In a notable ruling, the Income Tax Appellate Tribunal ( ITAT ), Chennai Bench, upheld the assessment by the Income Tax Officer ( ITO ) estimating an income of 8% on gross receipts deposited in the savings bank account of the assessee under Section 44AD of the Income Tax Act, 1961.
The case pertains to Assessment Year 2013-14, where the assessee, a Branch Manager of CISB Facility Services Pvt. Ltd., had deposited ₹1.99 crore in cash into his Axis Bank savings account but failed to file an income tax return initially.
Upon receiving a notice under Section 148, the assessee declared ₹4.49 lakh as income, estimating it at 5% of the cash deposit as commission income from his services. However, the assessing officer (AO) rejected this calculation due to a lack of documentary evidence and instead assessed income at 8% of gross receipts under presumptive taxation.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The ITAT bench comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member), noted that the assessee could not provide sufficient documentation to substantiate his claim of earning 5% commission. Supporting the AO’s reliance on Section 44AD, which allows presumptive taxation for small businesses, the tribunal stated that the estimation at 8% was justified given the absence of evidence.
V. Karthick Krishnan, C.A represented the assessee whereas the respondent was represented by Babita, JCIT.
The appellate order noted that neither during the assessment nor during the appeal could the assessee validate his income computation. The Income Tax Appellate Tribunal Bench found no infirmity in the lower authorities’ conclusions, dismissing the appeal and affirming the addition of ₹13.04 lakh.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The Chennai ITAT thus directed income estimation at 8% of gross receipts for Suresh under Section 44AD of the Income Tax Act, emphasizing the importance of proper documentation in income tax assessments.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
