TaxTMI 
TaxTMI 
2020 (9) TMI 536
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....15, the assessee electronically filed the return of income on 24/09/2014 declaring income of Rs. 8,46,017/- u/s. 44AD of the I.T. Act. Subsequently, the return was subject to scrutiny u/s. 143(3) of the I.T. Act. While going through the return of income, the AO observed that the turnover declared in Form No. 26AS was at Rs. 46,46,352/- whereas the assessee declared turnover at Rs. 41,41,302/-. Hence, there was difference of Rs. 5,05,050/- . being payment received by Narasimha Construction. On account of this, the AO made the addition of Rs. 5,05,050/-. Further, the AO after going through the Bank account found that there were deposit of Rs. 3 lakhs into the Bank account which was not satisfactorily explained by the assessee. Hence, he made further addition of Rs. 3 lakhs to the income declared by the assessee. 4. On appeal, the CIT(A) confirmed the order of the AO. 5. Against, this the assessee is in appeal before us. The Ld. AR submitted that the there was a difference between the turnover declared by the assessee and the turnover declared in form 26AS at Rs. 5,05,050/-. It was submitted that it is on account of inclusion of certain advances received in the turnover. He subm....
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....ny 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 predominantly influenced by suspicion, cannot be upheld. In my opinion, mere surmises and conjectures that the assessee had deposited cash in bank account whenever there is cash shortage to make payment, cannot the basis for a predetermined approach without bringing any specific transactions or evidence brought on record by the Assessing Officer to support his version. If the Assessing Officer wants to assess the income of the assessee under normal procedure, heavy burden on him to bring on record necessary material to show that t....
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....f 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 business receipts had been accepted. The Ld. AR with reference to any material on record, could not show that the cash deposits amounting to Rs. 14,95,300 were unexplained or undisclosed income of the assessee. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." 7.2 The Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, or....
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....lso '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 eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required....
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....rovisions 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 with ICICI Bank, Dharwad branch at Rs. 9.16 lakh. In my opinion, when moneys are deposited in the bank account, the relationship that is constituted between the banker and the customer is one of the debtor and creditor and not of trustee and beneficiary. Applying this principle, the bank statements supplied by the bank to its constituent is only a....
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.... by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profit and gains of business or profession". (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed." 10. The provision of the above 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 presumptiv....
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.... 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 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." 7.4 The crucial words in the said section for the purposes of present appeal are 'any previous year' an....
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....eleting the said addition made by the A.O. and confirmed by the CIT(A) u/s 68 of the Act, the entire order of the Tribunal stands vitiated in law. Being so, the amount found credited in the bank account of the assessee cannot be made an addition u/s 68 of the Act. Accordingly, I am inclined to delete the addition made u/s 68 of the I.T.Act." 8.1 A similar issue also came up for consideration before the Cochin Bench of the Tribunal in the case of Thomas Eapen in ITA No. 451/Coch/2019 wherein it was held as follows: 9. We have heard the rival submissions ad perused the record. The assessee offered income u/s. 44AD, the assessee being a small trader in medicine. There is no dispute that the assessee falls under the provision of sec. 44AD since the turnover of the assessee is less than Rs. 1 crore from eligible business. The Assessing Officer also accepted that the assessee's case falls under the purview of section 44AD and computed the income declared by the assessee at Rs. 3,37,160/- and thereafter made addition towards undisclosed profit u/s. 68 of the Act. In other words, the Assessing Officer has not at all rejected the books of accounts of the assessee. Section 44AD p....
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....f 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 business receipts had been accepted. The Ld. AR with reference to any material on record, could not show that the cash deposits amounting to Rs. 14,95,300 were unexplained or undisclosed income of the assessee. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." 9.2 The Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, order dt. 14/06/2016, held as follows:- "9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be decided by us is whether accepting the case of the assessee as taxable under the presumptive t....
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....ss 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 eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get them audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts." 9.3 .....
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....enditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 9.6 The crucial words in the said section for the purposes of present appeal are 'any financial year' an assessee has incurred any expenditure. But can we say on the facts and circumstances of the present case that the assessee has incurred any expenses. From an analysis of section 44AD of the Act contained hereinabove, we have already held that the assessee had not incurred the expenses to the extent of 92% of the gross receipts. Therefore, in the present case, the provisions of section 69A 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, the Assessing Officer could have made the addit....