TaxTMI 
TaxTMI 
2020 (1) TMI 1111
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....ficer under section 143(3) r.w.s. 147 was bad in law and was liable to be struck down. 3. The ld.CIT(Appeals) erred in upholding the addition of Rs. 5,96,470/- as unexplained cash deposits made by the Appellant in his Bank Account without appreciating the facts of the Appellant's case. 4. The ld.CIT(Appeals) failed to appreciate the fact that the Appellant was engaged in the business of civil construction and the said source for the deposits in the Bank Account were contract receipts and therefore the same was not liable to be added as unexplained deposits. 5. For these and other such grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed." 3. The facts of the case are that the assessee is having income from contract business, share trading etc. offered the income u/s 44AD of the Act. The assessment was reopened by issuance of notice u/s 148 of the Act on 31.08.2016 since the return filed by the assessee was belatedly on 31.03.2017 declaring total income of Rs. 2,19,830. On verification of the records, the Assessing Officer found that there are certain deposits with bank account with ICICI Bank, Lakkammanahalli,....
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....ed out any construction of building and Form No.26AS also have no details of contract receipts. According to him, the assessee has deposited cash into the bank account whenever there is a shortfall in cash for making payments towards share trading. This is a general observation made by the A.O. He had not brought on record any material to show that the assessee was not engaged in contract work and construction activities. In my opinion, when the assessee offered the income u/s 44AD of the Act, there is no necessity of maintaining any books of account by the assessee. It has given option to the assessee to offer the income under the presumptive basis and the same was opted by the assessee for the assessment year under consideration. The Assessing Officer is not entitled to make any guesswork and he has to make the assessment with reference to evidence and material brought on record. There must be something more than suspicion to support the assessment. A suspicion, however, strong may not take place for proof of evidence. The conclusion which are based on surmises and conjectures, cannot take place of proof. Therefore, the assessment made by the Assessing Officer, which are predomi....
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.... is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head "profits and gains" of business. However, the said provisions are applicable where the gross receipts paid or payable does not exceed Rs. 40 lakhs. 8. Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax at the rate of 8 per cent of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts. The stand of the assessee before the Commissioner of Income-tax (Appeals) and the Tribunal that the said amount of Rs. 14,95,300 was on account of ....
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....r the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation. 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it, which reads as under: "44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligib....
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....n 10." 7.4 The crucial words in the said section for the purposes of present appeal are 'any previous year' an A.O. has found any sum credited in the books of account of the assessee. But can I say on the facts and circumstances of the present case that the A.O. has found any sum credited in assessee's books of account. Therefore, in the present case, the provisions of section 68 of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses. 7.5 Applying the propositions of law laid down in the above case law cited supra to the facts of the case on hand, I delete the addition in question. 7.6 Even otherwise, in the present case, the Assessing Officer found certain deposits as unexplained in the bank account of the assessee w....
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....eclared income at Rs. 5,20,334. According to the A.O., the deposits are made by the assessee for investments in share trading. Whenever there is a short fall in cash, cash has been deposited in the account for making payments in respect of share trading. Since the assessee has not furnished any details of contract work done during the year and no details of construction of building has been given in Form No.26AS regarding the contract receipt, the A.O. rejected the contract receipts as false cash deposits. Accordingly, he treated the amount deposited with the bank account with ICICI Bank as unexplained credit u/s 68 of the I.T.Act. 9. Against this, the assessee carried the appeal before the CIT(A), who confirmed the order of the Assessing Officer, by observing that since the assessee has failed to substantiate his claim that the cash deposits were part of business turnover as a contractor. However, he has given credit towards opening balance available in the assessee's bank account to be deducted from the cash deposits considered as unexplained by the A.O. 10. Against this, the assessee is in appeal before the Tribunal. The assessee has raised following grounds:- "1. The lea....
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....rities. 14. I have heard the rival submissions and perused the material on record. The assessee has offered income u/s 44AD of the Act, being a small contractor and trader in shares and the turnover of the assessee is less than Rs. 1 crore from the said business activity, the income was offered u/s 44AD of the Act. The Assessing Officer disbelieved the claim of the assessee to be assessed u/s 44AD of the Act on the reason that the assessee has not furnished any details of contract work done during the year. According to him, the assessee has not carried out any construction of building and Form No.26AS also have no details of contract receipts. According to him, the assessee has deposited cash into the bank account whenever there is a shortfall in cash for making payments towards share trading. This is a general observation made by the A.O. He had not brought on record any material to show that the assessee was not engaged in contract work and construction activities. In my opinion, when the assessee offered the income u/s 44AD of the Act, there is no necessity of maintaining any books of account by the assessee. It has given option to the assessee to offer the income under the p....
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....uation of closing stock etc. In our considered opinion such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis. The Haryana High Court in the case of CIT vs. Surinder Pal Anand [2010] 192 taxmann 264), had held as follows:- "7. Section 44AD of the Act was inserted by the Finance Act, 1994 with effect from 1-4-1994. Sub-section (1) of section 44AD clearly provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head "profits and gains" of business. However, the said provisions are applicable where the gross receipts paid or payable ....
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....ove section are quite unambiguous to the effect that in case of an eligible business based on the gross receipts/total turnover, the income under the head 'profits & gains' of business shall be deemed to be @ 8% or any higher amount. The first important term here is 'deemed to be' which proves that in such cases there is no income to the extent of such percentage, however, to extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it is quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation. 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it fur....
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....a) the person, being a resident in whose name such credit 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." 14.4 The crucial words in the said section for the purposes of present appeal are 'any previous year' an A.O. has found any sum credited in the books of account of the assessee. But can I say on the facts and circumstances of the present case that the A.O. has found any sum credited in assessee's books of account. Therefore, in the present case, the provisions of section 68 of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision....