TaxTMI 
TaxTMI 
2025 (12) TMI 535
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....n individual and claimed to be engaged in the business of Private Civil Contracts by way of construction of individual residential house. The assessee was subject to search proceedings under section 132 of the Act dated 3rd December 2016. During the search proceedings, the cash amounting to Rs. 32.2 Lakh was found and seized by the search team. 3. In consequence to search proceedings, the assessment proceedings under section 153A of the Act for the year under consideration was initiated. The assessee filed return of income under section 153A of the Act declaring income at Rs. 3,14,080/- only. As such the assessee declared presumptive income as per section 44AD of the Act being 8% of the gross receipt of Rs. 39,26,030/- from the business of the civil contract. The assessee in support has furnished copy of the balance sheets for the A.Ys. 2011-12 to 2017-18. In the balance sheet for A.Y. 2014-15 and 2015-16 (year under consideration) the assessee has disclosed following figures: Particular Opening (A.Y.2014-15) Closing (A.Y. 2015-16 Capital Rs. 24,44,190/- Rs. 27,58,273/- Unsecured Loan 0 Rs. 18,00,000/- Sundry Creditor Rs. 28,56,521/- Rs. 17,30....
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....lances as claimed. 6.2 On checking the bank accounts, the AO observed that the transactions did not relate to any civil contract business. He found that apart from the cash deposits, the assessee also gave and received huge loans from certain persons without any proper explanation or necessity. The assessee failed to provide any evidence to prove how the money was earned or for what purpose such payments and receipts were made. The AO held that the assessee attempted to show the cash deposits as business income so that it would fall within presumptive taxation under section 44AD of the Act. However, as the assessee did not prove the existence of any business, the AO rejected the explanation and held that the cash deposits were unexplained. Therefore, the AO treated the amount of Rs. 67,00,000/- as unexplained money under section 69A of the Act. The AO applied tax at special rates under section 115BBE of the Act. Further, the AO also noted that the assessee failed to file the return of income voluntarily earlier despite having taxable income. Hence, penalty proceedings were also initiated. 7. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed th....
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.... representing business turnover cannot be treated as unexplained income. Reliance is placed on the decisions in CIT v. Smt. P.K. Noorjahan 237 ITR 570 and CIT v. Shanta Devi 208 ITR 87, where it is held that only net income is taxable. 9.4 The learned AR submits that the assessee has declared turnover higher than the cash deposits in the return, and tax has already been paid under presumptive scheme at the rate prescribed under section 44AD of the Act. Therefore, there is no undisclosed income. Without reducing the business expenditure or applying a reasonable profit percentage, the AO's action of taxing the full amount is arbitrary and unsustainable. 9.5 The learned AR further submitted that the application of section 115BBE is also wrong. This section applies only when income is assessed under deeming provisions after rejecting the explanation of the assessee. Here, the assessee has provided proper explanation which has not been disproved. Hence, higher rate of tax cannot be applied. 9.6 In the alternative, and without prejudice to the main submission, if the Hon'ble Tribunal still considers any part of the deposit as income, then only profit margin of 8% as per section ....
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....nds duly established and cannot be disregarded while framing assessment for A.Y. 2015-16. 11.2 It is further noted that the cash deposits made during the year under consideration are well within the cash availability disclosed in the balance sheet of the earlier year. Therefore, when the assessee has shown a consistent pattern of cash flow, and the same has been accepted by the Department in the preceding years, the AO cannot selectively treat the cash deposits of a later year as unexplained without first disturbing the acceptance of earlier years' results. The approach adopted by the AO lacks consistency and is contrary to the settled principle that once a particular state of affairs has been accepted in earlier years, the same cannot be arbitrarily rejected in subsequent years without any fresh material. 11.3 The contention of the AO that the balance sheets were prepared only after the search cannot be accepted in isolation. The returns were filed in response to statutory notices under section 153A, and therefore, the assessee was legally entitled to prepare statements of affairs for explaining his business income. It is also pertinent to note that for A.Y. 2011-12 to 2014-....