2024 (7) TMI 1330 - AT - Income Tax

Addition u/s 68 - unexplained cash deposited in the bank account - No return of income was filed by the assessee u/s. 139 but in pursuance to notice issued u/s. 148 - assessee argued that since he had opted for the presumptive taxation scheme u/s 44AD, which does not require maintaining books of accounts - HELD THAT - The assessee having not maintained its books of accounts in the instant case, although was liable to maintain such books of account as are stipulated u/s 44AA cannot take the plea that provisions of Section 68 cannot be applied, as the assessee cannot take benefit of his own wrong, as there cannot be premium on non compliance. Thus, hold that the assessee was required to explain the sources of cash deposits in his bank account maintained with IDBI Bank, genuineness of the transaction of the aforesaid cash deposits and creditworthiness as well identity of creditors, as are required under the deeming fiction of Section 68, which in the instant case, the assessee having failed to do so, and the authorities below have rightly invoked provisions of Section 68 and made the additions as income of the assessee within the four corners of deeming fiction of Section 68. The case laws relied upon by the assessee were decided on their own facts and are not applicable to the instant case - Appeal filed by the assessee is hereby dismissed.

Issues Involved:
1. Validity of the addition of INR 21,51,200 as unexplained credit under Section 68 of the Income-tax Act, 1961.
2. Applicability of Section 68 in the context of presumptive taxation under Section 44AD.
3. Requirement of maintaining books of accounts under Section 44AD.
4. Justification for invoking Section 147 for reopening the assessment.

Issue-Wise Detailed Analysis:

1. Validity of the Addition of INR 21,51,200 as Unexplained Credit under Section 68:

The primary issue pertains to the addition of INR 21,51,200 by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income-tax Act, 1961. The AO observed that the assessee had made cash deposits in his savings account with IDBI Bank, which remained unexplained since no return of income was filed under Section 139 for the assessment year 2011-12. Despite the assessee's claim that the cash deposits were from his business of trading fruits and vegetables, no supporting evidence was provided. Consequently, the AO treated the cash deposits as unexplained and made the addition under Section 68.

2. Applicability of Section 68 in the Context of Presumptive Taxation under Section 44AD:

The assessee argued that since he had opted for the presumptive taxation scheme under Section 44AD, which does not require maintaining books of accounts, Section 68 should not be applicable. However, the Tribunal noted that the primary onus is on the assessee to prove that he is an eligible assessee engaged in an eligible business under Section 44AD. The assessee failed to provide any evidence to substantiate the nature of his business, such as licenses, purchase and sale records, or trading vouchers. The Tribunal held that merely claiming to avail the presumptive scheme without substantiating the business activities does not exempt the assessee from the provisions of Section 68.

3. Requirement of Maintaining Books of Accounts under Section 44AD:

The Tribunal observed that while Section 44AD, as it stood at the relevant time, did not require maintaining books of accounts, this exemption is conditional upon the assessee proving that he is engaged in an eligible business. Since the assessee failed to provide any evidence of carrying on the business of trading in fruits and vegetables, the protection under Section 44AD(5) was not applicable. The Tribunal held that the assessee was liable to maintain books of accounts under Section 44AA, and the non-maintenance of such books does not preclude the application of Section 68.

4. Justification for Invoking Section 147 for Reopening the Assessment:

The AO reopened the assessment under Section 147 after noticing the unexplained cash deposits in the assessee's bank account. The Tribunal upheld the reopening of the assessment, noting that the assessee had not filed a return of income under Section 139, and the source of the cash deposits remained unexplained. The Tribunal found that the AO had valid reasons to believe that income had escaped assessment, justifying the invocation of Section 147.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, upholding the addition of INR 21,51,200 as unexplained cash credit under Section 68. The Tribunal emphasized that the assessee failed to substantiate the nature of his business and did not provide any evidence to support his claim of trading in fruits and vegetables. The Tribunal also held that the presumptive taxation scheme under Section 44AD does not exempt the assessee from explaining the sources of cash deposits in his bank account. The reopening of the assessment under Section 147 was also found to be justified.

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