Rahimathulla Abdul Rahman Vs ITO (ITAT Chennai)
In the case of Rahimathulla Abdul Rahman vs ITO, the Income Tax Appellate Tribunal (ITAT) Chennai addressed the treatment of bank credits for income estimation under Section 44AD of the Income Tax Act. The case arose from a best judgment assessment for AY 2017-18, where the Assessing Officer (AO) estimated business income at 8% on Rs.119.80 lakh, the bank turnover, and added Rs.10.18 lakh as unexplained cash deposits during the demonetization period. While the Commissioner of Income Tax (Appeals) granted partial relief by excluding Rs.2.5 lakh from the cash deposit addition, the rest of the AO’s order was upheld, prompting the assessee to appeal further.
The ITAT observed that the assessee, engaged in iron and steel trading, had no maintained books of accounts, making Section 44AD presumptive taxation provisions applicable. It ruled that distinguishing between cash deposits and other bank credits lacked merit since the only source of deposits was business receipts. Consequently, the tribunal treated the entire bank credit of Rs.129.98 lakh as business receipts and recalculated income at 8% of this total, amounting to Rs.10.39 lakh. The appeal was thus partly allowed, modifying the tax computation while reinforcing the presumptive income principles under Section 44AD.
