In a significant ruling, the Rajkot bench of the Income Tax Appellate Tribunal (ITAT) has held that as a relief to small taxpayers, maintaining books u/s 44 AD of the Income Tax Act,1961 is not required for small businesses and deleted the addition.
The A.O. reopened the case of assessee u/s 148 of the Income Tax Act on information that the assessee had deposited 18,66,000/- in his ICICI Bank account at the Porbandar Branch. The assessee claimed to have returned income on a presumptive basis on his business carried out as per the provisions of section 44AD of the Act.
The entire cash deposits were treated as unexplained and added to the income of the assessee as the assessee failed to furnish any evidence to prove the source of the cash deposit. CIT(A) upheld the findings of the A.O. as the assessee had been unable to substantiate the source of cash deposits from the turnover of his business.
It was evident that small businessmen were not required to maintain books of accounts as per Section 44AD of the Act and were difficult for the assessee to produce bills to substantiate his turnover in cash that too after a lapse of six years. The Tribunal held that the entire deposits of Rs. 18,66,000/- in cash in the bank can be safely attributed to the business receipts of the assessee only.
Ms Annapurna Gupta, Accountant Member and Shri TR Senthil Kumar, Judicial Member deleted the addition of Rs. 18,66,000/- on account of an unexplained cash deposit and the appeal filed by the assessee got allowed. The respondent was represented by Shri B.D. Gupta.
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