on which the file goes to the Bench Clerk 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Despatch of the Order………Date on which the typed draft is placed before the Dictating Member 19.12.2019 1. Other Member………………Date on which the approved draft comes to