HIKKLLU RANGAMUTHAIAH GOPAL ,BANGALORE V. INCOME TAX OFFICER, WARD-6(2)(1), BENGALURU

ITA 1735/BANG/2024

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The case involves an appeal by Hikkllu Rangamuthaiah Gopal against the order of the National Faceless Appeal Centre (NFAC), which upheld additions made by the Income Tax Officer (ITO) for the assessment year 2017-18. The additions were related to a cash deposit of Rs. 7,16,100 and a difference in turnover declared and gross receipt reported in Form 26AS. The ITO treated the cash deposit as unexplained money under section 69A and added it to the assessee's income. Additionally, the ITO added income on the contract receipts reported in Form 26AS. The CIT(A) partially relieved the assessee by adjusting the income estimated on the differential turnover amount but upheld the addition regarding the unexplained cash deposit. The Tribunal's decision focused on the application of section 44AD of the Income Tax Act, which allows for presumptive taxation and does not require detailed bookkeeping for eligible assessees.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315939 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Surinder Pal Anand (2010) 192 Taxman 264 (P&H HC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANESH R GALE; STANDING COUNSEL
• Assessee Lawyers: SRIPADA M; C.A
• Keywords: Business income; Presumptive income; FORM 26AS
• Section: 44AD; 28

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER ITA No.1735/Bang/2024 Assessment Year: 2017-18 Hikkllu Rangamuthaiah Gopal, No.61/192, 4th Cross KEC Colony, 1st Stage, Basaveshwarnagar, Bangalore. PAN – APQPG 3612P Vs. The Income Tax Officer, Ward – 6(2)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Sripada M, C.A Revenue by : Shri Ganesh R Gale, Standing Counsel for Department Date of hearing : 07.04.2025 Date of Pronouncement : 13.05.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 15/07/2024 in DIN No. ITBA/NFAC/S/ 250/2024-25/1066719298(1) for the assessment year 2017-18. 2. The issue raised by the assessee in ground Nos. 1 to 5 of its appeal memo are interconnected and pertains to the addition on account of cash deposit of Rs. Rs. 7,16,100/- and addition on account of difference in turnover declared and gross receipt reported in Form- 26AS. ITA No.1735/Bang/2024 Page 2 of 7 . 3. The relevant facts are that the assessee is an individual deriving income from contract business. The assessee for the year under consideration declared business income u/s 44AD of the Act at ₹ 11,76,722/- being 11.5% of gross business receipt of ₹1,02,32,798/- only. After claiming the deduction under chapter-VI-A of the Act, the assessee declared the taxable income of ₹9,81,490/- only. The return of income was selected for limited scrutiny to verify the correctness of contract receipts/fees and cash deposits in the bank. 4. During the assessment proceeding it was found that the assessee has made cash deposits of ₹7,16,100/- into Canara Bank Account No. 2529201001407. Likewise, it was noticed that as per Form 26AS the assessee during the year has received contract receipt of Rs. 1,18,51,890/-. Accordingly, the assessee was asked to explain the sources and genuineness of cash deposit as well as to substantiate whether the contract receipt reported in form 26AS has been offered to tax. The AO found that the assessee failed to make a reply to the notices issued to him. Hence, the AO, in absence of any explanation or reply from the assessee treated the cash deposit of Rs. ₹7,16,100/- as unexplained money under section 69A of the Act and added to the total income of the assessee. In addition, the AO also computed income on the contract receipt reported in Form 26AS at 10% i.e. 11,85,189/- and added to the total income. 5. The aggrieved assessee preferred an appeal before the learned CIT(A)/NFAC. ITA No.1735/Bang/2024 Page 3 of 7 . 6. The assessee during the appellate proceeding submitted that the cash deposit in the bank constitutes only 5.7% of the total turnover and the impugned cash deposit already included in the turnover on presumptive income as per section 44AD of the Act which has already been offered to tax. Therefore, making further addition of cash deposits independently will amount to double taxation of the same amount. 7. Regarding the addition of Rs. 11,85,189/- made on account of gross receipt as per form 26AS, the assessee contended that he has already offered business receipt of Rs. ₹1,02,32,798/- to tax therefore AO should have estimated the income only on the amount of difference between the gross receipt shown in form 26AS and the gross receipt offered to tax. Instead, the AO has estimated the income @ 10% on the entire receipt as per Form 26AS which is not justified and amounts to double addition. 