Mr. Bhaskar Joseph, Bangalore V. Income Tax Officer, Ward- 6(2)(2), Bangalore

ITA 1737/BANG/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9798 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 05-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV NULVI
• Keywords: Unexplained cash credit; Presumptive income; Unexplained expenditure; Business income; Search and seizure; Principle of natural justice; Question of law
• Section: 131; 68; 69; 28; 10; 44AD; 69C; 69A; 192; 13; 22; 20

Judgement Text

ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA No.1737/Bang/2019 Assessment Year: 2015-16 Mr. Bhaskar Joseph No.20, Krupa Sagar, 4 th N Block Dr. Rajkumar Road Rajajinagar Bangalore 560 010 PAN NO : AGBPJ6676L Vs. ITO Ward-6(2)(2) Bangalore APPELLANT RESPONDENT Appellant by : Sri Rajeev Nulvi, A.R. Respondent by : Sri Ganesh R. Ghale, A.R., Standing counsel for Revenue. Date of Hearing : 07.06.2022 Date of Pronouncement : 07.06.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against the order of CIT(A), Bengaluru-6 dated 18.1.2019 for the assessment year 2015-16. The assessee has raised following grounds of appeal:- 1. “The order of the Assessing Officer as well as the Commissioner of Income Tax (Appeals) is bad in law and against the facts and circumstances of the case. 2. On the fact and circumstances of the case and under the provisions of the law, the Assessing Officer has erred in passing the order without considering the principal of Natural Justice. 3. On the fact and circumstances of the case and under the provisions of the law, the Commissioner of Income Tax (Appeals) erred in ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 2 of 25 dismissing our grounds of appeal and sustaining the additions Rs.41,35,000-00 even though the additional evidence has been submitted to establish the identity of the person paid me the cash without establishing the fact that the submission of identity of the person who given me cash has been submitted. 4. Treating Rs.41,35,000-00 as unexplained cash credits. Under the provisions of the law Where any sum is found credited in the books of an assessee maintained for the previous year and the assessee offers no explanation about the nature and source thereof then the officer may treat it as unexplained cash credits but I have given full information regarding each and every cash credit in bank account and also the details of the concerned third parties. And The addition under Section 68 can be made on the basis of unexplained cash credit found in the books of the assessee, hence existence of books of an assessee is a condition precedent before an addition under Section 68 can be made but in my case I have declared income - u/ s.44AD and not maintained any books of accounts (this is also said in the assessment order against which I am appealing). Hence the additions made are not correct in view of the law. 5. Books of accounts must be of assessee himself and not of any other assessee (In Smt Shanta Devi v. CIT [1998] 171 ITR 532 (P&H)) and Bank Pass book is not books of account for the purpose of Section 68 (In CIT, Poona v. Bhaichand H. Gandhi 141 ITR 67 (Born.) but the additions of Rs.41,35,000-00 were made based on cash credit entries in my bank account and not my books of accounts. And hence the additions made are not correct in view of the law. And the Assessing Office would have used her quasi-judicial powers u/s 131 to compelling the witness or other party Ms. Classic Auto Motives to attend and give their statement, as I have stated so many times my inability to get the confirmation of the transaction from them and the Assessing Officer has not followed the interest of natural justice by not exercising her powers u/ s 131 to enforce the attendance of the concerned person. 6. For these and other reasons which may be adduced at the time of the hearing, the Appellant prays before this Honourable Bench to annul the order as it is void-ab-initio.” 2. At the outset, it is observed that there was a delay of 128 days in filing the appeal before this Tribunal. The assessee filed a petition accompanied with affidavit dated 8.12.2020 as follows:- ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 3 of 25 ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 4 of 25 2.1 The assessee also filed medical certificate confirming the health reason, which is as follows:- ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 5 of 25 3. I carefully gone through the affidavit and also the medical certificate furnished by the assessee. As per the affidavit assessee has received the Ld. CIT(A)’s order on 30.1.2019. The assessee is required to file the appeal before the Tribunal on or before 1.4.2019. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 6 of 25 However, the assessee filed appeal before this Tribunal on 6.8.2019. Thus, there was a delay of 128 days. The assessee explained that assessee was unwell till the end of July, 2019 and after recovery assessee contacted the auditor on 3.8.2019. After that Mr. Venkatachalam, assessee’s consultant filed appeal before this Tribunal on 6.8.2019. To support this, assessee filed medical certificate from Dr. Chikkalingaiah, MBBS, MD (Regd. No.17398 (KMC)) dated 28.7.2019, wherein he has stated that he advised the assessee to take 4 months rest from 1.3.2019. 