Yogesh Nigam, Gurgaon V. ITO, New Delhi

ITA 3399/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6914 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 06-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: ASHWANI KR GARG
• Keywords: Gift; Source of fund
• Section: 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 3 , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 3 399 /DEL/201 6 AY: 20 05 - 06 SH. YOGESH NIGAM VS. ITO, WARD NO.44(1) C 1/682, CIVIC CENTRE ZADE HOME IN ZADE GARDEN NEW DELHI PALAM VIHAR, GURGAON PAN: ABJPN 5924 E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KR.GARG, ADV. RESPONDENT BY : SH. F.R.MEENA, SR. D.R. ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 34 , N EW DELHI DATED 21 .03.2016 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 20 0 5 - 06, WHEREIN THE LD. CIT (A) CONFIRMED THE PENALTY LEVIED UNDER SECTION 271 ( 1 )( C ) OF THE A CT MADE BY THE A SSESSING O FFICER (A.O.). 2. F ACTS IN BRIEF : - THE ASSESSEE IS A SALARIED EMPLOYEE . HE IS EMPLOYED WITH THE A SSOCIATION OF STATE ROAD TRANSPORT U NDERTAKING . H IS SALARY FOR THE RELEVANT A.Y. WAS RS. 1 , 44 , 235 / - I.E. ABOUT RS. 12 , 000 / - PER MONTH . H E HAS NO OTHER SOURCES OF INCOME . HE FILED HIS RETURN OF INCOME AND 29.7.15 DISCLOSING AN INCOME OF RS.1,01,810/ - . D URING THE 2 ASSESSMENT PROCEEDINGS THE RETURN WAS PICKED UP FOR SCRUTINY AND IT WAS NOTICED THAT THE ASSESSEE HAD TAKEN LOAN OF RS. 7 LACS. ON BEING QUESTIONED THE ASSESSEE FILED CONFIRMATION LETTER S FROM THE PERSON WHO HAD GIVEN HIM THE LOAN S ON THE GROUND THAT THE CREDITWORTHINESS OF THESE CREDITORS WAS NOT ESTABLISHED THE AMOUNT WAS ADDED UNDER SECTION 68 OF THE A CT . ON APPEAL THE F IRST A PPELLATE A UTHORITY DISMISSED T HE A PPEAL OF THE ASSESSEE. THEREAFTER THE NOTICE UNDER SECTION 271 (1)( C ) OF THE ACT WAS GIVEN AND PENALTY LEVIED . THE FIRST APPELLATE AUTHORITY CONFIRM ED THE PEN ALTY. AGGRIEVED THE ASSESSEE IS BEFORE US . 3. AFTER HEARING THE RIVAL CONTENTIONS, I FIND THAT ADMITTEDLY, THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT . UNDER THESE CIRCUMSTANCES, NO ADDITION CAN BE MADE U/S 68 OF THE ACT AS HELD IN THE FOLLOWING CASE LAWS: - I) THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT, PUNE VS.BHAICHAND H GANDHI141 ITR 67, HELD AS FOLLOWS: - 'INCOME - CASH CREDIT - BANK PASS BOOK IS NOT A BOOK MAINTAINED BY ASSESSEE OR UNDER HIS INSTRUCTIONS - CASH CREDIT FOR PREVIOUS YEAR SHOWN IN ASSESSEE'S BANK PASS BOOK - NOT SHOWN IN CASH BOOK OF ASSESSEE FOR THAT YEAR - CANNOT BE TREATED AS INCOME OF THAT PREVIOUS YEAR - I.T.ACT, 1961 SEC.68. WH EN MONEYS ARE DEPOSITED IN A BANK THE RELATIONSHIP THAT IS CONSTITUTED BETWEEN THE BANKER AND THE CUSTOMER IS ONE OF DEBTOR AND CREDITOR AND ITA NO.5592/DEL/2015 NOT OF TRUSTEE AND BENEFICIARY. THE PASS BOOK SUPPLIED BY THE BANK TO ITS 3 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 UND E R THE INSTRUCTIONS OF THE C ONSTITUENT. HENCE, THE PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE CANNOT BE REGARDED AS