In a significant ruling, the Rajkot bench of the Income Tax Appellate Tribunal (ITAT) in the recent ruling in the case of Mahesh K. Bhutiya Vs Income Tax Officer has struck down the addition for unexplained cash deposit for small taxpayers, opting for presmptive taxation u/s 44 AD of the Income Tax Act,1961.
Facts of the case:
The A.O. reopened the case of assessee u/s 148 of the Income Tax Act on information that the assessee had deposited 18,66,000/- in his ICICI Bank account at the Porbandar Branch. The assessee claimed to have returned income on a presumptive basis on his business carried out as per the provisions of section 44AD of the Act.
The entire cash deposits were treated as unexplained and added to the income of the assessee as the assessee failed to furnish any evidence to prove the source of the cash deposit.
CIT(A) upheld the findings of the A.O. as the assessee had been unable to substantiate the source of cash deposits from the turnover of his business against which appeal was preferred by the appellant before ITAT.
Order of ITAT: Deliberation and Ruling
It was evident that small businessmen were not required to maintain books of accounts as per Section 44AD of the Act and were difficult for the assessee to produce bills to substantiate his turnover in cash that too after a lapse of six years.
The ITAT stated that very small businessmen like the assessee for whom the law itself provides a convenient method for declaring their incomes by returning taxes on at a presumptive rate, thus doing away with the onerous requirement of maintaining books of account and other documents , noting that it acted as a detterent to such businessmen from declaring their income ,the Revenue is expected to take a considerate and holistic view on such matters and not waste its efforts and energies in making such paltry additions .
The Tribunal held that the entire deposits of Rs. 18,66,000/- in cash in the bank can be safely attributed to the business receipts of the assessee only.
Ms Annapurna Gupta, Accountant Member and Shri TR Senthil Kumar, Judicial Member deleted the addition of Rs. 18,66,000/- on account of an unexplained cash deposit and the appeal filed by the assessee got allowed.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
