SHRI ASHIT KUMAR DEY,JAGDALPUR vs. INCOME TAX OFFICER, JAGDALPUR

During the course of the assessment proceedings, it was observed by the AO that cash amounting to Rs. 86,74,500/- was over the year deposited in the saving bank A/c No. 11566963331 of the assessee held with State Bank of India, Branch: Bastar. As the assessee on being confronted failed to come forth with any explanation as regards the nature and source of the aforesaid cash deposits, therefore, the AO treating the entire amount of Rs.86,74,500/- (supra) as an unexplained cash credit made an addition of the same u/s 68 of the Act. Also, the AO not being satisfied with the amount of income returned by the assessee, therein, after putting him to notice made an addition of Rs.

Aggrieved, the assessee carried the matter in appeal before the CIT (Appeals) but without any success.

The assessee being aggrieved with the order of the CIT (Appeals) has carried the matter in appeal before us.

We have heard the Ld. Authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. Authorized Representative (for short ‘AR’) for the assessee in support of his contentions.

Admittedly, it is a matter of fact borne from the record that cash amounting to Rs. 86,74,500/- (supra) was over the year under consideration i.e from 18.09.2008 to 25.03.2009 deposited in the aforementioned SB A/c No. 11566963331 of the assessee with State Bank of India, Branch: Bastar. Also, we find that the assessee despite sufficient opportunity had failed to come forth with any explanation as regards the nature and source of the 4 Ashit Kumar Dey V.ITO aforesaid cash deposits in question, and thus, failed to discharge the onus that was cast upon him. At the same time, as stated by the Ld. AR, and rightly so, the AO had grossly erred in law and the facts of the case in treating the aforesaid simpliciter cash deposits in the assessee’s bank account as unexplained cash credits under Sec. 68 of the Act. At this stage, we may herein observe, that it is not case of the department that the aforesaid cash deposits in the assessee’s bank account formed part of his books of account. On the contrary, a perusal of the return of income filed by the assessee reveals beyond doubt that no books of account were maintained by him, and even the income therein disclosed by him was on an estimate basis.

In the backdrop of the aforesaid facts our indulgence has been sought to adjudicate the sustainability of the addition of the simpliciter cash deposits made in the assessee’s bank account as an unexplained cash credit within the meaning of Sec. 68 of the Act. In our considered view, it is only where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee either 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, that the 5 Ashit Kumar Dey V.ITO sum so credited may be held as an unexplained cash credit within the meaning of Sec. 68 of the Act. Notably, section 68 of the Act would come into play only in a situation “where any sum is found credited in the books of an assessee……..” (emphasis supplied by us). However, as the bank passbook maintained by a bank cannot be regarded as the books of the assessee, therefore, a simpliciter cash deposit made in the same, de-hors any credit in the books of account cannot be brought within the sweep of the provisions of Sec. 68 of the Act. In sum and substance, as a standalone cash deposit in the bank account of an assessee cannot be construed as a credit in his books of account, therefore, the provisions of Sec. 68 on the said count itself would not stand triggered. Our aforesaid conviction is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT v. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bombay). In its aforesaid order the Hon’ble High Court had held, that when monies are deposited in a bank, then, the relationship that is constituted between the banker and the customer is one of a debtor and creditor and not as that of a trustee and a beneficiary. Applying the aforesaid principle, it was therein observed, that a passbook supplied by the bank to the assessee could not be 6 Ashit Kumar Dey V.ITO regarded as the book of the assessee, i.e. a book maintained by the assessee; or under his instructions by the bank. Following the aforesaid judgment of the Hon’ble High Court a coordinate bench of the Tribunal, i.e., ITAT ‘B’ Bench, Mumbai in the case of Sh. Mehul V. Vyas L/heir of Smt. Madhuriben V. Vyas vs. ITO in dated 07.04.2013 (to which one of us, i.e., the JM was a member), had held as under:

We are of the considered view that a credit in the ‘bank account’ of an assessee cannot be construed as a credit in the ‘books of the assessee’, for the very reason that the bank account cannot be held to be the ‘books’ of the assessee. Though it remains as a matter of fact that the ‘bank account’ of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the ‘books’ of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision, viz. Sec. 68, and are of the considered view that an addition made in respect of a cash deposit in the ‘bank account’ of an assessee, in the absence of the same found credited in the ‘books of the assessee’ maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68. That our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bombay) wherein the Hon’ble High Court has held as under: - “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.” We find that the aforesaid view of the Hon’ble jurisdictional High Court had thereafter been followed by a ‘SMC’ of the ITAT Mumbai bench in the case of Smt. Manshi Mahendra Pitkar Vs. ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Trib.) wherein it was held as under: - “I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of section 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation “Where any sum is found credited in the books of an assessee……..............”. The Hon’ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved the proposition that 8 Ashit Kumar Dey V.ITO a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon’ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. Therefore, on this account itself the impugned addition deserves to be deleted. I hold so.” We further find that a similar view had also been arrived at in a ‘third member’ decision of the Tribunal in the case of Smt. Madhu Raitani Vs. ACIT (2011) 10 taxmann.com 206 (Gauhati) (TM), as well as by a coordinate bench of the Tribunal in the case of ITO, Barabanki Vs. Kamal Kumar Mishra (2013) 33 taxamann.com 610 (Lucknow Trib.). Thus in the backdrop of the aforesaid facts of the case read in light of the settled position of law, we are of the considered view that the addition made by the A.O in respect of the cash deposit of Rs.10,53,000/-(supra) in the bank account of the assessee by invoking Section 68 has to fail for the very reason that as per the judgment of the Hon’ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), a bank pass book or bank statement cannot be considered to be a ‘book’ maintained by the assessee for any previous year, as understood for the purpose of Section 68 of the Act. Therefore, on this count itself the impugned addition Rs.10,53,000/- deserves to be deleted.

Resultantly, the appeal of the assessee is allowed.”

The Ground of appeal No. 1 as per the concession of the ld. AR is dismissed as not pressed.

Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.