Munijhar Vs ITO (ITAT Delhi)
Delhi ITAT: Presumptive Taxpayer Under Section 44AD Cannot Be Faulted for Absence of Cash Balance in Earlier ITRs; Demonetisation Addition Deleted
The Delhi ITAT deleted additions aggregating over ₹1.05 crore, holding that an assessee declaring income under the presumptive taxation scheme of section 44AD cannot be disbelieved merely because earlier ITRs did not disclose detailed cash balances or balance sheet particulars, when such disclosures were not statutorily required.
The Assessing Officer had made an addition of ₹45.98 lakh under section 69A, treating cash deposited during the demonetisation period as unexplained. The assessee explained that the deposits were made out of opening cash-in-hand of ₹82.92 lakh, duly supported by cash books for the preceding years. The Tribunal observed that, up to AY 2016-17, an assessee filing ITR-4 under section 44AD was not required to furnish detailed balance sheet items such as cash balances or sundry debtors. Therefore, the absence of such particulars in earlier returns could not be used to reject the cash book or treat the deposits as unexplained. The addition under section 69A was accordingly deleted.
The Tribunal also deleted the addition of ₹57.19 lakh made by treating the sale of agricultural land as short-term capital gains. It held that the assessee had produced a Tehsildar’s certificate and official correspondence showing that the land was situated beyond the prescribed municipal limits and was therefore not a capital asset under section 2(14). The Assessing Officer’s reliance on Google Maps was held insufficient to displace the official revenue records. Consequently, the profit on sale of the agricultural land was held to be exempt.
The ITAT further deleted the estimated addition of ₹2.92 lakh computed at 8% of ₹36.59 lakh as alleged business income. It accepted the assessee’s explanation that the bank credits represented sale proceeds of agricultural land and repayment of loans/advances, supported by sale deeds, confirmations, ledger accounts and income-tax records of the parties. The Tribunal held that business income cannot be estimated on mere conjectures without corroborative material showing that the credits represented business receipts.
Accordingly, the ITAT allowed the appeal in full and deleted all the additions.
FULL TEXT OF THE ORDER OF ITAT DELHI
