ITAT deleted addition for cash deposited in bank account where return of income was filed u/s 44AD of the Income Tax Act
In a recent judgment, ITAT Guwahati deleted addition u/s 69A on account of cash deposited in bank account out of sales, of which return of income was filed u/s 44AD of the Income Tax Act, 1961 (the Act) holding that once the assessee opted presumptive taxation, without giving any adverse finding on the same and without excluding the turnover shown and recasting the profit and loss account, the same amount could not have been added for cash deposited in the bank account.
ABCAUS Case Law Citation:
4641 (2025) (07) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC in confirming addition made u/s 69A of the Income Tax Act, 1961 (the Act) by the Assessing Officer (AO) on account of cash deposited in bank account.
The case of the assessee was completed u/s 143(3) of the Act. The case of the assessee was set aside u/s 263 of the Act by the Pr. Commissioner of Income Tax, Jorhat by making certain observations regarding the deposits in one of the four bank accounts of the assessee.
The AO issued notice u/s 142(1) of the Act and required the assessee to explain the source of cash deposited in the bank account. The assessee uploaded the reply and explained the source as being (i) the opening balance of the cash in hand, (ii) gift from relatives and (iii) agricultural income and (iv) cash sale proceeds from trading business.
The AO required the assessee to provide the names of the parties, their addresses and PANs from whom he had made purchases and the details of parties to whom he had sold the agriculture produce.
The assessee responded by stating that he had prepared the sales ledger by clubbing the katcha slips having same rate for convenience and ease of understanding only. It was stated that the partywise name, PAN, Address to whom sales were made were not maintained by him.
The AO did not find the reply acceptable and made the impugned addition under section 69A to the income of the assessee.
The CIT(A) dismissed the appeal of the assessee observing that during the course of appellate proceeding, the appellant could not bring any material evidences on record, along with logical justification, to justify the source of above cash, deposited in the beginning of the F.Y.
The CIT(A) held that from the facts of the case it was crystal clear that the appellant had deposited the above cash out of his undisclosed sources, therefore, the AO had rightly added to the income of the appellant.
The Tribunal observed that in the return of income filed, the assessee had shown income under the heads salary, income from other sources and income from business or profession under section 44AD of the Act. It was submitted before the AO that the details of purchases of paddy traded were not maintained, but certain katcha slips for sales were maintained by his ‘Mohri’ which were produced before us as well. The AO accepted the opening balance of cash, the gifts received as well as the cash generated from sale of agricultural produce from the land owned by the assessee, but the explanation regarding paddy purchased and sold was not accepted.
The Tribunal further observed that the assessee had shown profit at the rate of 8% under section 44AD and was not required to maintain the books of account and other details since it is a presumptive section for estimating the business income yet he had produced part of the self-generated sale vouchers in support of the sale of purchased paddy.
The Tribunal also observed that before the AO the assessee had stated that he had made payments to creditors against purchases by issuing cheques and the details were filed for transactions with various persons. Besides these purchases by cheques, the assessee had also purchased the ‘Dhaan’ from many number of local farmers of nearby area in cash which was sold in cash.
The Tribunal noted that though the assessee was not required to maintain the vouchers for the purchases since the income was shown under section 44AD of the Act, however, the AO could have rejected the submission of the assessee if he had evidence that payments for purchases as claimed were not made by cheques after examining the details from the bank. It was also not mentioned in the assessment order the period over which the cash was deposited.
The Tribunal noted that the assessee claimed that the purchases were made on credits for which payments were made by cheque, but no enquiry in this regard had been carried out by the AO and even the CIT(A) has not considered the reply filed. Further, once the assessee had shown Gross Receipts/Turnover on which net profit of 8.52% was declared, without giving any adverse finding on the same and without excluding the turnover shown and recasting the profit and loss account, the same amount could not have been added under section 69A for cash deposited in the bank account.
Hence, considering the totality of facts and the failure of the AO to bring any further evidence to counter the submissions of the assessee by conducting any enquiry or to rebut the contentions of the assessee, Tribunal directed AO to delete the addition.
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