Sarojini Devi Budda Vs ITO (ITAT Visakhapatnam)
Summary: The assessee filed her return for AY 2013-14 declaring income of ₹2 lakh. Based on information that ₹28 lakh had been credited to her Andhra Bank account, the assessment was reopened under Section 147, and the Assessing Officer, after the assessee failed to furnish supporting evidence for the deposits, treated the entire amount as unexplained cash credits under Section 68; the CIT(A) confirmed the addition. Before the Tribunal, the assessee contended, among other things, that she was a commission agent in the jaggery business, that the deposits represented farmers’ sale proceeds routed through her bank account and that only 2% commission was earned, and specifically argued that Section 68 could not apply because she did not maintain books of account and the addition was based on the bank statement. The Visakhapatnam ITAT considered the decision in Vangapandu Prem Kumar v. ITO and the line of authorities concerning whether a bank passbook or bank statement constitutes the assessee’s books for Section 68. The Tribunal held that the addition of ₹28 lakh under Section 68, made on the basis of cash deposits into the assessee’s bank account, was unsustainable and directed the Assessing Officer to delete it. The Tribunal accordingly allowed the appeal, without adjudicating the assessee’s grounds on merits and other grounds after deleting the addition under Section 68.
Bank Statement Is Not Assessee’s Books of Account; Visakhapatnam ITAT Deletes ₹28-Lakh Section 68 Addition
The assessee filed her return for AY 2013-14 declaring income of ₹2 lakh. Based on information that ₹28 lakh had been credited to her Andhra Bank account, the assessment was reopened under Section 147. The assessee initially explained the deposits as connected with her money-lending activities but failed to furnish supporting evidence. The AO completed the assessment under Section 147 read with Section 144B and treated the entire deposits as unexplained cash credits under Section 68. The CIT(A) confirmed the addition.
Before the Tribunal, the assessee contended that she was a commission agent in the jaggery business and that the deposits represented farmers’ sale proceeds routed through her bank account, from which she earned only a commission. More importantly, she argued that Section 68 could not be invoked because she did not maintain books of account and the addition was based solely on entries appearing in her bank statement.
The Visakhapatnam ITAT held that Section 68 applies only when a sum is found credited in the books maintained by the assessee. A bank passbook or bank statement represents the customer’s account in the books of the bank and cannot be regarded as the assessee’s own books of account.
Following Vangapandu Prem Kumar v. ITO and the Bombay High Court ruling in CIT v. Bhaichand N. Gandhi, the Tribunal held that cash deposits appearing only in the assessee’s bank account could not be assessed under Section 68. Accordingly, it deleted the entire addition of ₹28 lakh and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] vide DIN: ITBA/NFAC/S/250/2025 -26/1082858472(1) dated 21-Nov-2025 for the Assessment Year 2013-14.
2. The Assessee has raised the following grounds of appeal:
“1. The order passed by the learned CIT(A) is arbitrary, unjust, and contrary to the facts on record.
2: The learned CIT(A) erred in confirming the addition of ฿ 28,00,000 under section 68 without appreciating that the appellant is only a commission agent in jaggery business and the cash deposits represented sales proceeds of farmers routed through the appellant, on which only 2% commission is earned.
3. The learned CIT(A) failed to appreciate the settled: legal position that Section 68 cannot be invoked when no books of account are maintained by the assessee. Reliance is placed on:
a) Kanchan LalwaniVsThe Income Tax Officer, Ward-1, Vizianagaram ITA I.T.A.No.484/Viz/2025 b) Vangapandu Prem Kumar vs ITO (ITAT Vizag),
c) A. Srinivasa Rao vs ITO (ITAT Vizag)
d) Smt. Bhabhal Bhaita vs ITO (ITAT Delhi)
4. The learned CIT (A) failed to consider that in similar cases of jaggery commission agents (including the case of Shri S. Jagga Maheshwara Rao (vegetable commission agent)), the Department its elf accepted the deposits as gross business turnover and assessed commission income at 2%, and therefore the present addition under Section 68 IS inconsistent and bad in law.
5. The addition of 28,00,000 u/s 68 is excessive, unjustified and liable to be de leted, and at the most only commission income @2% on such deposits could be assessed.
6. The appellant craves leave to add, amend, alter, or delete any of the above grounds at the time of hearing.”
3. Brief facts of the case are that, assessee is in individual and filed her return of income for the A.Y. 2013-14 declaring total income at Rs.2,00,000/-. As per the information received from the ITO (Inv), unit III, Vishakhapatnam, an amount of Rs. 28 lacs found credited in the bank account of the assessee maintained with Andhra Bank during the year under consideration. Accordingly, Ld. Assessing Officer [hereinafter in short “Ld.AO”] issued notice under section 148 after obtaining prior approval from appropriate authorities. However, assesse e failed to comply with the same. Subsequently, Ld. AO issued further hearing notices under section 142(1) of Act on various dates seeking assessee substantiations / explanation on the sources of cash credits found in assessee bank account to the tune of Rs.28 lacs with supporting documentary evidences. In response to the same, assessee contended the same attributable to explainable cash deposits as related to assessee’s money lending business and accordingly requested to consider the same as explainable. After considering the submissions of the assessee, Ld.AO observed that assessee did not adduce any such details of such money lending business activities explaining the sources of money lent and proves of such receipt back from such creditors as part of m oney lending business activities etc and in the absence of the same, AO treated entire cash deposits / credits as unexplained credit under section 68 of the Act. Accordingly, the assessment has been completed by the Ld.AO, under section 147 r.w.s. 144B o f the Act on 14.09.2021 by treating the entire cash credits as unexplained credit and added to the total income of the assessee under section.68 of the Act.
4. Being aggrieved by the assessment order passed by the Ld.AO, the assessee preferred an appeal before the Ld. CIT(A) and filed its submissions. Ld. CIT(A), after considering the submissions of the assessee, sustained the additions made by the Ld.AO.
5. Being aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal. .
6. Learned Counsel for the assessee, Shri K.S.S. Sarma, CA, submitted that the Ld.AO made additions towards cash deposits into bank account under section 68 of the Act, even though, the provisions of section 68 does not apply, once the assessee has not mainta ined books of accounts. He further submitted that bank pass book is not a book of account of the assessee. Therefore, all the credits in bank account added under section 68 of the Act, cannot be made. In this regard, he relied upon the decision of the IT AT, Visakhapatnam Bench in the case of Vangapandu Prem Kumar v. ITO in ITA No. 269/VIZ/2019 dated 23.11.2020.
7. Learned Senior AR for the Revenue, Shri A.P.Babu, Sr.AR, relied upon the orders of the Ld.AO and Ld. CIT(A), and submitted that, the assessment pr oceedings before the Ld.AO are exparte and the assessee could not explain the sources for cash deposits. Therefore, he submitted that the order of the Ld.CIT(A) should be upheld.
8. We have heard both the sides, perused the material available on record and h ad gone through the orders of the authorities below. Admittedly, the assessment proceedings before the Ld.AO are exparte, the assessee neither filed any details nor explained the sources for cash deposits. Before the Ld. CIT(A), the assessee explained the commission agent in jaggery business and claimed that the assessee is into business of commission agent and source for cash deposits is its business receipts which is part of the regular return o f income filed by the assessee. We find that the Ld.AO has made addition of Rs.28,00,000/- under section 68 of the Act, towards cash deposits into bank account on the basis of bank statements of the assessee. An identical issue of cash deposited into ban k account and addition made under section 68 of the Act has come up before the ITAT in the case of Vangapandu Prem Kumar v. ITO (supra) where the Tribunal on identical set of additions towards cash deposits, deleted the additions by holding as under: –
“7. We have heard both the parties and perused the material placed on record. As observed from the orders of the lower authorities, the deposits were made in the bank account representing Andhra Bank account No.030310100028234 and the addition was made u/s 6 8 of the Act. The assessee has challenged the action of the AO in making the addition u/s 68 in respect of cash deposits. Therefore, we, take up first the additional ground relating to validity of addition u/s 68. As per section 68, the sum found credit ed in the books of account maintained by the assessee, for which no explanation is offered by the assessee required to be brought to tax. For the sake of clarity, we extract relevant part of the section 68 which reads as under:
Cash credits.
68. Where an y sum is found credited in 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 Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year:
Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee- company shall be deemed to be not satisfactory, unless—
(a) the person, being a resident in whose name such cred it is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.
From plain reading of section 68, what is to be made addition and what is to be brought to tax u/s 68 is the credits made in the books of accounts, for which the assessee failed to offer explanation. As per para No.4.1 of the assessment order, the AO found that the deposits were made in Savings Bank account with Andhra Bank and the same was not taken in to account in books of accounts, thus, it is clear that the deposits made in the bank account were not entered in the books of accounts. Therefore, the AO ought to have considered t he addition u/s 69 instead of 68. As discussed earlier, the deposits made in the bank account are not to be taxed u/s 68 of the Act and the correct course of action is to tax the same is u/s 69 of the Act. On similar facts, this Tribunal in the case of Smt. Asha Sanghavi Vs. Income Tax Officer in I.T.A. No.33/Viz/2019 dated 15.11.2019 held that the cash deposits required to be brought to tax u/s 69, but not u/s 68 of the Act. For the sake of clarity and convenience, we extract relevant part of the order of this Tribunal which reads as under:
“10. We have heard both the parties and perused the material placed on record. In the instant case, the AO made the addition of Rs.1,22,29,000/- representing cash deposits made in the bank account u/s 68 of the Act. Section 68 allows the AO to make addition for the sums credited in the books of accounts maintained by the assessee for which the assessee fails to offer satisfactory explanation with regard to source. In the instant case, the assessee is maintaining the books of accounts but did not make any entry in the books of accounts. The amounts were deposited in the bank accounts, but not made relevant entry. Hence, the Ld.AR argued that since the assessee did not make any entry in the books of accounts, the AO i s not permitted to make the addition u/s 68. The issue with regard to deposits made in the bank account, whether to be brought to tax u/s 68 or not was considered by the coordinate bench of ITAT Mumbai in Mehul V.Vyas Vs. Income Tax Officer (supra) and held that the amounts found credited in the bank pass book or bank statement cannot be considered to be books maintained by the assessee in any previous year as understood for the purpose of section 68 of the Act. For the sake of clarity and convenience, we extract para No.8 of the cited order which reads as under:
“5. We have heard the Id. Authorized representatives of both the parties, perused the orders of the lower authorities as well objection raised by the Id. A.R as regards the addition of Rs.10,53,000/- which was made by the A.O under Section 68 of the ‘Act’, in respect of the cash deposit in the bank account of the assessee We find substantial force in the contention of the Id. A.R that an addition under Section 68 can only be made where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee either offers no explanation about the nature and source as regards the same, or the explanation offered by him in the opinion of the assessing officer is not found to be satisfactory. That before adverting further, we herein reproduce the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: –
“Cash Credits.
W here any sum is found credited in 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 [Assessing] officer, sat is factory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year……….
That a bare perusal of the aforesaid deeming section therein 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. We not being oblivious of the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed t o be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature, thus confining ourselves within the realm of our jurisdiction, therein construe the scope and gamut of the aforesaid statutory provision by according a plain meaning to the language used in Sec.68. We are of the considered view that a credit in the ‘bank account’ of an assessee cannot be construed as a credit in the ‘books of the assessee’, for the very reason that the bank account cannot be held to be the ‘books’ of the assessee. Though it remains as a matter of fact that the ‘bank account’ of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the ‘books’ of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision, viz. Sec. 68, and are of the considered view that an addition made in respect of a cash deposit in the ‘bank a in the absence of the same round credited in the ‘books of the assessee’ maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68. That our aforesaid view is fortified by the judgment of th e Hon’ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bombay) wherein the Hon’ble High Court has held as under: –
“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 and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent’s ac count 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 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.”
We find that the aforesaid view of the Hon’ble jurisdictional High Court had thereafter been followed by a ‘SMC of the ITAT Mumbai bench in the case of Smt. Manshi Mahendra Pitkar Vs . ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Trib.) wherein it was held as under: –
I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of sect/on 68 of the Act The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fail within the ambit of secti on 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. N otably, section 68 of the Act would come into play only in a situation “Where any sum is found credited in the books of an assessee……….. “. The Hon’ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved the proposition that bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been inv oked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon’ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or ban k statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. Therefore, on this account itself the impugned addition deserves to be deleted. I hold so”
We further find that a similar view had also been arrived at in a ‘third member’ decision of the Tribunal in the case of Smt. Madhu Raitani Vs. ACIT (2011) 10.taxmann.com 205 (Gauhati) (TM), as well as by a coordinate bench of the Tribunal in the case of ITO, Barabanki Vs, Carnal Kumar Mishra (2013) 33 taxamann.com 610 (Lucknow Trib.) Thus in the backdrop of the aforesaid facts of the case read in light of the settled position of law, we are of the considered view that the addition made by the A.O in respe ct of the cash deposit of Rs.10,53000/- (supra) in the bank account of the assessee by invoking Section 68 has to fail for the very reason that as per the judgment of the Hon’ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), 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 of the Act. Therefore, on this count itself the impugned addition Rs.10,53,000/- deserves to be deleted.
10.1. While delivering the decision, the Coordinate Bench relied on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand N.Gandhi (supra). Similar view was taken by the coordinate Bench of ITAT, Delhi in the case of Smt Babbal Bhatia in TS-306 -ITAT2018.
In the instant case, though the assessee has maintained the books of accounts, the cash deposits made in the bank account were not found credited in the books of accounts. The entire transactions were made outside the books of accounts. In the absence of any finding with regard to cash deposits recorded in the books of accounts of the assessee, the addition made by the AO u/s 68 in respect of cash deposits made in the bank account are unsustainable. During the appeal hearing, the L d.DR did not bring any other decision to support the revenue’s contention that the cash deposits made in the bank account to be brought into the purview of section 68 of the Act. The case law relied upon by the Ld.DR in the case of Sachdeva (supra) though related to sale of jewellery and the failure of the assessee to prove the genuineness of sale, it was not related to the addition u/s 68. The case law relied upon by the Ld.DR is distinguishable and does not help the Revenue’s case. Since the facts are identical to the decision of Mehul V.Vyas (supra), respectfully following the view taken by the coordinate bench of ITAT, Mumbai, we hold that the addition made by the AO u/s 68 in respect of cash deposits made in the bank account is unsustainable, accordi ngly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO. Accordingly, the appeal of the assessee is allowed.
7.1. Since the facts are similar, respectfully following the view taken by the Coordinate Bench of ITAT in the case of Asha Sanghavi (supra), we hold that the addition made u/s 68 in respect of deposits made in the bank account is unsustainable, hence, deleted.
The assessee also explained that the family is having agricultural holdings of 48.60 acres and the entire depo sits were made out of agricultural income of the family members which was received in the form of loans / gifts, thus, the assessee has argued the case on merits also. Since, we have deleted the addition, holding that the addition u/s 68 unsustainable, we consider it is not necessary to adjudicate the grounds on merits and other grounds raised by the assessee. Accordingly, appeal of the assessee is allowed.”
9. In this view of the matter and considering the facts and circumstances and also by following the decision of the ITAT, Visakhapatnam in the case of Vangapandu Prem Kumar v. ITO (supra), we direct the Ld.AO to delete the addition of Rs.28,00,000/- made under section 68 of the Act towards cash deposits into the bank account.
10. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 21st August, 2026.