4. The contention of the Ld. D.R. is that the medical certificate dated 28.7.2019 cannot be considered as valid certificate as this was given after lapse of period of sickness of assessee. Accordingly, he submitted that appeal may be unadmitted without condoning the delay in filing the appeal of the assessee. 5. I have heard the rival submissions and perused the materials available on record. In this case, admittedly, there was delay of 128 days in filing appeal before this Tribunal. The assessee filed petition along with medical certificate. The argument of the Ld. D.R. is that the medical certificate produced by assessee dated 28.7.2019, which is after expiry of the sickness period, wherein doctor has advised the assessee to take rest for 4 months from 1.3.2019. In my opinion, there is no error in producing such medical certificate by assessee. The doctor, being a professional not understanding the legal implications has given such certificate. The wordings therein cannot change the circumstances of the case. Admittedly, the assessee was sick and he was undergoing the treatment and doctor advised him to take rest for 4 months from 1.3.2019. I find that the assessee explained the delay with good and sufficient reasons and same to be condoned. Accordingly, I condone the delay and admit the appeal for adjudication. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 7 of 25 6. The main ground for consideration in this appeal is with regard to the sustaining of addition of Rs.41.35 lakhs as unexplained deposit u/s 68 of the Act. As per Ld. A.R.’s information, it is noticed by the AO that assessee deposited an amount of Rs.1,01,27,400/-in respect of SB account with Federal Bank Ltd., Rajaji Nagar branch, Bangalore on various dates. The assessee was asked to furnish the source for such deposits. The assessee has explained as follows:- 1. “On 23.09.2014 Rs.30,00,000/- cash has been deposited and source for this cash deposit is the Federal Bank Gold Loans of Rs.37,71,000/- availed and cash withdrawn and kept in the hand. 2. On 23.09.2014 Rs.7,00,000/- cash has been deposited and source for this cash deposit is the Federal Bank Gold Loans of Rs.37,71,000/- availed and cash withdrawn and kept in the hand. 3. O n 23. 09.2014 Rs.1, 60,000/- cas h has be en deposit ed and s ourc e for this c as h depos it is cash in hand out of s avings from pr ev iou s period ear nings . 4. O n 29.09. 2014 Rs.35,00,000/- cash has been depos ited and s ource for this cas h deposit is Cas h dire ctly deposited by M/s Classic Auto Motives, HBR, N agavara, Bangalore for purchasing the Audi-Q-7 Car through me from Mr.Ar vind Rathur out of the total amount payable of Rs.54 lakhs to the car vendor. 5. On 09.10.2014 Rs.11 lakhs cash has been deposited and source for this cash deposit is the Federal Bank Gold loans of Rs.27 lakhs availed and cash withdrawn on 07/10/2014 and savings from previous period earnings. 6. O n 30.10. 2014 Rs.13. 50 lakhs cas h has be e n deposited and sour c e for this cash de posit is the amount of Rs .13.50 Lakhs r e cei ved by o nline tr ansf e r from M/s C lassic Auto Motiv es to the sam e SB A/ c and cash w ithdr aw n on 15.10.2 014 and k ept in hand. 7. On 31.10.2014 Rs.2.974 lakhs cash has been deposited and source for this cash deposit is out of cash withdrawn from the same SB74/c on 31.10.2014. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 8 of 25 8. O n 25.11.2014 Rs. 2 0,000/- cash has be en deposite d and source for this cas h deposit is out of cash w ithdr aw al from the same SB A/ c on 31. 10 .2014" 7. The AO observed that as can be seen from the statement above, on 30.10.2014, there is a deficit cash balance of Rs.41,35,000/-. Out of this a sum of Rs.35,00,000 deposited on 29.9.2014, the source for which was explained by the assessee as cash deposited by M/s. Classic Auto Motives Bangalore. The assessee was asked to substantiate the genuineness of the transaction and confirmation from the party - M/s Classic Auto Motives. The assessee vide letter dated 18/09/2017 has stated as under: "For purchase of Audi-7 from Mr. Arvind Rathur„ M/s. Classic Moto Motives has directly deposited Rs.35.00 lakhs cash to my Bank account on 29.9.2014 and also transferred Rs.20 lakhs by 1VEFT to my Bank account on 31.10.2014 and as such the total amount received from M/s. Classic Auto Motives was Rs.55,00,000/- And I have transferred Rs.54.00 lakhs by RTGS to Mr.Arvind Rathur on 7.10.2014 for purchase of the aforesaid Audi Q-7 car for and on behalf of the M/s.Classic Auto Motives. And as such my profit out of the aforesaid transaction is Rs.1,00,000/- (Rs.55 lakhs - Rs.54 lakhs) and the same declared as my income under the head Income from other sources after deducting the relevant expenditure for the said transaction. Details of M/s. Classic Auto Motives . And in spite of my full effort also I could not get their PAN and confirmation letter from M/s. Classic Auto Motives." 7.1 Again the assessee was informed by the AO that for the cash deposit of Rs 35,00,000 AO had not received any confirmation from M/s Classic Auto Motives and the assessee was asked by a letter to show cause as to why the cash deposit of Rs . 