THE BOOK OF THE ASSESSEE, THAT IS, A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. THEREFORE, A CASH CREDIT FOR THE PREVIOUS YEAR SHOWN IN THE ASSESSEE 'S BANK PASS BOOK BUT NOT SHOWN IN THE CASH BOOK MAINTAINED BY THE ASSESSEE FOR THAT YEAR, DOES NOT FALL WITHIN THE AMBIT OF S.68 OF THE ACT AND AS SUCH THE SUM SO CREDITED IS NOT CHARGEABLE TO TAX AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' II) THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MS.MAYAWATI REPORTED IN 338 ITR 563 (DEL) HELD AS FOLLOWS: - 'AS THE ITAT HAS COME TO THE CONCLUSION THAT SECTION 68 HAS NO APPLICABILITY TO THE FACTS OF THE PRESENT CASE AS THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS. IF THAT BE SO SECTION 68DOES NOT APPLY IN THIS CASE FOR THE SIMPLE REASON CHEQUE RECEIVED FROM MR.PANKAJ JAIN HAS BEEN DEPOSITED IN HER BANK ACCOUNT IN THIS REGARD. THE ITAT WAS OF THE OPINION THAT BALANCE SHEET/STATEMENT OF THE AFFAIRS CANNOT BE EQUATED TO BOOKS OF ACCOUNT BECAUSE A PASS BOOK OF THE BANK CANNOT BE TREATED AS A BOOK OF ACCOUNT OF THE ASSESSEE BECAUSE THIS IS PROVED BY THE BANKER, WHICH IS GIVEN TO ITS CUSTOMER AND IS ONLY A COPY OF THE CUSTOMER S ACCOUNT IN THE BOOKS MAI NTAINED BY THE BANK. THE BANK DOES NOT ACT AS AN AGENT OF THE 4 CUSTOMER NOR CAN IT BE SAID THAT THE BANKER MAINTAINS THE PASS BOOK UNDER INSTRUCTIONS OF THE CUSTOMER (ASSESSEE) THE RELATIONSHIP BETWEEN THE BANKER AND CUSTOMER IS ONE OF THE DEBTOR AND CREDITOR ONLY. THEREFORE, A CASH CREDIT APPEARING IN ASSESSEE S PASS BOOK RELEVANT TO A PARTICULAR PREVIOUS YEAR, IN A CASE WHERE THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNT, DOES NOT ATTRACT THE PROVISIONS OF SECTION 68. KEEPING IN VIEW THE ABOVE IN THE INSTANT CASE NEITHER THE GIFTS RELATING TO IMMOVABLE PROPERTY CAN BE COVERED UNDER SECTION 68 NOR THE GIFT OF RS.2 LACS RECEIVED BY THE ASSESSEE CAN BE COVERED UNDER THE PROVISIONS. IN VIEW OF THE ITAT ALL GIFTS SATISFIED THE REQUIREMENT OF A VALID AND GENUINE GIFT. THE ASSESSEE HAS FULLY EXPLAINED THE SAME AND THEREFORE IT CANNOT BE SAID THE ADDITION CAN BE SUSTAINED EVEN U/S 69 OF THE INCOME TAX ACT. IN ITA NO.5592/DEL/2015 THIS MANNER THE ITAT HAS DISMISSED THE APPEAL OF THE REVENUE DEPARTMENT.' III ) . THE ITAT LUCKNOW 'B' BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS.KAMAL KUMAR MISHRA 143 ITD 686 (LUCKNOW TRIB.) AT PARA 7 AND 8 HELD AS FOLLOWS. '7. THE AFORESAID PROVISIONS OF SECTION 68 OF THE ACT CAN ONLY BE INVOKED WHERE ANY SUM IS FOUND CREDITED I N 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 INCOME - TAX OFFICER, SATISFACTORY. IN THAT EVENTUALITY, T HE 5 SAID SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. MEANING THEREBY MAINTENANCE OF BOOKS OF THE ASSESSEE, IN WHICH CREDIT ENTRY SO FOUND, IS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. NOW THE QUESTION ARISES WHETHER THE PASSBOOK ISSUED BY THE BANK WITH REGARD TO THE ACCOUNTS OF THE ASSESSEE CAN BE TERMED TO BE THE BOOKS OF THE ASSESSEE FOR THE PURPOSE OF SECTION 68 OF THE ACT. THIS ISSUE WAS EXAMINED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND N. GANDHI (SUPRA) AND WHILE ANSWERING THE QUESTION I.E. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT CASH CREDIT FOR THE PREVIOUS YEAR SHOWN IN THE ASSESSEE'S BANK M PASSBOOK ISSUED TO HIM BY THE BANK, BUT NOT SHOWN IN THE CASH BOOK MAINTAINED BY HIM FOR THAT YEAR DOES NOT FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT AND AS SUCH THE SUM SO CREDITED IS NOT CHARGEABLE TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR, THEIR LORDSHIPS OF THE HON'BLE BOMBAY HIGH COURT CATEGORICALLY HELD THAT PASSBOOK SUPPLIED BY THE BANK TO THE ASSESSEE COULD NOT BE REGARDED AS BOOK OF THE ASSESSEE, THAT IS, A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTION. THE RELEVANT OBSERVATIONS OF THE HON'BLE BOMBAY HIGH COURT ARE EXTRACTED HEREUNDER: - 'IN BALADIN RAM V. CIT [1969] 71 ITR 427, IT HAS BEEN HELD BY THE SUPREME COURT THAT IT IS NOW WELL SETTLED THAT THE ONLY POSSIBLE WAY IN WHICH INCOME FROM AN UNDISCLO SED SOURCE CAN BE ASSESSED OR REASSESSED IS TO MAKE THE ASSESSMENT ON THE BASIS THAT THE PREVIOUS 6 YEAR FOR SUCH AN INCOME WOULD BE THE ORDINARY FINANCIAL YEAR. EVEN UNDER THE PROVISIONS EMBODIED IN S.68 OF THE SAID ACT IT IS ONLY WHEN ANY AMOUNT IS FOUND C REDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THAT THE ITA NO.5592/DEL/2015 SECTION WILL APPLY AND THE AMOUNT SO CREDITED MAY BE CHARGED TO TAX AS THE INCOME OF THAT PREVIOUS YEAR, IF THE ASSESSEE OFFERS NO EXPLANATION OR THE EXPLANATION OFFER ED BY HIM IS NOT SATISFACTORY. 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 AN D 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 CONST ITUENT, 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.' 8. IN THE CASE OF ANAND RAM RATIANI VS. CIT (SUPRA), THE HON'BLE GAUHATI HIGH COURT HAS ALSO HELD THAT PERUSAL 7 OF SECTION 68 OF THE ACT SHOWS THAT IN RELATION TO EXPRESSION 'BOOKS', THE EMPHASIS IS ON THE WORD 'ASSESSEE' MEANING THEREBY THAT SUCH BOOKS HAVE TO BE THE BOOKS OF THE ASSESSEE HIMSELF AN D NOT OF ANY OTHER ASSESSEE. IN THAT CASE, THE BOOKS OF ACCOUNT OF THE PARTNERSHIP FIRM WERE NOT TREATED AS THOSE OF THE INDIVIDUAL PARTNER AND ACCORDINGLY THE ADDITIONS MADE IN THE HANDS OF THE INDIVIDUAL PARTNERS ON THE BASIS OF THE BOOKS OF THE PARTNERS HIP FIRM WAS DELETED.' 4. AS I HAVE HELD THE ADDITION ITSELF CANNOT BE MADE UNDER SECTION 68 OF THE ACT , THE QUESTION OF LEVY OF PENALTY UNDER SECTION 271 ( 1 )( C ) DOES NOT ARISE . ON THIS GROUND A LONE T HIS PENALTY HAS TO BE QUASHED. 4.1. AS I HAVE QU ASHED THE PENALTY ON T ECHNICAL GROUND , I DO NOT GO INTO THE ARGUMENTS ON MERITS MADE BY THE ASSESSEE AND EVIDENCES PRODUCED BY HIM TO PROVE THE CREDITWORTHINESS OF THE PERSONS WHO HAVE GIVEN PERSONAL LOAN S. I N THE RESULT THE APPEAL OF THE ASSESSEE STA ND S ALLOWED . 5 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 T H JANUARY,2017 . S D / - (J.SUDHAKAR REDDY) ACCOUNTANTMEMBER DATED: THE 1 8 T H JANUARY, 2017 *MANGA 8 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR