Bank Passbook Not Regarded as 'Books of Account’: ITAT Rejects S. 68 Addition Made Without Assessee's Books

The Income Tax Appellate Tribunal (ITAT) has ruled that a bank passbook cannot be considered "books of account" for the purpose of making an addition under Section 68 of the Income Tax Act, 1961. This significant decision came as the ITAT set aside an addition made by the Assessing Officer (AO) without examining the assessee's actual books of account. Section 68 allows for additions for unexplained cash credits if the taxpayer fails to provide a satisfactory explanation. However, the ITAT emphasized that for Section 68 to apply, the cash credit must be found in the "books of account" maintained by the assessee. Since a bank passbook is maintained by the bank, not the assessee, it does not fall under this definition. The ruling underscores the procedural requirement for the AO to first ascertain whether the assessee maintains books of account and, if so, to analyze them before invoking Section 68. This judgment provides crucial clarity for taxpayers regarding the scope of Section 68 additions.