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of <h1>Madras High Court Upholds Dismissal of Tax Appeal Due to Lack of Evidence</h1> <h3>Smt. S. Sakunthala Sivam Versus Income Tax Officer, Ward – 1 (3), Salem</h3> Smt. S. Sakunthala Sivam Versus Income Tax Officer, Ward – 1 (3), Salem - TMI Issues:Assessment under section 143(3) of the Income Tax Act, 1961 for unexplained investment, Appeal before CIT (Appeals) Salem, Dismissal of appeal by Income Tax Appellate Tribunal, Questions of law under section 44AD of the Income-tax Act, Interpretation of source of cash deposits, Application of section 69 of the Act, Legal position of Section 44AD, Failure to prove nature of business and source of credit, Dismissal of appeal based on lack of evidence.Assessment under Section 143(3) of the Income Tax Act:The appellant, deriving income on commission basis from real estate business, filed a return of income for the assessment year 2011-12. An assessment order was passed under section 143(3) making an addition of Rs.25,00,000 as unexplained investment under section 69 of the Act. The appellant challenged this order through appeals, culminating in a tax case appeal before the Madras High Court.Questions of Law under Section 44AD of the Income-tax Act:The appellant raised substantial questions of law regarding the application of section 44AD, questioning the Tribunal's dismissal of the appeal without considering the statutory mandate of section 44AD. The main contention was that once income is returned under section 44AD, there is no obligation to question the source for each entry forming the basis for gross income calculation.Interpretation of Source of Cash Deposits and Application of Section 69 of the Act:The appellant argued that the cash deposits in the savings bank account represented business receipts under section 44AD, but the assessing officer treated it as unexplained investment under section 69 of the Act. The authorities found the sources of the deposits were not properly explained by the appellant, leading to the dismissal of appeals.Legal Position of Section 44AD:Section 44AD of the Act provides for estimating income at 8% of gross receipts for certain businesses, subject to specific conditions. However, the appellant failed to prove the nature of business and the source of the credit of Rs.25,00,000, presenting conflicting stands before the authorities.Failure to Prove Nature of Business and Source of Credit:Despite the appellant's argument that the Income Tax Practitioner failed to properly represent the case, the appellate authorities found the appellant did not co-relate the source of cash deposits adequately. The First Appellate Authority and the Income Tax Appellate Tribunal both dismissed the appeals due to lack of evidence supporting the appellant's claims.In conclusion, the Madras High Court dismissed the tax case appeal, stating that no substantial question of law arose for consideration. The court upheld the decisions of the lower authorities, emphasizing the appellant's failure to explain the sources of cash deposits adequately.
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