Ghamanda Ram Vs ITO (ITAT Chandigarh)
Presumptive Taxation Overrides Section 68 – ITAT Chandigarh Deletes ₹15.36 Lakh Cash Credit Addition and Directs Re-Computation Under Section 44AD
The Chandigarh Bench of the ITAT allowed the assessee’s appeal for AY 2017-18 and deleted the addition of ₹15.35 lakhs made u/s 68, holding that once income is assessed under the presumptive scheme u/s 44AD, no part of turnover or deposits can be separately treated as unexplained cash credits.
The assessee, a small cloth trader, had originally declared turnover of ₹7.65 lakhs and later, in response to notice u/s 148, declared higher turnover of ₹25.90 lakhs and offered income under section 44AD. The Assessing Officer, instead of applying presumptive taxation on the revised turnover, treated the difference in turnover (₹18.25 lakhs) and a part thereof (₹15.35 lakhs) as unexplained cash credit u/s 68, which was confirmed by the CIT(A).
The Tribunal held that:
- The AO had accepted that the assessee was engaged in genuine trading business.
- Once income is declared under section 44AD, the assessee is not required to maintain books, and deposits forming part of turnover cannot be examined under section 68.
- The correct course was to apply presumptive profit rate on the revised turnover, and not to split deposits and treat them as unexplained credits.
Accordingly, the ITAT deleted the entire addition of ₹15.35 lakhs u/s 68 and directed the AO to recompute income by applying the profit rate u/s 44AD on the revised turnover of ₹25.19 lakhs, instead of the lower turnover shown in the original return.
