Income From Undisclosed Sources Bank Statements Cannot Be Treated as Books of Accounts of Assessee for Purposes of Section 68

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers Bank Statements Cannot Be Treated as Books of Accounts of Assessee for Purposes of Section 68 CA Manoj Gupta Maintenance of books of account is one of the condition precedent for invoking Section 68. A question arises as to whether bank pass book/statement can be considered as books of the assessee for the purposes of Section 68. The judiciary so far has denied this. 1. Circumstances when Section 68 becomes applicable A plain reading of Section 68 shows that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offers no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the assessing officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 2. Where credit in a bank pass book-Invocation of Section 68 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 and beneficiary. The pass book supplied by the bank to its constituent is only a copy of the constituents 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 under the instructions of constituents. Thus, a credit appearing in bank pass book but not in books of assessee in a particular previous year cannot be charged as income under Section 68.--Vide CIT v. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom). In Ms. Mayawati v. Dy. CIT (2008) 113 TTJ (Del-Trib) 178 : (2008) 19 SOT 460 (Del-Trib), it was held that Section 68 would have no application where the assessee was not maintaining any books of account. A pass book of bank cannot be treated as books of account of the assessee because a pass book is provided by the banker, and is only a copy of the customers account in the books maintained by the bank. The bank does not act as an agent of the customer nor can it be said that the banker maintains the pass book under the instructions of the customer. Therefore, a cash credit appearing in assessees 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. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Bank Statements Cannot Be Treated as Books of Accounts of Assessee for Purposes of Section 68

CA Manoj Gupta

Maintenance of books of account is one of the condition precedent for invoking Section 68. A question arises as to whether bank pass book/statement can be considered as books of the assessee for the purposes of Section 68. The judiciary so far has denied this.

1. Circumstances when Section 68 becomes applicable

A plain reading of Section 68 shows that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offers no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the assessing officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

2. Where credit in a bank pass book-Invocation of Section 68

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 and beneficiary. The pass book supplied by the bank to its constituent is only a copy of the constituents 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 under the instructions of constituents. Thus, a credit appearing in bank pass book but not in books of assessee in a particular previous year cannot be charged as income under Section 68.--Vide CIT v. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom).

In Ms. Mayawati v. Dy. CIT (2008) 113 TTJ (Del-Trib) 178 : (2008) 19 SOT 460 (Del-Trib), it was held that Section 68 would have no application where the assessee was not maintaining any books of account. A pass book of bank cannot be treated as books of account of the assessee because a pass book is provided by the banker, and is only a copy of the customers account in the books maintained by the bank. The bank does not act as an agent of the customer nor can it be said that the banker maintains the pass book under the instructions of the customer. Therefore, a cash credit appearing in assessees 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.