Where assessee files its return u/s 44AD, it is not under obligation to explain individual entry of cash deposit
DECIDED BY: HIGH COURT OF PUNJAB AND HARYANA , IN THE CASE OF: CIT v. Surinder Pal Anand, APPEAL NO: ITA No. 156 of 2010, DECIDED ON June 29, 2010
ADARSH KUMAR GOEL, J.
1. This appeal has been filed by the revenue under Section 60A of the Income Tax Act, 1961 (in short, “the Act”) against the order of the Income Tax Appellate Tribunal (ITAT) dated 29.05.2009 (Annexure A-3) for assessment year 2005-06 proposing the following substantial question of law:-
“Whether on the facts and in the circumstances of the case and in law the order of the ITAT is perverse in deleting the addition made by the Assessing Officer, holding that the cash credits were out of business receipts falling u/s 44AD when at no stage the assessee had filed any evidence to show the nature of business and the details of parties from whom so called contract receipts were received and also ignoring the fact of non-deduction of tax on these so called contract receipts.”
2. The assessee filed its return of income on 16.11.2005 declaring an income of Rs.1,40,120/-. The said return had been filed showing the business income of Rs.1,60,120/- under Section 44AD of the Act. The Assessing Officer did not accept the return and made an addition of Rs.14,95,300/- in respect of the cash deposited in the bank account during the year. On appeal, the Commissioner of Income-tax (Appeals) accepted the appeal of the assessee vide order dated 8.1.2009 (Annexure A-2) holding that the assessee was not required to maintain regular books of account as the return had been filed under Section 44AD of the Act as the turnover was below Rs.40 lacs. Unless the turnover was disputed, the addition made by the Assessing Officer was not justified. It was also recorded that since the cash deposits in the bank statement were lower than the business receipts shown by the assessee and in the bank statement there were withdrawals as well as deposits, the addition was unjustified. The relevant observations of the Commissioner of Income-tax (Appeals) are as under:-
“11. I have carefully considered the rival submissions. The main issue is in regard to the addition of Rs.14,95,300/- on account of the cash deposits. In appeal, the ld counsel filed the written submissions and it was explained that the assessee could not furnish a reply to the notices issued by the assessing officer as he remains on tour. It was tressed that the assessee has filed return u/s 44AD wherein the assessee need not maintain the books of accounts. It was explained that in the bank statement there was withdrawal as well as deposits. The assessing officer has made additions on account of entries credits in the bank statement and did not look into the withdrawals made by the assessee. It was explained that these are the business receipts and the assessee has already shown income of Rs.1,60,120/- i.e. 8% of the gross receipts of Rs.20 lacs. The total cash credits in the bank statement are lower than the business receipts shown by the assessee.
12. The non-compliance made by the assessee appears to be on account of his nature of work and having no fixed place of business. He remains on tour, etc. In fact, the notices sent by this office could also not be served on the assessee as he was not available. I am in agreement with the contention of the assessee that it is no account case and the return was filed u/s 44AD. The assessee is not required to maintain regular books of account if the turnover is below Rs.40 lacs and the assessee files return u/s 4AD. In view of these facts, the addition made by the assessing officer is deleted and this ground of the assessee is allowed.”
3. On further appeal, the ITAT upheld the order of the Commissioner of Income-tax (Appeals).
4. We have heard learned counsel for the appellant.
5. It was submitted on behalf of the appellant that since from the information available in respect of the cash deposit in bank account of the respondent-assessee, the total deposits made during the year amounting to Rs.14,95,300/- had been made in the said bank account, the assessee having failed to explain the source of the said amount, the addition made by the Assessing Officers was justified.
6. We have considered the submission of learned counsel for the appellant and do not find any merit in the same.
7. Section 44AD of the Act was inserted by Finance Act, 1994 w.e.f. 1.4.1994. Sub-section (1) of Section 44AD clearly provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8% of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in Sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head “profits and gains” of business. However, the said provisions are applicable where the gross receipts paid or payable does not exceed Rs.40 lacs.
8. Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax @ 8% 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 Commissioner of Income-tax (Appeal) and the ITAT that the said amount of Rs. 14,95,300/- was on account of business receipts had been accepted. Learned counsel for the appellant with reference to any material on record, could not show that the cash deposits amounting to Rs.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.