The Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, has recently in an appeal filed before it, held that addition under Section 68 and taxing under Section 115BBE cannot be invoked, when the assessee is not required to maintain the books of accounts.
The aforesaid observation was made by the Jodhpur ITAT, when an appeal was filed before it by the assessee, as against the order of the CIT(A), Ajmer, dated 05-06-2018 for the assessment year 2015-16.
The grounds of the assessee’s appeal being that, on the facts and circumstances of the case and in Law, the CIT(A), has erred in confirming the addition under section 68 of Rs.2,79,134/- and taxing at 30% under section 115BBE, ignoring the fact that such income is derived from profits of retail trade covered under section 44AD of the Act, hearing the contentions of either sides as presented by Shri Amit Surana, CA, on behalf of the assessee, and by Shri S.M. Joshi, the JCIT-DR on behalf of the Revenue and thereby perusing the materials available on record, the Jodhpur ITAT observed:
“We have heard the rival contentions and perused the materials available on record. We notice that the assessee is an individual and in engaged in the business of trading. The income of Rs.2,63,920/- declared in the ITR for the assessment year 2015-16 on 9-03-2017. The assessee offered the income under section 44AD of the Act on presumptive basis. The case of the assessee selected for scrutiny under CASS followed by service of notice under section 143(2) and 142(1) of the Act. Learned Assessing Officer carried the necessary enquiry about the income shown by the assessee u/s 44AD of the Act, called for the details of sundry debtors and creditors and the assessee being unable to satisfy on certain issues made additions which have been confirmed by the ld CIT(A) and now in dispute before us.”
“The assessee has offered income on presumptive basis under section 44AD of the Act is not required to maintain regular books of account. Ld. AO has not disputed the amount of revenue/gross receipt declared by the assessee by placing any contrary material. The details called for by the AO mainly include the sundry debtors and creditors. In this case, the assessee is not required to maintain proper books of accounts since he has opted for presumptive taxation under section 44AD of the Act. Under these given facts and circumstances of the case, firstly we fail to find any merit in the action of Ld. AO calling for the details of sundry creditors and further making addition u/s 68 of the Act for unexplained creditors of Rs.28,964/-. Section 68 of the Act comes into operation only where any sum is found credited in the books of the assessee maintained in the previous year and the assesseeofferes no explanation about the nature and source thereof or explanation offered by him, is not in the opinion of the AO satisfactory then such sum so credited may be charged to tax as income of the assessee. Since the assessee is admittedly not required to maintain the books of account, therefore, there is no basis for invoking the provision of section 68 of the Act. Thus, we delete the addition of Rs.28,964/- made for unexplained sundry creditors”, the ITAT added.
“As regards the invoking the provisions of Section 115BBE of the Act, we fail to find any merit in the action of the AO since in the instant case we have held that provision of Section 68 cannot be invoked as the assessee was not required to maintain the books of account. Since Section115BBE comes into operation only in case of income referred in Section 68/69/69A/69B/69C and 69D of the Act which is not applicable on the issues raisd in the instant case, therefore, there is no justification for invoking the provisions of Section 115BE of the Act”, the Coram of Khul Bharat, the Judicial Member and Manish Borad, the Accountant Member further observed.
Thus, the Jodhpur ITAT finally held:
“In the result, the appeal of the assessee is partly allowed.”
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