TMI Blog2019 (11) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... n 44AD of the Act, he cannot be punished for not maintaining the same. From an analysis of section 44A we have already held that the assessee had not incurred the expenses to the extent of 92% of the gross receipts. Therefore, in the present case, the provisions of section 69A cannot be applied. Asking the assessee to prove to the satisfaction of the AO, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD 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, the AO could have made the addition under section 69A of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case. Applying the propositions of law laid down in the above case law lo the facts of the case on hand, we delete the addition in question. AO nor the CIT(A) have given any reason as to why the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed return of income for A.Y. 2015- 16 on 16/03/2017 declaring total income of ₹ 3,37,160/-. The assessment u/s. 143(3) of the I.T. Act was completed o 21/12/2017 by assessing the total income at ₹ 34,73,680/- after making the following additions: S.No. Item Amount Rs. Reason 1. Under section 68 of the Act 27,94,306 Unexplained cash deposit in Bank 2. Undisclosed profit 3,14,953 Profit on undisclosed sales 3. Interest income 27,265 Difference as per 26AS On examination of the bank account statements of the assessee at various banks, it was ascertained that total of credits in different banks during the year was reckoned at ₹ 94.,04,685/- Out of which a sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act cannot be applied to tax the unexplained deposits in the Bank. However, the same can be taxed under section 69A of the Act. According to the CIT(A), quoting of wrong section is not fatal to the addition made and hence, it was held that the unexplained deposits in the Bank account are assessable under section 69A of the Act. 6.1. The CIT(A) noticed that the assessee neither in the assessment proceedings nor in the appeal proceedings produced any evidence to prove that the deposits in the Bank account represent the business receipts. Further, the Assessing Officer excluded the business receipts to the extent the payments made by the assessee to pharmaceutical companies. According to the CIT(A), the onus is on the assessee and not on the Assessing Officer to prove the source of the credits in the Bank account. In view of the above discussion, it was held that the amount of unexplained deposit in the Bank account i.e. ₹ 27,94,306/- was assessable under section 69A of the Act and the Assessing Officer was directed to assess accordingly. 7. Against this, the assessee is in appeal before us. The Ld. AR submitted that the AO made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to consider the explanation rendered in the context of circumstance of each case. 7.2 Reliance was placed on the judgment of the ITAT Delhi Bench in the case of Shamsher Sigh Gill, Haridawr v ITO , Haridwar. The Ld. AR also relied on the view upheld by ITAT Cochin Bench in the case of A R Balakrishna Reddiar and Sons V ITO, Ward -1, Alleppey where it was held that if it is the case of AO that the credit entries appearing in the bank account are in respect of the transactions of the firm, then what will be assessable is the profit earned by the firm and not the entire amount as it is the nature of suppressed sales on the factum that the assesses is engaged in the business as a wholesale dealer of reputed companies. Further, the Ld. AR placed reliance on the judgment delivered by the Hon'ble Supreme Court in the case of Lakhmichand Baijanath v CIT where it was held that when an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business . In view of the above, the Ld. AR prayed that the addition of ₹ 27,94,306/- made in respect of total income should be deleted. 8. The Ld. DR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provides that where an assessce is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head profits and gains of business. However, the said provisions are applicable where the gross receipts paid or payable does not exceed ₹ 40 lakhs. 8. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it is quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation. 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, he cannot be punished for not maintaining the same. 9.5 Now coming to the argument of the learned D.R. that the addition has been made under section 69A of the Act, on which there is no bar under section 44AD of the Act, we are quite in agreement with the same. The only fetter provided under section 44AD of the Act are the applicability of provisions of sections 30 to 38 of the Act. The provisions of section 69A of the Act reads as under: Unexplained expenditure, etc.- Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explantation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assesses for such financial year; Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. 9.6 The crucial words in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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