The Tax Publishers

Addition on Basis of Entry in Bank Pass Book--Approach of Department

CA. Nisha Bhandari

Whenever any sum is found credited in bank pass book for which no satisfactory explanation is given by the assessee, the assessing officer generally invoke provision of Section 68. However, where assessee has not maintained books of account such addition cannot be sustained. The learned author clarifies that where provision of Section 68 cannot be invoked, addition in such cases can be made under Section 69 or 69A, as the case may be and hence one cannot escape from taxability by taking plea that no addition can be made in absence of books of accounts.

1. Maintenance of books of account--A condition precedent for invoking Section 68

In order to invoke provision of Section 68 there should be books of account maintained by the assessee. As observed in CIT (Central) v. Sri Baba Rupadas Spinning Mills (P) Ltd. now M/s BRD Textiles (P) Ltd. 2013 TaxPub(DT) 695 (P&H-HC), where any sum was found credited in books of assessee and it offered no explanation about the nature and source, or the explanation offered was not satisfactory, in opinion of the assessing officer, the sum credited may be charged to income-tax.

Since maintenance of books of account is a condition precedent for applicability of Section 68, the said provisions cannot be invoked, where assessee has not maintained any books of account.--Vide Dy. CIT v. Finlay Corporation Ltd. (2003) 86 ITD 626 (Del-Trib).

Existence of books of account maintained by the assessee is a condition precedent for addition under Section 68 and, no such books having been maintained by the assessee, there is no legal scope to intervene provisions of Section 68. Further the bank pass book, profit and loss account and balance sheet cannot be considered as books of account.--Vide Smt. Madhu Raitani v. Asstt. CIT (2011) 10 ITR 91 (Gau-Trib) : (2011) 45 SOT 231 (Gau-Trib).

Where books of account were not maintained for any financial year Section 68 could not be applied on account of unexplained sources of deposit in bank account.--Vide Yadwinder Singh v. ITO (2016) 48 ITR (Trib) 328 (Amr ' SMC'-Trib).

2. Meaning of 'books or books of account'

In Central Bureau of Investigation v. V. C. Shukla (1998) 3 SCC 410, the Supreme Court held that 'Book' ordinarily means a collection of sheets of paper or other nateruak, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as book for they can be easily detached and replaced. Thus, spiral notebooks and spiral pads can be regarded 'books' within the meaning of Section 34 of the Indian Evidence Act, 1872 but not the loose sheets of papers contained in the files.

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