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Facts
The assessee deposited Rs. 12.34 Lacs cash during demonetization, but initially filed no return of income. Later, a belated return was filed under Section 44AD declaring business income, attributing deposits to sales proceeds, savings, and a Rs. 2.50 Lacs gift from father-in-law, for which sufficient documentary evidence was not furnished. The AO framed a best judgment assessment under Section 144, rejecting the business claim and taxing the total income (deposits plus returned income) at 60% under Section 115BBE, which was confirmed by the CIT(A).
Held
The Tribunal accepted the assessee's business claim, noting that presumptive taxation under Section 44AD does not require elaborate records, and similar income was offered in previous years. However, acknowledging the unsubstantiated nature of the claims, especially the gift, a lump sum addition of Rs. 2.50 Lacs was confirmed, to be taxed at normal rates, not the higher rate under Section 115BBE, citing a Madras High Court decision. The Ld. AO was directed to re-compute the income accordingly.
Key Issues
Whether the assessment framed under best judgment (Section 144) was valid when the assessee later filed a return under presumptive taxation (Section 44AD). Whether the unexplained cash deposits and gift amount are taxable at normal rates or at the higher rate under Section 115BBE.
Sections Cited
144, 44AD, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017- 18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 20-11-2023 confirming an assessment as framed by Ld. Assessing Officer [AO] on best judgment basis u/s 144 on 23-12-2019. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
During assessment proceedings, the Ld. AO observed that the assessee deposited cash of Rs.12.34 Lacs In its two bank accounts in old currency during demonetization period. However, no return of income was filed by the assessee. The assessee furnished computation sheet declaring business income u/s 44AD for Rs.3,78,396/- on turnover of Rs.47,29,950/- and accordingly stated that the deposits represent sale proceeds of business, accumulated savings and cash-in-hand. The net income was shown as Rs.2,98,080/-. The assessee also stated that Rs.2.50 Lacs represent gift from father-in-law. However, he could not furnish sufficient documentary evidences to prove the same. The said return of income was held to be invalid and belated by Ld. AO and Ld. AO framed assessment on best judgment basis wherein Ld. AO rejected business claim of the assessee though the assessee furnished some of the sales records viz. sale bill books etc. The sales turnover was also held to be abnormal. Finally, the deposits of Rs.12.34 Lacs as well as returned income of Rs.2.98 Lacs was considered as undisclosed income and bought to tax @60% u/s 115BBE. The Ld. CIT(A) confirmed the assessment against which the assessee is in further appeal before us.
It emerges that the assessee has furnished some documentary evidences viz. sales bill book to establish its business claim. The return of income, though filed belatedly, has been furnished declaring business income u/s 44AD. Since the income has been offered on presumptive basis, there is no requirement for the assessee to maintain elaborate records and regular books of accounts. Similar income has been offered by the assessee during past many years. Therefore, the business claim is to be accepted. However, considering the fact that the claim could not be fully substantiated and the gift could also not be substantiated fully, we confirm lump sum addition of Rs.2.50 Lacs in the hands of the assessee. The same would be over and above the net returned income of Rs.2,98,080/-. The returned income which shall be considered as normal business income only. The confirmed addition of Rs.2.50 Lacs would be subject to normal rate of tax since higher rate of tax u/s 115BBE would not be applicable in this year as per the decision of Hon’ble High Court of Madras (Madurai Bench) in S.M.I.L.E. Microfinance Ltd. vs. ACIT (WP (MD) No.2078 of 2020 dated 19-11-2024). We order so. The Ld. AO is directed to re-compute the income of the assessee. No other ground has been urged before us.