SMT SHASHI MUDALIYAR,NAGPUR vs. A,C.I.T CENT CIR. 1(1), NAGPUR

Brief facts for the assessment years under consideration are that the assessee is engaged in civil construction business and partner in M/s New Viraj Housing Agency. The assessee has been filing her returns regularly by declaring income from construction business u/s 44AD of the I.T. Act for the last several years which has been accepted by the department.

During the proceedings before the first appellate authority, assessee contended that the assessment for AY 2009-10 & AY 2010-11 was complete and not pending on the date of search. The time limit for the issue of notice u/s 143(2) had also expired. Assessee further contended that the addition of cash deposit in bank has been made solely on the basis of bank statements which were submitted during assessment proceedings and not on the basis of any incriminating evidence / material found during search. Assessee further submitted that since, no incriminating material / evidences were found during the course of search, therefore, no addition can be made u/s 153A of the Act. In this regard, assessee also placed reliance on the decision of the Jurisdictional Bombay High court in M/s Continental Warehousing -ITA No 523, Al Cargo Logistics and Murli Agro Products-ITA No 36/2009, ITAT Mumbai,Special Bench in the case of All Cargo Global Logistics Ltd vs. DCIT [2012] 137 ITD (Mum.)(SB) and others. Assessee also contended the merits of the additions made by the AO and explained that the cash deposits in bank are out of the gross receipts from construction business, the income from which has already been accepted and included by the assessing officer in the assessed income. The assessee also argued that perusal of the bank statements shows that the construction receipts have not been received through banking channel and hence it is obvious that the payments were received in cash. After considering the submissions of the assessee, the Ld. CIT (A) sustained the addition. Thus, further aggrieved, the assessee has filed the present appeals before us.

During the course of hearing, the Ld. counsel for assessee submitted that source of cash deposits in the bank account is out of assessee’s civil construction business and the assessing Officer has not brought on record any source of income other than the business which was carried on by the assessee. The names of customers from whom construction receipts were received was furnished during assessment proceedings and the fact that the payments received from these customers is not reflected in bank statements, shows that the same was received in cash. It was submitted that once the return of income disclosing gross receipts from civil construction business has been accepted as per provisions of section 44AD of the Act, no separate addition can be made on the basis of bank deposits especially where the credits made in the bank account is less than gross receipts declared in the return of income. In support, the reliance was placed on the decision of the Hon’ble Punjab and Haryana High Court in case of CIT v. Surinder Pal Anand 242CTR 061 & ITAT Kolkatta Bench in Kapil Dev Vs ITO- to 856/kol/2010(Copy already placed on record).

Per contra, the ld. DR submitted that it is not disputed that the assessee has declared gross receipts from his civil construction business and return of income has been filed u/s 44AD of the Act. However, during the course of assessment proceedings, the assessee was required to file documentary evidence to substantiate her claim regarding construction business and in absence of any such evidence furnished before the AO, it was not possible to verify that the receipt so declared is from the business of construction. The ld. DR further submitted that assessee has not explained the source of cash deposits and the additions were accordingly made by the AO which were rightly confirmed by the Ld. CIT(A).

We shall first take ground No 3 relating to addition of Rs 6,02,000/- in AY 2009-10, Rs 45000/- in AY 2010-11 and AY 2011-12 and Rs 8,90,000/- for AY 2012-13 made by AO for unexplained cash deposited in the bank account and confirmed by the Ld. CIT(A).

We have heard both the parties and perused the orders of the Revenue Authorities and material on record. It is noted that the assessee is in the civil construction business and has been filing her returns since last several years by declaring income under the presumptive tax provisions of Section 44AD of the act. In pursuance to notice u/s 153A, the assessee had filed all her returns from AY 2007-08 to AY 2012-13 on 13/03/2015. The assessee for all these years except for AY 2011-12 has filed her return of income u/s 44AD declaring gross receipts from construction business amounting to Rs 20,62,500/- in AY 2009-10, Rs 26,50,000/- in AY 2010-11 and Rs 42,00,000/- in AY 2012-13. The returns so filed u/s 44AD has been accepted by the Assessing officer which in effect means the declarations and disclosure so made by the assessee in terms of carrying on construction business, non-maintenance of books of accounts and gross receipts from such business has since been accepted by the Assessing officer. In such a scenario, where there are cash and other credits in the bank account maintained by the assessee which are less than the gross receipts from construction business so declared by the assessee, we find the explanation offered by the assessee that such deposits are from her construction business as a plausible explanation in absence of anything contrary on record in terms of any other source of income. Our view is fortified by the decision of the Hon’ble Punjab and Haryana High Court decision in case of Surinder Pal Anand (supra)and ITAT Jaipur bench in Virendra Kumar Vs ITO in it was held as under: Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax @ 8% of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts. The stand of the assessee before Commissioner of Income-tax (Appeal) and the ITAT that the said amount of Rs 14,95,300/- was on account of business receipts had been accepted. Learned counsel for the appellant with reference to any material on record, could not show that the cash deposits were unexplained or undisclosed income of the assessee.”

We therefore find force in the contention so advanced by the Ld. counsel for the assessee that the source of cash and other deposits in the bank account is out of assessee’s construction business and gross receipts thereof have already been offered in the return of income. In light of the aforesaid discussion, the addition so made by the Assessing officer for AY 2009-10, AY 2010-11, AY 2011-12 and AY 2012-13 is hereby directed to be deleted. 10. In view of our decision on merits of the additions made by the Assessing Officer, the legal and other grounds raised by the assessee have not been adjudicated upon.