Ishtiaq Ahmad Rather Vs ITO (ITAT Amritsar)
Conclusion: Addition of cash deposit under section 68 was not justified as the same could only be invoked if the taxpayer maintained books of accounts and assessee filed an income tax return under Section 44AD which did not require books of accounts.
Held: Assessee was engaged in retail trading of hardware and ceramics, filed a presumptive income return under Section 44AD for the assessment year 2016-17. AO found that assessee had deposited Rs.1195000 and Rs. 8658000 in the HDFC savings bank accounts. AO scrutinized and completed the assessment by adding Rs. 9853000 as unexplained cash deposits. Assessee challenged CIT(A) order before ITAT arguing that the cash deposits were part of the business income and they were adequately explained through sales. AO argued that the return was filed under the presumptive taxation scheme ( Section 44AD ) which allowed assessee to declare income on a presumptive basis without the requirement to maintain detailed books of accounts. Assessee contended that Section 68 could only be invoked where assessee maintained regular books of account, thus the addition made under Section 68 was invalid. It was held that Section 68 applies only when books of accounts are maintained. Therefore, the application of Section 68 was incorrect as assessee filed returns under Section 44AD. Tribunal found that the cash deposits were matched by equivalent withdrawals, and assessee was entitled to the telescoping benefit. Thus, the addition of Rs. 9,853,000 made under Section 68 was deleted and the penalty under Section 271(1)(c) was also deleted
