TaxTMI 
TaxTMI 
2026 (8) TMI 559
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.... dated 30.03.2013 passed by the Income Tax Officer, Ward-1, Virudhunagar [hereinafter referred to as "the AO"], u/s. 144 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the Assessment Year 2017-18. 2. The brief facts of the case emanating from the records are that the assessee is an individual, carrying on the business of trading in goods and filed his return of income on 07.11.2017 declaring total income of Rs. 2,02,500/-. The case was selected for limited scrutiny under CASS for the reason that large cash payments were made for the purchases by credit cards. Accordingly, statutory notices were issued to the assessee seeking for details and documents in support of the return of income filed. Meanwhile, the AO issu....
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....ed to purchase goods by using the credit cards and traded the same. The turn over out of the credit cards purchases made has already been shown in the gross receipts considered for declaring the income as computed u/s. 44AD of the Act under presumptive taxation. Therefore, the addition of credit cards payments made through cash cannot be treated as unaccounted money to make addition u/s. 69A of the Act as unexplained money. Further, the ld.AR submitted that the assessee has been regularly filing the return of income by declaring the profit around 20% on the gross collections / receipts / turnover and filed a paper book showing the income declared at 20.2% of the gross receipts u/s. 44AD of the Act. In view of the above, the ld.AR prayed tha....
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....confirmed by the ld.CIT(A). 7. Before us, the ld.AR submitted that the impugned cash payments were not independent unexplained transactions but represented payments made towards credit card dues incurred for purchasing trading goods in the ordinary course of business. It was further submitted that the sales generated out of such purchases had already formed part of the gross turnover disclosed in the return of income and the assessee had offered the business income u/s. 44AD of the Act. The assessee has also placed on record the details of income declared in the relevant assessment year to demonstrate that the profit declared works out to 20.2% of the gross turnover, which is substantially higher than the minimum presumptive rate prescri....
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....nsactions, only the profit element embedded in such transactions can reasonably be brought to tax and not the entire turnover or business receipts. 11. It is a settled proposition of law that where the impugned transactions are intrinsically connected with the business activity of the assessee, the addition should ordinarily be confined to the profit element embedded therein, particularly when the corresponding turnover has not been rejected and the assessee has declared income under the presumptive provisions of the Act. Taxing the entire cash payment would amount to taxing the gross business receipts instead of the real income, which is contrary to the settled principles governing assessment of business income. 12. In the present ca....