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TMI Blog2019 (11) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account, more so, in view of the fact that his income has been assessed as per section 44AD of the Act, he cannot be punished for not maintaining the same. From an analysis of section 44A we have already held that the assessee had not incurred the expenses to the extent of 92% of the gross receipts. Therefore, in the present case, the provisions of section 69A cannot be applied. Asking the assessee to prove to the satisfaction of the AO, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses, the AO could have made the addition under section 69A of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case. Applying the propositions of law laid down in the above case law lo the facts of the case on hand, we delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment u/s. 143(3) of the I.T. Act was completed o 21/12/2017 by assessing the total income at ₹ 34,73,680/- after making the following additions: S.No. Item Amount Rs. Reason 1. Under section 68 of the Act 27,94,306 Unexplained cash deposit in Bank 2. Undisclosed profit 3,14,953 Profit on undisclosed sales 3. Interest income 27,265 Difference as per 26AS On examination of the bank account statements of the assessee at various banks, it was ascertained that total of credits in different banks during the year was reckoned at ₹ 94.,04,685/- Out of which a sum of ₹ 8,61,647/- represented transfer from LIC and gift from his daughter who was working abroad and these were proved. As the assessee was not maintaining books of account including cash book, it was hard to ascertain the actual of cash and credit sales. But, it was noticed that the assessee had made payments to various wholesale pharmaceutical companies for a sum of ₹ 53,48,732/- during the F.Y. 2014-15 towards purchase. The Purchase bills and the suppliers' ledgers were produced and these were verified and accepted as proved. (The tax treatment in respect of such unexpla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the assessee to pharmaceutical companies. According to the CIT(A), the onus is on the assessee and not on the Assessing Officer to prove the source of the credits in the Bank account. In view of the above discussion, it was held that the amount of unexplained deposit in the Bank account i.e. ₹ 27,94,306/- was assessable under section 69A of the Act and the Assessing Officer was directed to assess accordingly. 7. Against this, the assessee is in appeal before us. The Ld. AR submitted that the AO made the addition by treating the cash deposits in the bank account as unexplained cash credit without considering the purchase bill, sales bills and bank statements produced by your appellant during the course of assessment and ignoring the fact that the deposits are immediately connected with the business of the assessee. It was submitted that it is a well settled principle in law that maintenance of books of accounts is a condition precedent to apply Sec 68 of the Act. The Ld. AR relied on the judgment of the Bombay High Court in the case of CIT v Shri Bhaichand Gandhi 141 ITR 67 wherein it was held that a bank passbook cannot be regarded as a book of the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer of reputed companies. Further, the Ld. AR placed reliance on the judgment delivered by the Hon'ble Supreme Court in the case of Lakhmichand Baijanath v CIT where it was held that "when an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business". In view of the above, the Ld. AR prayed that the addition of ₹ 27,94,306/- made in respect of total income should be deleted. 8. The Ld. DR submitted that there is no prohibition for making addition u/s. 68 or 69A of the I.T. Act, though the assessee offered income u/s. 44AD of the I.T. Act. 9. We have heard the rival submissions ad perused the record. The assessee offered income u/s. 44AD, the assessee being a small trader in medicine. There is no dispute that the assessee falls under the provision of sec. 44AD since the turnover of the assessee is less than ₹ 1 crore from eligible business. The Assessing Officer also accepted that the assessee's case falls under the purview of section 44AD and computed the income declared by the assessee at ₹ 3,37,160/- and thereafter made addition towards undisclosed profit u/s. 68 of the Act. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption from maintaining of books of account has been provided and presumptive tax at the rate of 8 per cent 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 the Commissioner of Income-tax (Appeals) and the Tribunal that the said amount of ₹ 14,95,300 was on account of business receipts had been accepted. The Ld. AR with reference to any material on record, could not show that the cash deposits amounting to ₹ 14,95,300 were unexplained or undisclosed income of the assessee. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." 9.2 The Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, order dt. 14/06/2016, held as follows:- "9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it, which reads as under: "44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get them audited is only on the assessee who opts to claim the income bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 9.6 The crucial words in the said section for the purposes of present appeal are 'any financial year' an assessee has incurred any expenditure. But can we say on the facts and circumstances of the present case that the assessee has incurred any expenses. From an analysis of section 44AD of the Act contained hereinabove, we have already held that the assessee had not incurred the expenses to the extent of 92% of the gross receipts. Therefore, in the present case, the provisions of section 69A of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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