SMT SMT DHEERAJ DEVI KOTHARI,RAJNANDGAON vs. THE INCOME TAX OFFICER-1, RAJNANDGAON

The present appeal filed by the assessee is directed against the order passed by the CIT (Appeals)-II, Raipur dated 27.11.2015, which in turn arises from the order dated 19.03.2014 passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) for assessment year 2011-12. Before us the assessee has assailed the impugned order on the following grounds of appeal:

Succinctly stated, the assessee had filed her return of income for the assessment year 2011-12 on 31.03.2012, declaring a total income of Rs.1,89,670/-. The return of income filed by the assessee was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had over the year deposited cash aggregating to Rs.44,25,000/- in her saving bank account with Axis Bank, Branch: Tagore Nagar, Raipur. Backed by the aforesaid fact, the Assessing Officer called upon the assessee to explain the nature and source of the cash deposits. As the assessee failed to come forward with any explanation as regards the nature and source of the aforesaid cash deposits therefore, the Assessing Officer treated the same as an unexplained cash credit and made an addition of Rs.44.25 lac to the returned income of the assessee. Accordingly, the Assessing Officer vide his order u/s 143(3) of the Act, dated 19.03.2014 assessed the total income of the assessee at Rs.46,14,670/-.

Being aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). Before the CIT(Appeal) the assessee tried to relate the cash deposit of Rs.44.25 lacs (supra.) to various sources, viz. (i) gift received from father Late Shri. Tikamchand Ji Burad, Raipur: Rs. 2 Lac; (ii) gift received from father-in-law Late Shri. Balchand Ji Kothari of Rajnandgaon; Rs.1 lacs; (iii) interest income received from loans and advances given to various parties by investing the aforementioned amounts; and (iv) marriage gifts of Rs. 3 lacs. Backed by her aforesaid contention, it was submitted by the assessee that after accumulating the aforesaid principal amount a/w interest income for over 14 years i.e. from 1987-88 to 2001-02 the total estimated savings in her hand was Rs. 6 lacs (approx). It was further submitted by her that though she had been filing her returns of income way back from assessment year 2002-03, however, during the assessment years 2004-05, 2005-06 and 2008-09 her income was below the basic exemption limit, thus, no return of income for the said years was filed. It was claimed by the assessee that considering the aforesaid facts the savings in her hands during the aforesaid period i.e assessment year 2002-03 onwards could safely be taken at Rs.9 lacs. Accordingly, the assessee on the basis of her aforesaid submissions claimed that the accumulated savings of Rs. 15 lacs (Rs.6 lacs + Rs.9 lacs) was duly available with her at the start of the year under consideration. However, the CIT(A) was not inclined to accept the aforesaid explanation of the assessee. Observing, that the assessee had failed to place on record any gift deed etc. to substantiate her claim of having received the aforementioned gifts the CIT(A) declined to accept her claim of having received the aforesaid amounts in question as gifts. Also, it was observed by the CIT(A) that the assessee could not place on record the requisite details as regards the interest bearing loans which were claimed to have been advanced by her to certain persons, viz. names and addresses of the loanee’s, rate of interest, period of loans, date of repayments, mode of payments/repayments etc. Accordingly, the CIT(A) neither finding favour with the claim of the assessee of having an accumulated savings of Rs.15 lac (supra) with her at the start of the year under consideration; nor with her claim of having redeposited the cash that was withdrawn by her from bank account, thus, rejected the same. Observing that the Assessing Officer rightly had rightly held the amount of Rs.44.25 lac (supra) as an unexplained cash credit within the meaning of Section 68 of the Act, the CIT(A) confirmed the addition so made by the Assessing Officer.

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

We have heard the Ld. Authorized Representative of both the parties, perused the orders of the lower authorities a/w the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. Before us, the Ld. AR had both assailed the validity of the jurisdiction assumed by the Assessing Officer for making the impugned addition of Rs.44.25 lacs (supra) u/s.68 of the Act; as well as had thrown a challenge to the impugned addition on merits. As the validity of the jurisdiction assumed by the Assessing Officer for making the impugned addition has been challenged before us, therefore, we shall first deal with the same. As observed by us herein above, the Assessing Officer had made impugned addition of the cash deposits of Rs.44.25 lacs (supra) in the assessee’s savings bank account with Axis Bank, Branch: Tagore Nagar, Raipur by treating the same as an unexplained cash credit. On appeal, the CIT(A) had categorically upheld the addition of Rs.44.25 lacs (supra) as an unexplained cash credit u/s.68 of the Act. It is in the backdrop of the aforesaid facts that the Ld. AR has assailed the validity of the jurisdiction assumed by the A.O for making an addition of Rs.44.25 lacs (supra) u/s.68 of the Act. It was also claimed by the Ld. AR that as the bank account or bank passbook of an assessee cannot be held as the latters “books of accounts”, therefore, no addition could have validly been made in her hands u/s 68 of the Act. In support of his aforesaid contention the Ld. AR had relied on the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. BhaichandN. Gandhi (1983) 143 ITR 67 (Bom). Backed by his aforesaid contention, it was submitted by the Ld. AR that the addition of Rs.44.25 lacs (supra) so made/upheld by the Assessing Officer/CIT(A) u/s.68 of the Act could not be sustained in the eyes of law and was liable to be vacated.

We have given a thoughtful consideration to the issue in hand before us and are persuaded to subscribe to the contention advanced by the ld. A.R that as the bank account or bank passbook of an assessee cannot be held as his 'books of account', therefore, no addition in respect of a simpliciter cash deposit made in the said bank account could be validly made under Sec.68 to the I.T. Act. Our aforesaid observations is duly fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi (1983) 143 ITR 67 (Bom). Apart from that, we find that a similar view had been arrived at by a coordinate bench of the Tribunal viz. ITAT, Mumbai in the case of Mehul V. Vyas Vs. ITO (2017) 764 ITD 296 (Mum), wherein following the judgment of the Hon’ble High Court in the case of Bhaichand N. Gandhi (supra) it was observed as under: "8. We have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities as well as the material produced before us. We will first deal with the objection raised P a g e |5 ITA No.105/Asr./2017 A.Y. 2008-09 Shri Satish Kumar Vs. Income Tax Officer by the Id. A.R as regards the addition of Rs.10,53,000/- which was made by the A.O under Section 68 of the 'Act', in respect of the cash deposit in the bank account of the assessee. We find substantial force in the \contention of the Id. A.R that an addition under Section 68 can only be made 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 as regards the same, or the explanation offered by him in the opinion of the assessing officer is not found to be satisfactory. That before adverting further, we herein reproduce the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: "Cash Credits.

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

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