MR. TEJSINGH DHANSINGH RAJPUROHIT ,MUMBAI vs. ITO WARD 30(1)(1), MUMBAI

The ITAT Mumbai Bench in vide order dated 13.02.2019 set aside the assessment on the issue of addition to the file of AO for passing a fresh order after assessee reconciles or correlate the cash sales made with that of cash deposits in the bank account.

However, in remand proceedings the AO recomputed the unaccounted cash receipts of Rs.11,79,760/- and cheque receipt of Rs.2,71,990/- and thus, made addition of Rs.14,51,660/- u/s. 68 of the Act.

Even before us, the assessee failed to show that he is neither following cash system of accounting nor following mercantile system of accounting. Further on perusal of the orders of the revenue authorities we found that AO had already granted the relief of redeposit and only added the unexplained cash and cheque receipts which were not explained by the assessee with documentary evidences. Although, in this regard assessee had contended that the amount of cash deposits and cheque were received from the debtor relating to FY 2009-10. However, the assessee failed to submit any documentary evidences in this regard. Therefore, Ld. CIT(A) rightly rejected the said contention. Since no new evidences or document have been placed on record before me. Therefore, I find no reasons to interfere into the said order passed by Ld. CIT(A) and thus, dismiss these grounds raised by the assessee.

Since, the assessee has also taken an alternate prayer to accept the said deposits made out of his business sales and treat profit @ 8% thereon on presumptive basis as envisaged by the law u/s. 44AD of the Act and relied upon the decision in the case of i. Dineshkumar Verma [Hon’ble Income-Tax Appellate Tribunal “SMC” BENch, Mumbai –ITA No. 1183/Mum/2019 Dated 28-12-2020. ii. Mehul V. Vyas [Hon’ble Income-Tax Appellate Tribunal “B” Bench, Mumbai Dated 07-04-2017. iii. Shri Kokkarne Prabhakara [Hon’ble Income-Tax Appellate Tribunal Bengaluru Dated 11-09- 2020. iv. Commissioner of income-Tax Vs. Bhaichand N. Gandhi [1982] 11 Taxman 59 )Bom.) 9. After, having gone through the entire factual and legal position, I am of the view that the additions u/s. 68 of the Act, can be made only if any sum is found credited for the books maintained by the assessee for any previous year and the assessee fails to offer a valid explanation for credit of such sum in the books or explanation offered is rejected by the AO. In other words, maintains of books by the assessee is sine qua non for making addition u/s. 68 of the Act. Since Section 44AD does not obligates the assessee to maintain books, the provisions of section 68 cannot be invoked where the assessee has filed return of income under the provisions of section 44Ad of the act without maintain books of account. “The Hon’ble High Court of Gauhati in the case of Anand Ram Raitani vs. CIT reported as 223 ITR 544 has held that existence of books of account is a condition precedent for invoking the provisions of section 68 by the AO. The relevant extract of the judgment is as under: “we have gone through section 68 of the Act. The AO before invoking the power under section 68 of the act must be satisfied that there are books of account maintained by the assessee and the cash credit is recorded in the said books of accounts and if the assessee fails to satisfy the AO, the said sum so credited has to be charged to income tax as the income of the assessee of that previous year. The existence of books of account is a condition precedent for invoking of the power. Discharging of burden is a subsequent condition. If the first point is not fulfilled the question of burden of proof does not arise. The AO made the assessment by making addition of the amount for which disallowance was claimed Mr. Bhuyan very candidly admits that addition was made in exercise of the under-section 68 of the Act, therefore, the first condition necessary for invocation of the power is existence of the books of account.”

The Tribunal in the case of Madhu Raitani Vs. ACIT (supra) following the decision rendered in the case of CIT vs. Bhaichand N. Gandhi (supra) and Anand Ram Raitani (supra) held that if books of account are not maintained by the assessee, the provisions of section 68 cannot be invoked. The tribunal further held that bank passbook cannot be considered as books of account. Similar view has been taken by the coordinate bench in the case of Manasi Mahendra Pitkar (supra).

The Co-ordinate Bench of Tribunal in the case of Shri. Kokarre Prabhakara vs. ITO(supra), in a similar situation where the assessee had declared income under section 44AD of the Act without maintaining books and the AO had invoked the provisions of section 68 of the Act, the Tribunal deleted the addition by placing reliance of various decision of the Tribunal holding that where the returns are filed on the basis of income declared under section 44A of the Act, there cannot be any application of section 68 of the Act.”

Thus, in the back drop of the facts and the relevant provisions of the Act coupled with case laws discuss above I am of the view that the alternate prayers raised by the assessee needs to the allowed and thus, I hold that no addition u/s.68 of the Act can be made in the instant case and therefore, the deposit of Rs. 14,51,660/- is treated as out of assessee’s business sales/ turn over/gross receipts and thus I treat profit @18% thereon on presumptive basis as envisaged by law u/s.44AD of the Act therefore, I allowing alternative prayer raised by the assessee and direct the AO to recomputed the profit @ 8% of Rs.14,51,660/- and act accordingly.

Ground No.3 this ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming of disallowance of deduction u/s.80C of the Act.

After having heard the counsel for both the parties, I found that the revenue authorities have not even entertain the claim of the assessee by holding that ITAT has set aside the assessment only for passing a fresh order with regard to two additions of unexplained deposits in the bank account. However, to my mind this cannot be a reason to deny to entertain the claim of the assessee, more particularly when assessee had raised specific ground before ITAT in the first round of litigation itself. Whereas it is an admitted fact that in respect of claim of deduction u/s.80C of the Act of Rs.1 lac, the assessee had already submitted receipt/ certificate regarding LIC premium payments made in the year under consideration which are also annexed at paper book. Since no fault has been found by the AO in the said receipt therefore, considering the said fact I allow this ground raised by the assessee and direct the AO to allow deduction u/s.80C of the Act of Rs.1 lac to the assessee. Thus this ground raised by the assessee stands allowed.