TaxTMI 
TaxTMI 
2020 (12) TMI 332
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....ot substantiate either with evidence or through a cash flow statement. The AO considered that the assessee had no valid explanations to offer regarding the cash deposits other than the jewel loan and accordingly, the balance of Rs. 36,01,384/- was treated as unexplained cash credits and brought to tax under the head income from other sources by invoking the provisions of section 115BBE of the I.T. Act. 4. On appeal, the CIT(A) after going through the records found that the total deposits in the bank account was and enhanced it by Rs. 13,63,616/-. 5. Against this enhancement the assessee is in appeal before me. The Ld. AR submitted that the assessee filed return of income and offered income under section 44AD by showing 8% of income on the turnover. The AO accepted this income declared by the assessee at Rs. 4,84,158/-. Thereafter, by invoking the provisions of section 115BBE, the AO made addition of Rs. 3,60,384/-. Further, it was enhanced by the CIT(A) to the tune of Rs. 49,65,000/- without giving mandatory notice for enhancement u/s. 251(2) of the I.T. Act. Further, he submitted that the AO had not considered opening balance in support of the Bank account. It was also submi....
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....rable to the later to the extent possible and that not to aggregate but only the peak of the credits be treated as unexplained. 4) (2014) 221 Taxman 0446 Ashok P. Magajikondi v. ITO wherein it was held that the AO has only considered the peak deposits and has given necessary deduction for deposits made out of prior withdrawal and possible receipt from debtors. Therefore, it was concluded that the findings of the lower authorities is correct and no material has been produced and confirmed the addition. 6. On the other hand, the Ld. DR submitted that a perusal of the bank account of the assessee showed that the jewellery loans were taken by the assessee as he was in urgent need of money as the amount was immediately withdrawn in cash. Even after huge withdrawals, the assessee had been withdrawing cash continuously for a period of one month using ATM or otherwise. So if the cash withdrawn after jewellery loan was always available otherwise. So if the cash withdrawn after jewellery loan was always available with it, there was not any requirement of making day to day cash withdrawals. 7. I have heard the rival submissions and perused the material available on record. In t....
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....t 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 the assessee is not engaged in contract work of building construction. In the present case, there is only on the basis of suspicion, made an addition after accepting the income offered by the assessee on presumptive basis u/s 44AD of the Act, which cannot be upheld. Being so, the assessment of the assessee to be made u/s 44AD of the Act and the addition u/s 68 of the Act cannot be sustained. Section 44AD provides that where the assessee is engaged in eligible business as proprietor under that section, a sum equal to 8% of the gross receipts shall be deemed to be the profits and gains of such business. Section 44AD exempts the assessee from maintenance of books of accounts. Once the income of the assessee is accepted u/s. 44AD, now the question arises for our consideration is whether the Assessing Officer could make further additions towards various discrepancies in the books of accounts of the assessee. 7.1 Section 44AD of the Act gives an opti....
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.... 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, 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 taxation as provided under section 44AD of the Act, the Assessing Officer can make addition under section 69C of the Act making the cash flow statement provided by the assessee the basis of his addition. 10. Section 44 AD of the Act reads as under: "44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assesse....
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....ch 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." 7.3 Now coming to the argument of the learned D.R. that the addition has been made under section 68 of the Act, on which there is no bar even though income offered under section 44AD of the Act, I am quite in agreement with the same. The only fetter provided under section 44AD of the Act are the applicability of provisions of sections 30 to 38 of the Act. The provisions of section 68 of the Act reads as under: "Cash credits. 68. Where 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 op....
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.... 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 copy of the constituent's account in the books maintained by the bank. It is not as if the bank statements are maintained bythe 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. Therefore, the bank statements supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, nor a book maintained by the assessee or under his instructions. As such, addition u/s 68 of the Act of the amount entered only in the bank statements was not justified. My this view is fortified by the judgment of the Hon'ble Bombay High Court in the case of CIT v. Bhaichand H.Gandhi [141 ITR 67 (Bom.)] and also the judgment of the Hon'ble Allahabad High Court in the case of Smt.Sarika Jain v.CIT (407 ITR 254). The Hon'ble Allahabad High Court held that the Tribunal is not competent to sustain the addition u/s 69A of the Act after deleting the said....
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....ite 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 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 fo....
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....orded, 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 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 oth....