Punjab & Haryana H.C : the unexplained amount in the accounts of the account holders can not be treated income of the assessee-bank under section 68

High Court Of Punjab & Haryana

CIT Vs. Citizen Urban Co-Op. Bank Ltd.

Assessment Year : 1999-2000

Section : 68

Adarsh Kumar Goel And Ajay Kumar Mittal, JJ.

IT Appeal No. 547 Of 2008

April  21, 2011

JUDGMENT
 
Ajay Kumar Mittal, J.-This appeal under section 260A of the Income-tax Act, 1961 (for short “the Act”), has been filed by the Revenue against the order dated February 15, 2008 passed by the Income-tax Appellate Tribunal Amritsar Bench, Amritsar (in short “the Tribunal”) in I.T.A. No. 115(ASR) of 2003, (Asst. CIT v. Citizen Co-operative Bank Ltd.[2009] 314 ITR (AT) 91 (Amritsar) relating to the assessment year 1999-2000.

2. The appeal was admitted by this court for determination of the following substantial question of law:

“Whether on the facts and in the circumstances of the case, the hon’ble Income-tax Appellate Tribunal is right in holding that section 68 of the Income-tax Act, 1961 does not apply to the co-operative bank for assessing the unexplained credits as taxable income ?”

3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is a co-operative society. It filed return of income for the assessment year 1999-2000 on June 29, 1999 declaring “nil” income. Later on, vide letter dated February 1, 2000, the assessee was informed that during the course of survey under section 133A(1) carried out at the bank on October 1, 1999, certain accounts and transactions were noticed whereby amounts contained in FDRs were credited to those accounts and thereafter the cash was withdrawn and the accounts were closed. In the wake of this situation, the assessee-bank was required to provide identity of those account holders, but the assessee expressed its inability to prove the genuineness of the creditors/depositors. Owing to failure of the assessee to do so, action under section 68 of the Act was recommended and accordingly, a notice under section 148 of the Act was issued to the assessee. Thereafter assessment was made under section 143(3) of the Act vide order dated March 28, 2002 at an income of Rs. 59,41,593, by making addition of the said amount, on account of peak balance standing in the name of the various depositors. The Commissioner of Income-tax (Appeals) (in short “the CIT (A)”), deleted the addition vide order dated December 31, 2002, made by the Assessing Officer. The Revenue carried the appeal before the Tribunal. The order of the Commissioner of Income-tax (Appeals) having been upheld and the Revenue’s appeal dismissed, it is how the Revenue is in appeal before us.

4. We have heard learned counsel for the appellant and have perused the record.

5. The point in issue in this appeal is, whether the unexplained amount in the accounts of the account holders could be treated income of the assessee-bank under section 68 of the Act, where the Revenue had not established that there was connivance of the said account holders with the assessee-bank ?

6. The Tribunal on appreciation of evidence came to the conclusion that there was no nexus of the said creditors with the bank and, therefore, the same could not be treated to be unexplained credits of the assessee. The findings recorded by the Tribunal in that behalf in paras 34 to 40 are as under (pages 111-112 of 314 ITR (AT) :

“Further, even on the merits, the addition was uncalled for. Concerning account Nos. 8211, 8212 and 8213, the introducer was Shri Vijay Sethi, the deceased managing director of the assessee-bank itself. The original investments were made in RMRD accounts of S. B. accounts with the Mithapur branch of the assessee. These investments were made way back in 1992. It was only on maturity that they were transferred to the accounts under consideration. It has rightly been contended that the origin of these amounts falling in the earlier years, which fact has also been admitted by the Assessing Officer, they could not be brought to tax in the year under appeal, in the hands of the assessee. The learned Commissioner of Income-tax (Appeals), thus, rightly deleted the addition in this regard.

The introducer of account Nos. 954, 955 and 956 was Shri Parmod Sharma, accountant of the assessee-bank. He appeared before the Assessing Officer in response to summons under section 131 of the Act. He admitted knowing the account holders personally. The onus with regard to these accounts, thus, stood amply discharged.

S. Swaran Singh was the account holder of account No. 1108. He was one of the directors of the bank and so he needed no independent introduction to open his account with the assessee-firm. His independent existence also stands proved by the entries through clearing in account.

Shri Pawan Sharma was the introducer to account No. 1658. His statement was recorded by the Assessing Officer under section 131 of the Act. He also confirmed knowing the account holder.

Smt. Harsimranjit Kaur, Prop. M/s. H.S. Gas Service owned up account No. 8268 of Shri J. P. Singh, which fact was got confirmed by the learned Commissioner of Income-tax (Appeals) through the Assessing Officer assessing the said lady. The above facts were duly taken into consideration by the learned Commissioner of Income-tax (Appeals) while admitting the appeal. We do not find anything erroneous with the order of the learned Commissioner of Income-tax (Appeals).

Not only this, in pursuance of the directions issued by the learned Commissioner of Income-tax (Appeals), the assessee located further details/addresses of account holders. These details were furnished to the Assessing Officer vide letter dated October 4, 2005. A copy of this letter had been placed at pages 90-91 of the assessee’s paper book. This also boosts the stand taken by the assessee.”

7. The aforesaid findings have not been shown to be perverse or erroneous in any manner by the learned counsel for the Revenue. In the given facts, the amounts mentioned above cannot be said to be unexplained credits in the hands of the assessee, under section 68 of the Act. The substantial question of law is, thus, decided against the Revenue and the appeal is dismissed.

[Citation : 336 ITR 62]

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