Books of Account & Vouchers are not required in 44AD return: ITAT Deletes Addition u/s 69A of Income Tax Act [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition under Section 69A of the Income Tax Act 1961, holding that the books of account and vouchers were not required in return filed under Section 44AD of the Income Tax Act.

A search & seizure operation on Faquir Chand Lockers and Vaults Pvt. Ltd. group of cases. The assessee’s Narendra Kumar Gupta’s locker No.237 was also covered under Section 132(1) of the Income-tax Act, 1961. On operation of locker no.237, cash was found and seized. On an enquiry in this regard, assessee submitted that some cash was from assessee’s proprietorship concern, Nelly Creations and the remaining cash was from trading of kirana items by Narender Kumar Gupta and Sons HUF. AO was not convinced with this explanation. He rejected the cash found said to be from Nelly Creation. He also rejected the claim from trading of kirana items by Narender Kumar Gupta and Sons HUF.

The Commissioner of Income Tax Appeals (CIT(A)), as regards the cash from Narender Kumar Gupta and Sons HUF, rejected the same on the ground that the return filed under Section 44AD of the Income Tax Act was an after-thought. He also took adverse inference that books and vouchers were not produced. Hence, he rejected the assessee’s plea in this regard. Therefore, he rejected the amount of cash seized of which pertained to Narender Kumar Gupta and Sons HUF and sustained addition under Section 69A of the Income Tax Act. 

As regards remaining cash, CIT(A) referred to assessee’s cash book and ledger. He found fault therein that sales in cash were very low and the expenditure incurred by the assessee was also very low. He noted that assessee had withdrawn cash in the months of July, September, October and November. He also found that it was not logical that the assessee withdrew the total amount from the bank and put it in the locker. Hence, he rejected this aspect also.

Gaurav Jain, appeared on behalf of the assessee and Subhra Jyoti, appeared on behalf of the revenue.

The two-member Bench of Shamim Yahya, (Accountant Member) and Astha Chandra, (Judicial Member) observed that as regards, the amount belonging to Narender Kumar Gupta and Sons HUF was concerned, it was noted that 44AD return had been submitted which had been accepted. The income, therefore, therein had been accepted. In such circumstances, there was no reason why the cash due of the income disclosed under Section 44AD of the Income Tax Act should not be accepted.

The bench set aside the impugned order holding that it was a settled law that books of account & vouchers were not required in 44AD return. Hence, adverse inference could not be taken that cash book & vouchers had not been maintained. The same income could not be taxed twice once in the hands of HUF and once again in the hands of the assessee.

To Read the full text of the Order CLICK HERE

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