| Question And Answer | |
|---|---|
| Subject: | section 44AD |
| Category: | Income-Tax |
| Querist: | BHARGAVI |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | deposit of cash, Section 44AD, Tax Audit |
| Date: | July 18, 2023 |
Assessee is in retail trade with turnover of Rs.200 lakhs. It is 100% cash business and deposits cash from sales into the bank. He offers 8% of turnover as income ( Rs. 16 lakhs) u/s 44AD of the Act. In the bank account there is closing balance of Rs.60 lakhs . The assessee uses the Rs.45 lakhs to purchase a plot of land.
The assessee opines that since he has offered 8% as income as required u/s 44AD the IT department cannot question the excess money of Rs.44 lakhs (60 – 16) standing in bank account and free to utilise to purchase the plot of land . Is the stand of the assessee correct?. What are the implications ?
The stand of the Assessee is correct. Deeming provisions under section 44AD of the Act are for the purpose of determining the amount chargeable to tax under the head Income from Business and Profession. The same has no correlation with the source of funds for purchasing a plot. Refer Sunil Gahlot v.ITO (2023) BCAJ – May – P. 35 ( Jodhpur)( Trib) (ITA No. 176 / Jodh /2019 dt . 24 -3 -2023)