TMI Blog2013 (10) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... k, for all its banking activities, is strictly governed by the Banking Regulations Act, 1949. The said Act defines a banking company as a company which transacts the business of banking. 'Banking' is described as accepting, for the purpose of lending or investment of money, due from the public repayable on demand or otherwise and withdrawal by cheque, draft order or otherwise. Thus, the deposits held by the assessee are its stock-in-trade. The amounts in the accounts maintained by the assessee bank were not in the control of the assessee bank. They are the deposits in the savings accounts of the customers of the assessee bank. To these deposits, s. 68 of the Act is not attracted. In the cases of banking companies like the assessee, the customer's identity is required to be taken by the bank with proper introduction, photographs and address, etc. This is so, because any person from the general public can open the account with the bank. The other cases of acceptance of deposits cannot be equated with that of the bank. In those cases, normally, deposits are accepted from the people connected with or known to the depositees. It is in accordance with the terms of s. 131 of the Negotiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed return admitting 'nil' income, after claiming deduction under S.80P of the Act at Rs.4,26,37,081. Though the return was initially processed under S.143(1), the case was taken up for scrutiny, and in the scrutiny assessment, the assessee was requested to furnish deposits register along with full details of the depositors, i.e. name and addresses, etc. in order to verity the genuineness of the transactions. There are some cash deposits also. The Authorised Representative for the assessee has furnished some computerized sheets of the Fixed Deposit accounts, which contained only the account number, member's name, opening balance, debit, credit and balance amount, but not addresses of the depositors, which were not made available. Observing that in the absence of the addresses, it is not possible to verify the genuineness of the transactions, the Assessing Officer held that difference between the closing balance as on 31.3.2009 of Rs.160,24,48,937 and opening balance as on 1.4.2008 of Rs.121,70,76,143, viz. Rs.38,53,72,794 represents the income of the assessee. He accordingly treated the said difference of Rs.38,53,72,794, representing effectively the deposits received during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be any unexplained deposits within the meaning of section 68 of the Income Tax Act, 196, if the assessee proves to the satisfaction of the assessing officer its depositors identity by furnishing proof of address, proof of identity and PAN numbers. 12. It is further observed that the membership of the Society is huge and the number of members of the Society is about 63,000. The Society has computerized its operations and all the business of the Society is available in the computer software. The Society has collected all the information from its deposits as a normal banking institution and complied the KYC norms. It is not obligatory on the part of the assessee to go in checking the address and other proof of identity given by the depositors. What is required to be done as per the normal banking system is to report the controlling authorities in case any suspicious transactions are reported. The present case the assessee has complied with all the elements as a banking institution thus discharged onus of proof of identity of the depositor. There is no single instance found out by the assessing Officer that the assessee is making deliberate attempt to accommodate tax dodgers. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the assessee's case was subject to rules laid down under the Banking Regulations Act, as also the regulations of the RBI; that all the banking operations are under audit and report in this regard goes to the RBI; that therefore, the case of the assessee bank could not be put at par with the cases of other persons, since the bank does not have any control in respect of the amounts credited in its accounts; that the bank is to maintain accounts of its customers, which accounts can be operated only by those customers and the bank does not have any control over the mounts in the accounts. While holding in favour of the assessee, the learned CIT(A) has duly taken into consideration the provisions under s. 68 of the Act, which are explicit. 27. As per s. 68 of the Act, 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 AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The business of the assessee bank is to carry on banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain confidentiality in respect of the information collected by a bank relating to its customers, such information is not to be divulged to outsiders. There is no such obligation with other assessees. 28. Despite the RBI guidelines providing maintenance of secrecy with regard to the information regarding the customers of the bank, the assessee furnished to the AO whatever information it had in its possession. The addresses of the account holders, as mentioned in the bank ledgers, as also the addresses of the introducers of the accounts were furnished to the AO. Now if the addresses of the customers of the assessee bank were found to be incomplete, this cannot form the basis for making the addition in question. Undisputedly, the assessee bank did not violate any of the relevant guidelines of the RBI. In the Master Circular of the RBI, (copy at p. 75 of the assessee's paper book), introduction by an existing account holder by the bank has been held to be one of the proper methods of introduction of a customer to the bank for opening an account. The bank was not required to go for detailed verification of the addresses/whereabouts of its customers, though this position has now cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's paper book), it was held that addition could not be made under s. 68, even though the minimum onus of proving the identity of depositors had not been discharged by the assessee. 32. In Dy. CIT vs. Sahara India Financial Corpn. Ltd. (2003) 81 TTJ (Luck) 389 : (2004) 2 SOT 733 (Luck) (copy at pp. 105 to 109 of the assessee's paper book), it was held that the deposits received by the assessee, which was a non-banking financial institution, recognised by the RBI, were not in the nature of taking of any loan or deposit for the purposes of its business, that rather, it was in the business of accepting deposits and that in view of the nature of such business, the scrutiny of the deposits could not be the same as in the case of an assessee making entries of deposits on account of loan etc. 33. In CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del), it was held that even if the subscriber to capital was not genuine, the amount of share capital could not, under any circumstance, be regarded as the undisclosed income of the company. This decision was upheld by the Hon'ble Supreme Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) while allowing the appeal of the assessee. The grievance of the Department in this regard is found to carry no force whatsoever and is, as such, rejected. 42. Apropos the objection of the Department that the learned CIT(A) erroneously admitted additional documentary evidence when before the AO, the assessee had denied producing the bank account holders on the plea that this would adversely affect its banking business. Here also, we find no case made out by the Department. 43. Before the learned CIT(A), the assessee, inter alia, filed copies of accounts of various account holders and other supporting documents, as additional evidence. The AO objected to the same. The learned CIT(A), however, allowed such evidence to be produced as additional evidence. In this regard, the assessee did not produce such evidence before the AO under the bona fide belief that it was not obliged to do so, as it would adversely affect its business. The learned CIT(A) found that the documents produced as additional evidence were in regard to the additions made and could not be produced at the time of assessment proceedings, in the bona fide belief which was, as aforesaid, nurtured by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 68 cannot be made merely because the address of the customers are incomplete. In view of this, we are in agreement with the findings of the CIT(A) on this issue. Hence, this ground raised by the revenue in all its appeals is dismissed." As far as the year under appeal is concerned, the CIT(A) has merely relied on the order of the Tribunal dated 26th June, 2010 in assessee's own case for the assessment years 2006007 and 2007-08 in ITA Nos.1156 to 1159/Hyd2009, wherein the issue relates to deletion of penalties levied under S.271D and 271E of the Act, and not with regard to the additions made under S.68 of the Act, and straight away deleted the additions based on the decision for the other years noted above. She has not done the exercise which the CIT(A) has done for the earlier years, discussed in the order of the Tribunal, relevant portion of which is extracted above. In our opinion, it is appropriate, in the facts and circumstances of the case for the year under appeal, to set aside the order of the CIT(A) and remit the mater back to the file of the CIT(A), who shall bring on record, the facts relating to the assessment year under consideration. The assessee is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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