Commissioner Of Income Tax-Ii v. Surinder Pal Anand

ITA No. 156 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax-II Versus Surinder Pal Anand ITA No. 156 of 2010Date of Decision: 29.6.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dugga, Advocate for the appellant. ADARSH KUMAR GOEL, J. 1.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 (in short, “the Act”) against the orderof the Income Tax Appellate Tribunal (ITAT) dated 29.05.2009(Annexure A-3) for assessment year 2005-06 proposing the followingsubstantial question of law:- “Whether on the facts and in the circumstances ofthe case and in law the order of the ITAT is perversein deleting the addition made by the AssessingOfficer, holding that the cash credits were out ofbusiness receipts falling u/s 44AD when at no stagethe assessee had filed any evidence to show thenature of business and the details of parties from whom so called contract receipts were received andalso ignoring the fact of non-deduction of tax onthese so called contract receipts.” 2.The assessee filed its return of income on 16.11.2005declaring an income of Rs.1,40,120/-. The said return had been filedshowing the business income of Rs.1,60,120/- under Section 44AD ofthe Act. The Assessing Officer did not accept the return and made anaddition of Rs.14,95,300/- in respect of the cash deposited in the bankaccount during the year. On appeal, the Commissioner of Income-tax(Appeals) accepted the appeal of the assessee vide order dated28.1.2009 (Annexure A-2) holding that the assessee was not requiredto maintain regular books of account as the return had been filed underSection 44AD of the Act as the turnover was below Rs.40 lacs. Unlessthe turnover was disputed, the addition made by the Assessing Officerwas not justified. It was also recorded that since the cash deposits inthe bank statement were lower than the business receipts shown by theassessee and in the bank statement there were withdrawals as well asdeposits, the addition was unjustified. The relevant observations of theCommissioner of Income-tax (Appeals) are as under:- “11. I have carefully considered the rivalsubmissions. The main issue is in regard to theaddition of Rs.14,95,300/- on account of the cashdeposits. In appeal, the ld counsel filed the writtensubmissions and it was explained that the assesseecould not furnish a reply to the notices issued by theassessing officer as he remains on tour. It was stressed that the assessee has filed return u/s 44ADwherein the assessee need not maintain the books ofaccounts. It was explained that in the bankstatement there was withdrawal as well as deposits.The assessing officer has made additions on accountof entries credits in the bank statement and did notlook into the withdrawals made by the assessee. Itwas explained that these are the business receiptsand the assessee has already shown income ofRs.1,60,120/- i.e. 8% of the gross receipts of Rs.20lacs. The total cash credits in the bank statement arelower than the business receipts shown by theassessee. 12.The non-compliance made by the assesseeappears to be on account of his nature of work andhaving no fixed place of business. He remains ontour, etc. In fact, the notices sent by this office couldalso not be served on the assessee as he was notavailable. I am in agreement with the contention ofthe assessee that it is no account case and the returnwas filed u/s 44AD. The assessee is not required tomaintain regular books of account if the turnover isbelow Rs.40 lacs and the assessee files return u/s44AD. In view of these facts, the addition made bythe assessing officer is deleted and this ground of theassessee is allowed.” 3.On further appeal, the ITAT upheld the order of theCommissioner of Income-tax (Appeals). 4.We have heard learned counsel for the appellant. 12.The non-compliance made by the assesseeappears to be on account of his nature of work andhaving no fixed place of business. He remains ontour, etc. In fact, the notices sent by this office couldalso not be served on the assessee as he was notavailable. I am in agreement with the contention ofthe assessee that it is no account case and the returnwas filed u/s 44AD. The assessee is not required tomaintain regular books of account if the turnover isbelow Rs.40 lacs and the assessee files return u/s44AD. In view of these facts, the addition made bythe assessing officer is deleted and this ground of theassessee is allowed.” 3.On further appeal, the ITAT upheld the order of theCommissioner of Income-tax (Appeals). 4.We have heard learned counsel for the appellant. 5.It was submitted on behalf of the appellant that since fromthe information available in respect of the cash deposit in bank accountof the respondent-assessee, the total deposits made during the yearamounting to Rs.14,95,300/- had been made in the said bank account,the assessee having failed to explain the source of the said amount, theaddition made by the Assessing Officers was justified. 6.We have considered the submission of learned counsel forthe appellant and do not find any merit in the same. 7.Section 44AD of the Act was inserted by Finance Act, 1994w.e.f. 1.4.1994. Sub-section (1) of Section 44AD clearly provides thatwhere an assessee is engaged in the business of civil construction orsupply of labour for civil construction, income shall be estimated at 8%of the gross receipts paid or payable to the assessee in the previousyear on account of such business or a sum higher than the aforesaidsum as may be declared by the assessee in his return of incomenotwithstanding anything to the contrary contained in Sections 28 to43C of the Act. This income is to be deemed to be the profits and gainsof said business chargeable of tax under the head “profits and gains” ofbusiness. However, the said provisions are applicable where the grossreceipts paid or payable does not exceed Rs.40 lacs. 8.Once under the special provision, exemption frommaintaining of books of account has been provided and presumptive tax@ 8% of the gross receipt itself is the basis for determining the taxable ITA No. 156 of 2010 income, the assessee was not under obligation to explain individualentry of cash deposit in the bank unless such entry had no nexus withthe gross receipts. The stand of the assessee before Commissioner ofIncome-tax (Appeal) and the ITAT that the said amount ofRs.14,95,300/- was on account of business receipts had beenaccepted. Learned counsel for the appellant with reference to anymaterial on record, could not show that the cash deposits amounting toRs.14,95,300/- were unexplained or undisclosed income of theassessee. 9.In view of the above position, we are unable to hold thatany substantial question of law arises in this appeal. 10.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE June 29, 2010gbs (AJAY KUMAR MITTAL)JUDGE