8. However, the learned CIT(A) regarding the addition on account of cash deposit noted that the assessee has not furnished any documentary evidence such as cash book, bank statement analysis, or reconciliation between cash sales and cash deposits, substantiating that such cash deposit has been included in the gross turnover as offered under section 44AD of the Act. The Ld. CIT-A therefore upheld the addition made by the AO on account of cash deposits into the bank. 9. Regarding the addition of Rs. 11,85,189/- on account of gross receipts, as per Form 26AS, the learned CIT(A) accepted the assessee’s contention that the income should have been estimated only of the differential amount of Rs. 16,19,092/- (Rs. 1,18,51,890 - ₹1,02,32,798) ITA No.1735/Bang/2024 Page 4 of 7 . only. However, the learned CIT(A) noted that the assessee himself has declared business income @ 11.5% whereas the AO has estimated income @ 10% of the turnover. Accordingly, the learned CIT(A) estimated the income on the difference amount @ 11.5%. Hence the learned CIT(A) granted partial relief to the assessee restricting the addition to Rs. 2,42,864 only. 10. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 11. The Ld. AR before us filed the written submission running from pages 1 to 9 and contended that the deposit of cash in the bank has already been treated as part of the turnover while declaring the income under presumptive basis under section 44AD of the Act, accordingly the ld. AR contended that the same cannot be made subject to further addition. 12. On the other hand, the Ld. DR before us vehemently supported the order of the authorities below. 13. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, it is necessary to note that under section 44AD of the Act, an eligible assessee, declaring profits on a presumptive basis, is relieved from maintaining detailed books of accounts. In this regard, we draw support and guidance form the judgment of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Surinder Pal Anand reported in (2010) 192 Taxman 264 (P&H HC) where it was held that under section 44AD of the Act, the ITA No.1735/Bang/2024 Page 5 of 7 . assessee is not required to maintain books of account and income is computed on presumptive basis, therefore no addition is required to be made on account of cash deposits if the same is less than the turnover declared. The relevant observation of the Hon’ble High Court reads as under: 7. Section 44AD of the Act was inserted by the Finance Act, 1994 with effect from 1-4-1994. Sub-section (1) of section 44AD clearly provides that where an assessee is engaged in the business of civil construction or supply of labour for civil construction, income shall be estimated at 8 per cent, of the gross receipts paid or payable to the assessee in the previous year on account of such business or a sum higher than the aforesaid sum as may be declared by the assessee in his return of income notwithstanding anything to the contrary contained in sections 28 to 43C of the Act. This income is to be deemed to be the profits and gains of said business chargeable of tax under the head \"profits and gains\" of business. However, the said provisions are applicable where the gross receipts paid or payable does not exceed Rs. 40 lakhs. 8. Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax at the rate of 8 per cent of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts. The stand of the assessee before the Commissioner of Income-tax (Appeals) and the ITAT that the said amount of Rs. 14,95,300 was on account of business receipts had been accepted. Learned counsel for the appellant with reference to any material on record, could not show that the cash deposits amounting to Rs. 14,95,300 were unexplained or undisclosed income of the assessee. 13.1 Thus, aforesaid decisions of Hon’ble High Courts clearly establishes that merely because cash deposits are found in bank accounts, the same cannot be presumed as unexplained unless AO shows that the deposits are unrelated to the declared turnover. 13.2 In the present case, the AO proceeded to make the addition under section 69A of the Act purely due to non-filing of replies. However, the assessee’s claim that these cash deposits were out of ITA No.1735/Bang/2024 Page 6 of 7 . declared business receipts remains plausible in the context of gross turnover exceeding ₹1 crore. The addition made by the AO is not sustainable in the absence of a demonstration by the AO that the cash deposits were not sourced from the declared turnover and any adverse material to rebut assessee's claim. Accordingly, the addition of ₹7,16,100/- made under section 69A is directed to be deleted. 13.3 Coming to the issue of estimation of business income on the amount of difference in turnover declared by the assessee and turnover as per Form-26AS. At the outset, we note that the assessee himself has declared business income @ 11.5% on the gross receipt/turnover. The learned CIT(A) adopting the rate of the assessee has computed the income on the differential amount. Therefore, considering the facts and circumstances, we do not find any infirmity in the approach adopted by the learned CIT(A). Hence, the assessee’s ground of appeal on this issue is hereby dismissed. 14. In the result, the appeal of the assessee is hereby partly allowed. Order pronounced in court on 13th day of May, 2025 Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 13th May, 2025 / vms / ITA No.1735/Bang/2024 Page 7 of 7 . Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "