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TMI Blog2014 (3) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... see is precluded from claiming that it has in fact earned the income higher than 8% and it has been so declared by it also, but it is absolved any liability of paying the tax on the additional income but only on the income arrived at the rate of 8% of the total turnover. Though there is no necessity to maintain accounts in case of furnishing return under section 44AD yet, if the assessee has maintained any accounts and has furnished the same with the return of income, like the capital account of the partners in the case in hand, the AO can examine said accounts and if he finds that there is an introduction of unexplained cash in the capital accounts of the assessee, he would be justified to ask the assessee to explain the source of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961, being introduction of capital by a partner namely Shri Shivgan Jetha Patel. 2. The Learned Commissioner of Income-Tax (Appeals) also erred in sustaining the disallowance of interest on capital of one of the partners, namely Shri Shivgan Jetha Patel, U/s.69 of the Income Tax Act, 1961. 3. The Appellant prays that the addition of ₹ 6,85,000/- and disallowance of interest thereon as above made to the returned income of the appellant firm by the assessing officer U/s.68 69C of the Income Tax Act, 1961, be deleted. 4. The Appellant craves leave to add to, amend or alter, delete, and/or modify the above grounds of appeal. 2. The facts of the case are that the assessee, a firm engaged in the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus in appeal before us. 4. We have heard the ld. representatives of both the parties and also have gone through the records. The first contention of the ld. A.R has been that since the assessee had furnished the return of income under provisions of section 44AD hence, there was no necessity to maintain books of account. The income under section 44AD is offered on estimation basis at the rate of 8% of the total turnover. For invoking or making additions under section 68, the maintaining of books of accounts is not necessary. Since the assessee had not been maintaining any books of account hence the additions made by the AO under section 68 were not sustainable. The second contention raised by the ld. A.R has been that even the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, then a sum equal to 8% of the total turnover or gross receipts of the assessee or a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee shall be deemed to be profits and gains of such eligible business of the assessee. So from the provisions of section 44AD, it reveals that in the absence of books of account and subject to satisfaction of the requirements of section 44AD, the income will be assessed on presumptive basis at the rate of 8% of the gross receipts or total turnover. However, if the assessee admits or claims that it has received more income than 8% of the turnover, it is free to offer the same at a higher rate. Now coming to the question of unexplained money, cash etc., we may observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income, like the capital account of the partners in the case in hand, the AO can examine said accounts and if he finds that there is an introduction of unexplained cash in the capital accounts of the assessee, he would be justified to ask the assessee to explain the source of such credits and in the absence of any satisfactory explanation, the AO will be justified in adding such sum into the income of the assessee. 7. In the case in hand, the AO found unexplained cash introduced in the capital account of the partners. The said capital accounts were also filed with the return of income furnished under section 44AD. The ld. CIT(A) from the explanation offered in the case of Shri Ishwar Shivgan Patel was satisfied regarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the partners is concerned, the said contention will come into operation only when the assessee firm explains the source of credit. However, in the case in hand the assessee firm has failed to explain the source of cash even from the partners. Under such an event the AO is justified in adding the same into the income of the assessee firm. So far the case laws relied upon by the ld. A.R. are concerned, in the case of CIT vs. Taj Borewells (supra), the Hon ble High Court has observed that it is the assessee firm to explain and prove the source of the money. Once the assessee firm has offered an explanation and established that the capital was contributed by the partners only then the same can not be considered for addition in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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