| Question And Answer | |
|---|---|
| Subject: | Section 68 and 44AD |
| Category: | Income-Tax |
| Querist: | Manoj Jain |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | cash credits, cash deposit, Presumptive taxation, Section 68 |
| Date: | March 28, 2022 |
The assessee is an individual engaged in the retail trade business. He has offered the income u/s 44AD by applying net profit rate at 10% of gross receipts of Rs. 15,10,125/-. For A.Y 2015-16, on the basis of information that assessee has deposited cash of Rs.8,70,500/- in bank. In response to notice u/s 148, the assessee has stated this cash is deposited out of his business receipts of Rs. 15,10,125/- and which is more than cash deposited in savings bank and therefore no addition on account of unexplained cash deposit in the bank account can be made. The AO has not appreciated the explanation of the assessee and made the addition of entire cash deposits of Rs. 8,70,500/-.
Is action of AO justified ?
Please Guide.
When the Assessee is following presumptive taxation system for his retail trade business and he is offering 10% of his business receipts for taxation under section 44AD. If the Assessee has offer explanation of the cash deposits form the business receipts. The Assessing officer cannot make separate addition for cash deposited in bank under section 68 for cash credits. The provision of section 68 cannot be invoked where the income offered u/s. 44AD of the Act as the said section does not oblige the assessee to maintain any books of account.
In Shri Kokarre Prabhakara vs. ITO ITA 1239/Bang/2019 Dtd.11/09/2020, held that where the assessee had declared income under section 44AD without maintaining books and the Assessing Officer had invoked the provisions of section 68 of the Act, tribunal deleted the addition holding that where the returns are filed on the basis of income declared under section 44AD of the Act, there cannot be any application of section 68 of the Act.
In Dineshkumar Verma, ITA No.1183/MUM/2019 (A.Y.2014-15) dt.28/12/2020 (Mum)(Trib.) the cash was deposited in the bank accounts of the assessee. The returned income did not match the presumptive rate of tax on the gross turnover of the assessee. Tribunal held that, an addition under S. 68 can only be made where any sum is credited in the books of the assessee maintained for any previous year. Therefore since no books of account were maintained in the ordinary course of business of the assessee, no such addition under S. 68 was tenable.
The jurisdiction High court in the case of CIT v. Bhaichand H.Gandhi (1983) 141 ITR 67 (Bom) (HC) held that, bank pass book is not constitute books of account.