Case Law Details
Dipyaman Dutt Vs ITO (ITAT Kolkata)
The appeal before the ITAT Kolkata concerned addition of ₹36,62,530 sustained by the CIT(A) out of total cash deposits of ₹68 lakh made during AY 2014-15. The assessee, engaged in catering business under a valid trade license issued by Kolkata Municipal Corporation, had filed return under Section 44AD declaring turnover of ₹65,68,500 and profit of ₹5,56,133 at 8% on presumptive basis, without maintaining books of account. The Assessing Officer treated the entire ₹68 lakh cash deposits as unexplained income. On appeal, the CIT(A) granted partial relief by deleting ₹31,37,470 based on debit entries but sustained the balance addition. The Tribunal held that once income is declared under Section 44AD, no further addition can be made in respect of individual cash deposits, as the assessee is not required to explain each entry. Relying on judicial precedent, the Tribunal set aside the CIT(A)’s order and directed deletion of the addition. The assessee’s appeal was allowed.
Facts of the Case:-The assessee was engaged in the business of catering and held a valid trade license issued by the Kolkata Municipal Corporation. For Assessment Year 2014–15, the assessee filed his return of income under Section 44AD declaring total turnover of ₹65,68,500 and offering income at 8% amounting to ₹5,56,133 on presumptive basis. No books of account were maintained as permitted under the presumptive scheme.
During the year, the assessee deposited cash of ₹68,00,000 in his bank account. The Assessing Officer required the assessee to explain the source of the cash deposits. Not being satisfied with the explanation, the AO added the entire sum of ₹68,00,000 as unexplained income.
In appeal, the Ld. CIT(A) granted partial relief by deleting ₹31,37,470 on the basis of corresponding debit entries in the bank account but sustained the balance addition of ₹36,62,530.
The assessee challenged the sustained addition before the Tribunal.
Statutory Provision Involved
The matter revolved around Section 44AD of the Income-tax Act, 1961, which provides for presumptive taxation for eligible businesses. Under this section, an assessee can declare income at 8% (or the applicable prescribed rate) of gross receipts without maintaining books of account, and such income is deemed to be the profits and gains of business.
The scheme dispenses with the requirement of maintaining detailed books and relieves the assessee from explaining individual business transactions once income is declared at the prescribed presumptive rate.
ITAT Findings:-The Tribunal observed that the assessee was engaged in a legitimate catering business and was operating under a valid municipal trade license. It was undisputed that the assessee had opted for the presumptive scheme under Section 44AD and had declared income at the prescribed rate on disclosed turnover.
The Tribunal held that once the assessee opts for presumptive taxation under Section 44AD and declares income accordingly, there is no obligation to explain each and every cash deposit in the bank account, particularly when the deposits are claimed to be business receipts.
The Tribunal found that the Ld. CIT(A) failed to properly appreciate the legal effect of Section 44AD and erred in sustaining part of the addition despite the assessee having offered income on presumptive basis. It was further noted that the addition was largely made due to alleged non-compliance, without disproving the business activity or turnover declared.
Accordingly, the Tribunal held that no separate addition could be made once income had been declared under Section 44AD.
Cases Relied Upon:-The Tribunal relied upon the judgment of the Punjab and Haryana High Court in the case of CIT-II v. Surinder Pal Anand, wherein it was held that once income is declared at the presumptive rate under Section 44AD, the assessee is not required to explain each individual cash entry in the bank account.
Outcome:-The Tribunal set aside the order of the Ld. CIT(A) and directed the Assessing Officer to delete the entire addition. The appeal of the assessee was allowed in full.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 19.11.2025 for the AY 2014-15.
2. The only issue raised by the assessee in the grounds of appeal is against the confirmation of addition of ₹36,62,530/- by the ld. CIT (A) as made by the ld. AO in respect of cash deposits during the year.
3. The facts in brief are that the assessee filed the return of income on 12.02.2014, which was processed u/s 143(1) of the Act. the case of the assessee was selected for scrutiny and the notice u/s 143(2) and 142(1) of the Act, along with questionnaire were duly issued and served upon the assessee. The assessee furnished before the ld. AO all the details and information as called for. During the year the assessee deposited cash of ₹68 lacs in his bank account. Accordingly, the AO called upon the assessee to explain the same. The assessee is engaged in the business of catering and was duly issued trade license by Kolkata Municipal Corporation, a copy of which is available at page no.9 of the Paper Book. The assessee has filed the return of income u/s 44AD of the Act. The reply of the assessee did not find favour with the AO and he added the entire cash deposit of ₹ 68,00,000/- to the income of the assessee on the ground that the assessee could not satisfactorily explain the source.
4. In the appellate proceedings lde. CIT(A) after taking into account the evidences and submissions of the assessee , partly allowed the appeal by deleting the addition to the tune of ₹ 31,37,470/-.
5. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is running a catering business under trade license in the name of CRUMBILICIOUS-DIPYAMAN DUTT No. 0062576 for F.Y. 2013-14 dated 17.06.2023. During the year, the assessee disclosed total turnover of ₹65,68,500/- and returned a profit of ₹5,56,133/- u/s 44AD of the Act on presumptive basis. The assessee is not maintaining any books of accounts. The ld. CIT (A) has allowed the relief to the assessee only to the extent of debit entries in the bank account of the assessee, however, the ld. CIT (A) failed to appreciate the fact that the assessee has filed the return of income on presumptive basis and this is also undisputed that the assessee is engaged in the business of catering etc. under proper trade license issued by Municipal Corporation, Kolkata. The assessee submitted before us that the money was received from the business in the ordinary course of business and therefore, the ld. CIT (A) has not appreciated the fact correctly and only deleted the addition to the tune of ₹31,37,470/- based upon debit entries in the bank account as against the total disallowance and addition made by the ld. AO of ₹68 lacs. Therefore, the order passed by the ld. CIT (A) partly sustaining the addition is not reasonable and cannot be sustained. Moreover, the assessee already disclosed the profit rate at the rate of 8% on the gross receipts. Consequently, we are not in concurrence with the conclusion drawn by the order of ld. CIT (A) sustaining the addition especially for the reason that the assessee has filed the return of income u/s 44AD of the Act, which has been overlooked by the ld. Commissioner of Income-tax (Appeals).
6. In our opinion, once the assessee has opted the presumptive scheme and offered the income u/s 44AD of the Act, no other addition can be made. The case of the assessee is squarely covered by the decision of Punjab and Haryana High Courtin case of Commissioner of Income-tax-II vs. Surinder Pal Anand [2010] 192 Taxman 264 (Punjab & Haryana)/[2011] 242 CTR 61 (Punjab & Haryana)[29-06-2010], wherein it has been held that once the assessee has shown the income at the rate of 8% u/s 44AD of the Act then there is no obligation to explain each and every entry of cash deposit in the bank account. We also note that the addition has been made by the ld. AO merely on the ground that there was non-compliance on the part of the assessee. Under these circumstances, we are inclined to set aside the order of the ld. CIT (A) and direct the ld. AO to delete the addition.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.02.2026.
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