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Facts
The assessee filed their return under Section 44AD of the Income Tax Act for AY 2012-13, declaring income of Rs. 4,68,380/- on gross receipts of Rs. 55,49,170/-. The Assessing Officer (AO) initiated proceedings under Section 147/148, reopened the assessment, and made an addition of Rs. 49,88,748/- on account of cash deposits, treating it as income from other sources under Section 68.
Held
The Tribunal held that the AO cannot invoke Section 68 for addition when the assessee has opted for presumptive taxation under Section 44AD and has not maintained detailed books of account. The cash deposits were found to be already included in the turnover declared by the assessee. The appeal of the assessee deserves to be allowed, and the impugned addition is directed to be deleted.
Key Issues
Whether Section 68 addition is permissible when assessee opts for presumptive taxation under Section 44AD and whether cash deposits are part of declared turnover.
Sections Cited
147, 148, 143(3), 68, 234B, 44AD, 139(1), 2(12A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘C’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI SUDHIR PAREEK
The instant appeal has been preferred by the Assessee against the order of Commissioner of Income Tax (Appeals)-24, New Delhi- 110055, [in short (Ld. CIT(A)] dated 18.04.2023 for Assessment Year 2012-13.
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. 1.1. The Assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the following actions of the Assessing Officer :- a. initiating proceedings u/s 147/148 of the Act without there being any valid reasons leading to belief of escapement of any income; b. passing order u/s 143(3)/147/148 of the Act determining taxable income at Rs. 54,57,128/- against returned income of Rs.4,68,380/- without any plausible basis; c. making an addition of Rs. 49,88,748/- on account of cash deposits in bank by capriciously invoking section 68 of the Act; d. not allowing credit for self-assessment tax in a sum of Rs.55.542/-; e. charging interest u/s 234B of the Act; The above actions are being arbitrary, fallacious, unwarranted and illegal must be quashed with directions for appropriate relief.”
The facts of the case may be narrated as that the case was picked up for scrutiny for escapement of income to the tune of Rs. 16,54,000/- representing cash deposit during the year. The case was reopened to verify the above amount pertaining to assessment year 2012-13 and in pursuance thereof the notice u/s 148 of the Income Tax Act, 1961 (‘the Act’) was issued and in response of the same, assessee filed the return of income on 14.11.2019 at an income of ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. Rs. 4,68,380/-. In order to proceed, thereafter a notice u/s 142(1) issued to furnish information of various points relating to source of cash with supportive evidence, inclusive return of income electronically in response notice u/s 148 of the Act for the A.Y. 2012- 13 and copy of bank account statement.
2.1 The assessee maintains three accounts in HDFC Bank, Kalka Ji, in which assessee had deposited a sum of Rs. 49,88,748/- in three accounts. Rs. 2,17,950/- (in the name of Jatin Arora), Rs. 35,93,658/- (in the name of Jatin Arora) and Rs. 11,77,140/- (in the name of Paras International) respectively. It is observed in the assessment order that above amounts exceeds the amount mention in the reason since the information passed was cash deposit of Rs. 2,00,000/- and above includes every cash deposits and no supportive evidence has been filed by the assessee and assessee has returned the income u/s 44AD and has not given any detail of purchases and also not given the any basis of sale of Rs. 55,49,170/-.
2.3 It was noticed that the assessee did not filed return of income voluntarily u/s 139(1) of the Act and has taken recourse to the 3
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. provision of section 44AD to avoid paying higher tax by hiding under the provisions of section 44AD.
On the conclusion of the assessment proceedings, the Ld. AO treated amount of Rs. 49,88,748/-, as income of the assessee under the head other sources having recourse to section 68 of the Act.
Aggrieved with the same, the assessee / appellant assailed the order by way of appeal and the Ld. CIT(A) dismissed the same by stating that in the absence of any documentary evidence of carrying out retail trade as well as in the absence of sale bills, it will not be appropriate to consider these cash deposits in the bank account as business receipts of the appellant.
We have heard rival contentions and carefully scanned the material available on record.
In the course of hearing, the Ld. AR submitted that the assesse filed return of income u/s 44AD of the Act and during the year under consideration, the assessee had deposits aggregating amount of Rs. 4
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. 49,88,748/- in his three bank accounts, which maintained with HDFC Bank and while declaring an income u/s 44AD in his return of income, the assessee disclosed the turnover/ gross receipts at Rs. 55,49,170.
6.1 It is further submitted that the scheme of presumptive taxation has been formed in order to avoid the longdrawn process of assessment in cases of small trades or in cases of those business where the income is almost of static quantum of all the business and also section 44AD of the Act gives an option to the assessee of offer income on presumptive basis. These are special provisions and the assessee opted the same and offered to tax income at the rate of 8% of his turnover. The Ld. AR submitted that when the law itself provides relief to from pain of maintaining the books of accounts to small traders under section 44AD, the Ld. AO cannot conclude that the assessee has taken a recourse to the provisions of section 44AD to avoid paying higher tax by hiding under the provisions of section 44AD. It is further contended that merely because a notice under Section 148 was issued and the assessee filed a return under Section 44AD, it cannot be the basis of concealment of income. 5
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. 6.2 Moreover, the AR vehemently argued that it is nowhere written in the law that the presumptive income can be availed only when the return is filed within due date as prescribed under section 139(1) and not after. The benefit of declaring presumptive income under section 44AD can justifiably be availed even in case of belated returns. The Learned AR submitted that in the present case; the return was filed belatedly only due to the health issue of the assessee’s consultant. Upon receiving the notice under Section 148, the assessee, being lack of time, the only option left with the assessee was to file the return of income under section 44AD. The Learned AR also submitted that A bare perusal of section 68 of the Act makes explicitly clear that the addition can be made under the section if, any sum is found credited in the books maintained by the assessee. That is the books should be that of the assessee. The "books or books of account" have been defined in section 2(12A) of the Act. The same reads as under- Books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device."
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. 6.3 Further, submitted that the definition of books under the Act is inclusive. A perusal of the definition shows that the same does not include bank passbook or bank statement. A conjoint reading of above provisions would thus lead to the conclusion that the addition u/s 68 can be made only where any amount is found credit in the books as defined u/s 2(12A) of the Act maintained by the assessee. It is stated that it is not mandatory for assessee to maintain books, if the return of income was filed under section 44AD. Addition under section 68 can be made only if any sum is found credited in the books maintained by assessee for any previous year and assessee fails to offer valid explanation for credit of such sum in the books or explanation offered is rejected by the Assessing Officer. Thus. maintenance of books by assessee was sine qua non for making addition u/s 68. Since section 44AD did not obligate assessee to maintain books, the provisions of section 68 could not be invoked where assessee had filed return of income under the provisions of section 44AD without maintaining books of account.
6.4 The Ld. AR relied upon the decision in Abhi Developers v. ITO [2007] 12 SOT 444 (ITAT Ahmedabad), wherein it was held that the 7
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. AO has no power to assess anything in excess of returned income if it is according to 44AD.
6.5 The Ld. AR has also submitted that the assessee had declared income from business of Rs. 4,56,697/- on total business receipts of Rs. 55,49,170/-. The breakup of the gross receipts is a under:
Particulars Amount (in Rs.) Gross Receipts (Banking 3,05,266 Channel) Gross Receipts (Other 52,43,904/- Mode) Total Gross Receipts 55,49,170/- Declared income 4,56,697/- Declared income (%) 8.23%
In the course of proceedings, the Learned AR draws our attention that the Ministry of Commerce and Industries issued Importer Exporter code 0507032918 on 26-07-2007 to Paras International INC in which assessee Jatin Arora shown as signatory and which is placed at page 55-56 of PB. There is material substance in the submissions advanced on behalf of the assessee that the addition u/s 68 of the Act can only made where any sum is found
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. credited in the books of accounts maintained by the assessee. The Learned AR also submitted that the amount of cash deposits of Rs 49,88,748/- which the Learned AO made addition u/s 68 of the Act is already included in the turnover declared of Rs 55.49,170/-by the assessee in his return of income which is total receipts received by the assessee during the relevant year and the Learned AO nowhere mentioned that the cash deposits which made addition u/s 68 of the Act is different from those mentioned by the assessee as turnover in his return of income.
On the basis of foregoing fact situation, we find merit in the contentions raised by the assessee. Accordingly, the appeal of the assessee deserves to be allowed. The impugned addition made in the assessment order dated 14.12.2019, as sustained by the order of the Ld. CIT(A) dated 18.04.2023, is directed to be deleted.
In the result, appeal of the assessee is allowed as indicated above.
ITA No.-1794/Del/2023 Dhanuka Agritech Ltd. Order pronounced in the open court on 30.05.2025