Facts of the Case

The assessee, Ram Bilash Sah, Supaul, filed his return of income for Assessment Year 2017-18 on 24.03.2018 declaring total income of ₹4,40,100 after claiming deduction under Chapter VIA. The return was filed under Section 44AD of the Income-tax Act declaring gross receipts of ₹54,96,132. The case was selected for scrutiny under CASS for verification of abnormal cash deposits during the demonetisation period. The Assessing Officer noted cash deposits aggregating to ₹33,56,000 in three bank accounts maintained with SBI and PNB during the demonetisation period. Due to alleged non-cooperation by the assessee and absence of supporting details, the Assessing Officer treated the said cash deposits as unexplained and made an addition under Section 69A of the Act. The CIT(A), NFAC, confirmed the addition holding that the assessee failed to substantiate the source of cash deposits.

Issues Involved

Whether cash deposits during the demonetisation period made by an assessee declaring income under Section 44AD can be treated as unexplained under Section 69A without examining the turnover declared, whether the assessee was required to maintain books of account, and whether verification should be carried out in light of CBDT instructions relating to demonetisation-period cash deposits.

Petitioner’s Arguments

The assessee submitted that he was engaged in the business of retail sale of fertilisers and seeds and had filed return under Section 44AD declaring income at 8 percent of turnover. It was argued that under the presumptive taxation scheme, the assessee was not required to maintain books of account. The assessee contended that the cash deposits represented business receipts out of declared turnover, supported by VAT returns, and that no defect was pointed out in the turnover reported. It was submitted that the authorities below failed to properly examine the issue in accordance with CBDT instructions issued for verification of demonetisation-period cash deposits.

Respondent’s Arguments

The Revenue supported the orders of the Assessing Officer and the CIT(A) and contended that the assessee failed to substantiate the source of cash deposits with cogent documentary evidence. It was argued that mere filing of VAT returns was insufficient to establish the genuineness of turnover and that abnormal cash deposits during demonetisation justified the addition under Section 69A.

Court Order / Findings

The ITAT Patna observed that the assessee had filed return under Section 44AD declaring turnover of ₹54,96,132 and that cash deposits of ₹33,56,000 were made during the demonetisation period. The Tribunal noted that the Assessing Officer had not examined the issue in light of the CBDT instructions and notifications issued for verification of demonetisation-period cash deposits. Considering the facts of the case and in the interest of justice, the Tribunal held that the matter required fresh examination. Accordingly, the issue relating to addition under Section 69A was remitted to the file of the Assessing Officer for fresh adjudication after considering the CBDT instructions and after granting reasonable opportunity of being heard to the assessee. The assessee was directed to substantiate his claim with cogent evidence and not to seek unnecessary adjournments.

Important Clarification

The Tribunal clarified that while presumptive taxation under Section 44AD relieves the assessee from maintaining books of account, the source of cash deposits during demonetisation must still be examined objectively in accordance with CBDT instructions, and additions cannot be sustained without proper verification.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The issue relating to addition of ₹33,56,000 under Section 69A of the Income-tax Act was restored to the file of the Assessing Officer for fresh examination in accordance with law after providing adequate opportunity of hearing to the assessee.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769148715_RAMBILASHSAHSUPAULVS.ITOWARD35SAHARSASAHARSA.pdf 

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