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TMI Blog2020 (6) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer called for explanation for the debits and credit in the bank account of the assessee and directed to prepare a cash flow statement. Since there was no compliance for preparing the cash flow statement by the assessee, the Assessing Officer prepared the cash flow statement by including in application side may transactions. It was claimed by the assessee that these amounts included in application side of cash flow statements prepared by the A.O. are mainly business transaction / expenditure for which assessee had declared income u/s 44AD of the I.T.Act. However, cash deficiency of Rs. 11,52,273 was calculated by the A.O. and the same was added to the total income disclosed by the assessee. The relevant finding of the A.O. in making the addition of Rs. 11,52,273 reads as follow:- "5. Considering the above sources / expenses /investments by the assessee during the year under consideration, a fund flow statement is extracted to arrive at the deficiency in cash, if any, in assessee's hands to meet all outgoings as tabulated under: Para Ref. Source Rs. Para Ref. Application Rs. Amount offered as income after all expenses 4,46,224 4.a Investment in Mult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the higher rate of estimation has been given in the inflow side of the cash flow statement along with other receipts/income. If the assessee fails to establish the nexus between the cash inflow and cash out flow, the excess cash out flow remains unexplained between the cash inflow and cash out flow, the excess cash out flow remains unexplained which attracts the provisions of sections 69 to 69C. If the assessee has actually earned profit in excess of 25% of the turnover and the assessee has other sources/ receipts for meeting her investments/expenses, then the assessee should establish the nexus between the cash inflow and cash out flow. Intangible addition offered in the form of enhances business profit estimated cannot be as such treated as source of unexplained investment. [Reliance is placed on the ratio of decision of Prakash Tiwari Vs CIT (MP) 148 ITR 474 wherein it was held that additions is sustainable are made towards unexplained investments.] In this case, 25% of the turnover as net profit has been allowed which is a reasonable estimate. While arriving at the above cash flow, all other cash as well as clearing debits ft credits in the banks are considered as pertainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44AD of the I.T.Act is presumptive taxation scheme in order to ease the tax burden on small taxpayers and the assessee was eligible for declaring income u/s 44AD of the I.T.Act. Further it was submitted that the assessee was not maintaining any books of account as the same was not required when the income is declared u/s 44AD of the I.T.Act. It was contended that the A.O. called for the explanation for all the debits and credits in the bank account and had prepared the cash flow statement by including many business transactions in the debit side. Therefore, it was submitted that the A.O. wrongly arrived at the cash deficiency of Rs. 11,52,273 especially when income was declared on presumptive basis u/s 44AD of the I.T.Act. It was further contended that the issue in question is squarely covered by the orders of the Tribunal in the case of Nand lal Popil v. DCIT [ITA Nos.1161 and 1162/Chd/2013 - order dated 14.06.2016] and in the case of Shri Thomas Eapen v. ITO [ITA No.451/Coch/2019 - order dated 19.11.2019]. It was submitted that in view of the above two orders of the Tribunal, further additions are not required when income is declared u/s 44AD of the I.T.Act. 6. The learned Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 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. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." 7.1 In the instant case, the A.O. had prep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `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. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of assessee. If 8% of gross receipts are `deemed' income of the assessee, the remaining 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. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get then audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts." 7.3 Further, the Cochin Bench of the Tribunal in the case of Thomas Eapen v. ITO (supra), while deal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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