Case Law Details
Sri. Girish V.Yalakkishettar Vs ITO (ITAT Bangalore)
Section 44AD of the Act gives an option to the assessee to offer income on presumptive basis. These are special provisions. The assessee has opted for the same and offered to tax income at the rate of 8% of his turnover. The issue is whether, the Assessing Officer can examine statement of accounts in such cases, make additions towards undisclosed purchases, undisclosed expenditure, under valuation of closing stock etc. In our considered opinion such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis.
Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax at the rate of 8 per cent of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts. The stand of the assessee before the Commissioner of Income-tax (Appeals) and the Tribunal that the said amount of Rs.14,95,300 was on account of business receipts had been accepted. The Ld. AR with reference to any material on record, could not show that the cash deposits amounting to Rs.14,95,300 were unexplained or undisclosed income of the assessee.
The crucial words in the section 68 for the purposes of present appeal are ‘any previous year’ an A.O. has found any sum credited in the books of account of the assessee. But can I say on the facts and circumstances of the present case that the A.O. has found any sum credited in assessee’s books of account. Therefore, in the present case, the provisions of section 68 of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses.
Applying the propositions of law laid down in the above case law lo the facts of the case on hand, I delete the addition in question. The Assessing Officer nor the CIT(A) have given any reason as to why the provisions of Section 44AD of the Act are not applicable to this case. This ground of appeal of the assessee is allowed.
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