Case Name: Bhavanji Jugaji Thakor Vs ITO (ITAT Ahmedabad)

Judgement date: 08/08/2024

Courts: ITAT Ahmedabad.

Mr Bavanji Thakor filed his return dt: 28.12.2016 declaring a total income of Rs 1,80,270/-. His case was selected for limited scrutiny based on the information mentioned in the individual transaction statement which stated the assessee has purchased immovable property amounting to Rs.49,50,000/-, sold immovable property at Rs.1,80,00,000/- and deposited cash in Bank of Baroda amounting to Rs.34,30,000/-. The AO then proceeded to make an addition of Rs.49,50,000/- thereby treating the same as unexplained investment under section 68. The AO also made an addition of Rs.34,30,000/- in respect of unexplained cash credit u/s 68 as well as addition of Rs.1,80,00,000/- as Short- Term Capital Gain (STCG). Thus, the Assessing Officer assessed the income at Rs.2,65,60,270/-.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

As per Section 68 of Income Tax 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 [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for Income-tax Officer” (w.e.f. 1.4.1988).], satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Matter was referred to ITAT

Order by Ahmedabad ITAT:

ITAT ordered that “We have heard both the parties and perused all the relevant material available on record. The contention of the Ld. AR that Section 68 cannot be invoked when the assessee has not prepared books of account but in the present facts of the assessee’s case, the provision regarding unexplained cash credit has been invoked after verifying and taking cognisance of the cash deposits and the savings account of the assessee with Bank of Baroda.

Thus, the transaction was very well recorded in the bank statement and, per se, the bank statement which is savings account of the assessee has to be treated as books of the assessee as the assessee is an individual and is not filing books of account in the common parlance that of the Company’s books of account.

Thus, the contention of the assessee that Section 68 of the Act cannot be invoked does not sustain. As regards to the component of cash deposits of Rs.34,30,000/-, the assessee before the CIT(A) has categorically mentioned that the sale receipt of property sold was received in cheques and he has explained these receipts correctly for which the CIT(A) has accepted the assessee’s contention.

The component of cash deposit cannot be correlated with the sale receipts of the property as the cash component is related to the assessee’s savings account for which the assessee has given explanations out of cash deposits made by the assessee out of his known source of income and the same was duly submitted as the assessee is having source of income from house property, income from other sources and income from agricultural activity.

Since the said aspects should have been taken into consideration and should have been verified by the Assessing Officer, therefore, on merit, this aspect requires to be remanded back to the file of the Assessing Officer for proper adjudication and verification as per Income Tax provisions. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice”.

So Ahmedabad ITAT made it clear that No Addition is Permitted Under Section 68 of Income Tax Act when Cash Deposition has been made by Taxpayer Out Of His Known Source Of Income

~Navneet Shukla