Friday, May 5, 2017

No sec. 68 additions on cash deposited in bank account if assessee wasn't maintaining books of account


a) On the basis of information from the CIT that during the year under consideration assessee had made a 'cash deposit' in her saving bank account with Punjab and Maharashtra Co-operative Bank, the case of the assessee was reopened.

b) During the course of the assessment proceedings, the Assessing Officer (AO) called upon the assessee to put forth an explanation as regards the nature and source of the cash deposit in her saving bank account.

c) The assessee placed on record substantial documentary evidence in form of summarized cash analysis to explain the genesis of the cash deposit.

d) AO was not in agreement with the explanation of the assessee and, hence, rejected the same and held the said cash deposit as an 'unexplained cash credit' and added the same to the returned income of the assessee by invoking the provisions of section 68.

e) On appeal, CIT(A) upheld order of AO. Aggrieved-assessee filed instant appeal before Tribunal.

Tribunal held in favour of assessee as under:-

1) A bare perusal of the section 68 reveals that an addition under the said statutory provision can only be made where any sum is found credited in the books of an assessee maintained for any previous year. Thus, the very sine qua non for making of an addition under section 68 presupposes a credit of the aforesaid amount in the 'books of an  assessee' maintained for the previous year.

2) A credit in the 'bank account' of an assessee could not be construed as a credit in the 'books of the assessee', for the very reason that the bank account could not be held to be the 'books' of the assessee.

3) Bombay High Court in the case of CIT v. Bhaichand N. Gandhi [1982] 11 Taxman 59 held that a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for any previous year, as understood for the purpose of section 68.

4) Giving a thoughtful consideration to the scope and gamut of the aforesaid statutory provision, viz., section 68, it was to be held that an addition made in respect of a cash deposit in the 'bank account' in the absence of the same found credited in the 'books of the assessee' maintained for the previous year, could not be brought to tax. - [2017] 80 311 (Mumbai - Trib.)

ITAT allows Sec. 54 relief for property purchased jointly with brother


a) Assessee was co-owner of flat jointly with his wife. He sold said flat and invested his share in another property and claimed long-term capital gain exemption under section 54. 

b) While making assessment, Assessing Officer (AO) observed that the new property purchased was in the name of two persons, namely, the assessee and his brother. He restricted deduction u/s 54 to the extent of 50% value of new property,

c) On appeal, CIT(A) disallowed entire exemption. Aggrieved-assessee filed the instant appeal before Tribunal.

Tribunal held in favour of assessee as under:-

1) In the given case, the name of the assessee's brother was added in the Agreement of new property so purchased for the sake of convenience. The entire investment for the purchase of new property along with stamp duty and registration charges were paid by the assessee.

2) There was no justification in the AO's action, in so far entire investment was made by the assessee and only for the safety reason he had included the name of his brother. 3) The issue was also covered by the decision of hon'ble Delhi High Court in the case of CIT v. Ravinder Kumar Arora [2011] 15 307 (Delhi) wherein High Court held that the assessee was entitled to full exemption u/s. 54F when the full amount was invested by the assessee, even though the property was purchased in the joint names of the assessee and his wife.

4) Therefore, assessee was entitled to full exemption under section 54, even though property was purchased in joint names of assessee and his brother. - [2017] 81 16 (Mumbai - Trib.)