2020 (12) TMI 21 - AT - Income Tax

Addition u/s 68 v/s 69 - deposits made by the assessee in the bank account in the form of cash in Andhra Bank - HELD THAT - AO is not permitted to make addition u/s 68 in respect of deposits made in the bank accounts. As per section 68 of the Act only the credits made in the books of accounts that were not explained by the assessee required to be brought to tax. Since the deposits were made in the bank account the same required to be taxed u/s 69 but not u/s 68 of the Act. This Tribunal in the case of Asha Sanghavi 2019 (11) TMI 868 - ITAT VISAKHAP ATNAM held that the addition made in respect of bank deposits u/s 68 cannot be sustained and the bank statement or bank passbook cannot be considered to be the books of accounts maintained by the assessee. Accordingly deleted the addition. - Decided in favour of assessee.

Summary

Issues Involved:
1. Sustaining the addition of Rs. 74,91,800/- out of the total addition of Rs. 1,89,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.
2. Validity of the addition under Section 68 of the Income Tax Act in respect of cash deposits in the bank account when the bank account is not a book of account.

Detailed Analysis:

Issue 1: Sustaining the Addition of Rs. 74,91,800/- under Section 68
The assessee filed a return of income admitting a total income of Rs. 32,53,980/- for the Assessment Year 2011-12. The assessment was reopened, and the AO made an addition of Rs. 1,89,00,000/- under Section 68 of the Income Tax Act, 1961, due to unexplained cash deposits in the bank account. The AO found that the assessee had made cash deposits in Andhra Bank, Brundavan Gardens Branch, Guntur, between 01.10.2010 and 24.12.2010. The AO disbelieved the explanation that the deposits represented the sale proceeds of agricultural land and treated them as unexplained cash credits.

The CIT(A) deleted the addition of Rs. 1,14,08,200/- and confirmed the balance addition of Rs. 74,91,800/-. The CIT(A) observed that the property relating to agricultural land to the extent of 8.50 cents at Ponnekallu Village, Guntur, and agricultural land of 9.37 acres at Ponnekallu Village, Guntur, were registered by the son of the assessee in 2010-11. Therefore, the CIT(A) believed that the assessee would have received Rs. 1,14,08,200/- comprising advances from S. Masthan Rao and K. Vijaya Bharati. The balance amount of Rs. 74,91,800/- was treated as unexplained.

Issue 2: Validity of Addition under Section 68
The assessee filed an additional ground challenging the validity of the addition under Section 68 of the Income Tax Act in respect of cash deposits in the bank account, arguing that the bank account is not a book of account. The Tribunal admitted the additional ground, stating that all material facts were available in the assessment record.

The Tribunal held that as per Section 68 of the Act, only the credits made in the books of accounts of the assessee, which are not explained to the satisfaction of the AO, are required to be brought to tax. In this case, there were no entries made in the books of accounts for invoking Section 68. The Tribunal cited the decision in Smt. Asha Sanghavi, where it was held that the addition made in respect of bank deposits under Section 68 cannot be sustained as the bank statement or passbook cannot be considered to be the books of accounts maintained by the assessee.

The Tribunal further supported its decision by referring to the Bombay High Court's judgment in CIT Vs. Bhaichand N. Gandhi, which held that a bank passbook is not a book maintained by the assessee for the purposes of Section 68. Consequently, the Tribunal set aside the order of the CIT(A) and deleted the addition made by the AO under Section 68.

Conclusion:
The Tribunal allowed the appeal and cross objection filed by the assessee and dismissed the appeal of the Revenue. The Tribunal concluded that the AO is not permitted to make an addition under Section 68 in respect of cash deposits made in the bank account, as the bank account is not considered a book of account maintained by the assessee. The addition of Rs. 74,91,800/- was deleted, and the entire addition made by the AO was deemed unsustainable.