GHAMANDA RAM,MANDI V. INCOME TAX OFFICER, WARD MANDI

ITA 1334/CHANDI/2025

AI Insights

The case involves Shri Ghamanda Ram, the appellant, who is engaged in the trading of clothes under the name M/s Jalpa Cloth House. The dispute arose from the reassessment of his income for the assessment year 2017-18, where the AO treated a difference in reported turnover between the original and the reassessment returns as unexplained cash credit under Section 68 of the Income Tax Act. The Tribunal found that since the assessee was using the presumptive taxation scheme under Section 44AD, the AO's action of treating part of the deposits as cash credit was contrary to law. The Tribunal's decision emphasized the application of the presumptive taxation scheme correctly without arbitrary additions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829951 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Chandigarh
• Assessment Year: misc
• Appeal Filed On: 22-10-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: ATUL GOYAL
• Keywords: Set aside; Unexplained cash credit; Presumptive income
• Section: 148; 68; 44AD

Judgement Text

"आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘SMC’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 1334/CHD/2025 Ǔनधा[रण वष[ / Assessment Year : 2017-18 Shri Ghamanda Ram, Village & P.O. Kunnu, Tehsil – Padhar, Distt. Mandi (HP). Vs The ITO, Ward Mandi (HP). èथायी लेखा सं./PAN NO: AOOPR9300J अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Assessee by : Shri Atul Goyal, CA Revenue by : Shri Vivek Vardhan, Addl. CIT Sr. DR Date of Hearing : 15.01.2026 Date of Pronouncement : 16.01.2026 PHYSICAL HEARING O R D E R PER RAJPAL YADAV, VP The assessee is in appeal against the order of the ld. Commissioner of Income Tax (Appeals) in short ‘the CIT (A)’ dated 22.08.2025 passed for assessment year 2017-18. 2. The ld. counsel for the assessee seeks an adjournment, however, after going through the record, we are not inclined Printed from counselvise.com ITA No. 1334/CHD/2025 A.Y. 2017-18 2 to adjourn the hearing and with the assistance of ld. DR, we have gone through the record and heard the appeal on merit. 3. Though the assessee has taken 8 grounds of appeal, but his solitary grievance is that ld.CIT (Appeals) has erred in confirming the addition of Rs.15,35,900/- which was added by the AO u/s 68 of the Act on account of unexplained cash credit. 4. With the assistance of ld. DR, we have gone through the record carefully. It emerges out from the record that assessee has filed his return of income on 28.10.2017 declaring total income of Rs.1,76,750/-. Thereafter the assessment of the assessee was reopened by issuance of a notice u/s 148 on 28.03.2021. The AO was of the opinion that assessee has deposited cash which required to be examined. In response to notice u/s 148, assessee has filed fresh return of income. The AO has observed that in the original return, assessee has shown turnover at Rs.7,65,300/-, however, in the return filed u/s 148, this turnover has been shown at Rs.25,90,627/-. The assessee, at the relevant time was engaged in trading of clothes under the name and style of M/s Jalpa Cloth House. Printed from counselvise.com ITA No. 1334/CHD/2025 A.Y. 2017-18 3 He has offered his income u/s 44AD of the Act. In other words, assessee has offered his income under presumptive taxation on the gross turnover. The AO, instead of assessing the income of the assessee under Section 44AD observed that there is a difference in the turnover reported by the assessee in the regular return vis-à-vis return filed u/s 148. This difference was of Rs.18,25,327/-. Hence, he treated a sum of Rs.15,35,900/- as unexplained cash credit. 5. On due consideration of the above facts, we are of the view that once it has been accepted by the AO that assessee is trading in clothes, his return is to be accepted in Presumptive Taxation Scheme u/s 44AD. Then out of the turnover, he cannot treat part of deposits as cash credit. The assessee is not supposed to maintain books of account. He has to declare the turnover and then apply the profit rate applicable on that turnover u/s 44AD of the Act. Therefore, the steps taken by the AO are contrary to law. Accordingly, we set aside both the orders. The addition confirmed at Rs.15,35,900/- is deleted. However, the AO will re-calculate the taxable income of the assessee by applying a profit rate on Printed from counselvise.com ITA No. 1334/CHD/2025 A.Y. 2017-18 4 the gross turnover shown by the assessee in the return filed u/s 148. In other words, the rate of profit available u/s 44AD is to be applied on the sum of Rs.25,19,627/- instead of the turnover of Rs.7,65,300/- disclosed in the original return of income. The ld. AO shall recompute the income according to the above observation. 6. In the result, appeal of the assessee is allowed. Order pronounced on 16.01.2026. Sd/ -Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 5. गाडᭅ फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "