Onus is on assessee to prove that he is in retail business, eligible for presumptive taxation

Onus is on assessee to prove and substantiate that he is in retail business, and eligible to claim presumptive of taxation u/s 44AD – ITAT

In a recent judgment, ITAT Agra has held that onus is on the assessee to prove and substantiate that the assessee is in retail business, and is eligible to claim presumptive scheme of taxation u/s 44AD

ABCAUS Case Law Citation:
4429 (2025) (02) abcaus.in SC

In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing appeal exparte and upholding the addition under section 69A of the Income Tax Act, 1961 (the Act) towards cash deposits in bank account.

The Assessing Officer (AO) was in possession of information that during the demonetization period, the assessee had deposited large amount of cash in his bank account. The Assessing Officer obtained the bank statements directly from the bank. The Assessing Officer observed that one bank account was a loan account in which cash was deposited and the said loan account stood closed. The Assessing Officer observed that in another bank account also assessee deposited cash during demonetization period.

The AO observed that pattern of cash deposits during demonetization period as well post demonetization period was different. The AO further observed that the assessee did not file his return of income with department. The Assessing Officer issued notices u/s. 142(1), but there were no compliance by the assessee. Show cause notice u/s. 144 were also issued by the AO to the assessee.

The assessee did not comply with the notices and the Assessing Officer made addition of cash deposited in the two bank accounts in the hands of the assessee u/s 69A read with section 115BBE of the Act vide best judgment assessment order passed u/s 144. 

Aggrieved, the assessee filed first appeal with the CIT(Appeals). The CIT(Appeals) dismissed the appeal of the assessee as the assessee had not participated in the assessment proceedings as well in the appellate proceedings, and as the assessee could not submit satisfactory explanations with regard to the nature and source of cash deposits, the CIT(A) dismissed the appeal filed by the assessee.

Before the Tribunal, the assessee submitted that he was in the business of small retail trade of daily needs. The assessee had filed return of income for the preceding two assessment year wherein the assessee had shown his business as retailer and invoked presumptive scheme of taxation u/s. 44AD of the Act. It was submitted that income for the impugned assessment year was below taxable limits, and hence no return of income was filed u/s 139 by the assessee.

It was submitted that both the authorities below had brought to tax the entire credits in the bank account for the year under consideration, which was not appropriate. Attention was drawn to proviso to section 251(1)(a) of the Act which was introduced by Finance Act, 2024 wef 01.10.2024, and it was submitted that now even the CIT(Appeals) has been given powers to set aside the matter back to the file of Assessing Officer for making de-novo assessment in case an assessment order is passed u/s. 144 of the Act. Prayers were made to restore the matter back to the file of Assessing Officer.

The Tribunal observed that the assessee had claimed that the assesseeis liable to tax u/s. 44AD of the Act since the turnover was below the threshold u/s 44AD, and the assessee’s income is also below the basic exemption limit, and hence the assessee was not liable to file income tax return and pay taxes.

The Tribunal further observed that both the orders passed by the authorities below were ex parte orders. Now, the assessee had come forward to explain its case. The additional evidences filed for the first time before the ITAT needed verification and onus is on the assessee to prove and substantiate that the assessee is in retail business, and is eligible to claim presumptive scheme of taxation u/s 44AD.

Accordingly, the Tribunal set aside the orders of the authorities below and the matter was restored back to the file of Assessing Officer for framing de novo assessment.

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