35.00 lakhs should not be added ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 9 of 25 to . the total income as unexplained cash credits. In response to this, the assessee has replied as under: " I, J Bhaskar, holding PAN:AGBPJ6676L. would like to inform your good office that in continuation of my reply dated 18.09.2017 would further like to inform your good office that I have tried my level best to get the confirmation from M/s Classic Auto Motives regarding the car sale transaction but I could not get it and Mr Khali Sait of M/s Classic Auto Motives has informed me that they have received a notice regarding this transaction from your office and they have already replied for the same." 7.2 Though the assessee was given sufficient opportunity to establish the identity of the person who has deposited the cash of Rs 35.00 lakhs, credit worthiness and genuineness of the transaction, the assessee could not prove any' of the above. Even he could not get the PAN of the person who has deposited the cash and the confirmation. It is therefore established that the cash credits (deposits) found in the bank account of the assessee in M/s Federal Bank Ltd is unexplained and hence it is added to the total income of the assessee as unexplained cash credit. 8. Against this assessee went in appeal before Ld. CIT(A). Before Ld. CIT(A), assessee pleaded that assessee’s income has been assessed u/s 44AD of the Act. Once the income of the assessee is accepted under presumptive basis, the books of accounts of the assessee cannot be relied upon so as to make an addition u/s 68 of the Act. However, the Ld. CIT(A) observed as under: “4.7 To sum up, the cash deposits amounting to Rs.35 lakhs and Rs.11 lakhs are treated as the unexplained money of the appellant u/s 69A of the Act. The appellant has made various contradictory claims regarding the source of the . cash deposits as detailed in the foregoing paragraphs. He has proffered the unlikely explanation that he withdrew cash in large amounts and kept it with himself as he was afraid of banking fraud. Given that money is usually deposited for safe- ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 10 of 25 keeping with the banks, the appellant's explanation is hardly plausible and cannot be accepted. The total cash deposits during the period are to the tune of Rs.1,01,27,400/- which the appellant has sought to explain as utilised for purchase of a car costing, Rs.54 lakhs. As brought out in the preceding paragraphs, a total amount of Rs.46 lakhs is unexplained which accounts for almost the entire balance of the cash deposits. It appears that under the garb of facilitating the transaction of car purchase, on which the net income declared is only Rs.14,706/-(Rs. 1,00,000/- commission minus expenses claimed of Rs.85,294/-),the appellant has introduced his own unaccounted money in the form of cash deposits. The appellant has tried to seek shelter behind legal arguments that he was not required to maintain books of accounts ,being subject to presumptive taxation u/s 44AD and since the bank statement is not a book of account, no addition can be made u/s 68. However, as detailed above, the cash deposits of Rs.46 lakhs represent the unexplained money of the appellant and are to be brought to tax u/s 69A.” 9. I have heard the rival submissions and perused the materials available on record. There is no dispute that assessee’s income has been assessed u/s 44AD of the Act and determined the income at Rs.8,58,940/-. Thereafter, the AO made addition of Rs.35 lakhs towards unexplained cash deposit u/s 69 of the Act and Rs.6.35 lakhs towards negative cash balance in the books of accounts totalling Rs.41.35 lakhs. The contention of the Ld. A.R. is that once the assessee’s case falls under the provisions of section 44AD of the Act, no invocation of section 68 or 69/69A of the Act is permissible as that would defeat the purpose of presumptive taxation. For this purpose, he relied on the order of the Tribunal in the case of Shri Kokkarne Prabhakara in ITA No.1239/Bang/2019 for the assessment year 2013-14 dated 11.9.2020 specifically following paras:- “8. Coming to the addition of Rs.3 lakhs as unexplained income of the assessee, I am of the opinion that similar issue came up for consideration before the Coordinate Bench of the Tribunal in the case of Sri Girish V.Yalakkishettar vs. ITO in ITA Nos. 354 & 355/Bang/2019 dated 27/01/2020 wherein it was held as follows: ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 11 of 25 “7. I have heard the rival submissions and perused the material on record. The assessee has offered income u/s 44AD of the Act, being a small contractor and trader in shares and the turnover of the assessee is less than Rs.1 crore from the said business activity the income was offered u/s 44AD of the Act. The Assessing Officer not disbelieved the claim of the assessee to be assessed u/s 44AD of the Act. According to him, the assessee has not carried out any construction of building and Form No.26AS also have no details of contract receipts. According to him, the assessee has deposited cash into the bank account whenever there is a shortfall in cash for making payments towards share trading. This is a general observation made by the A.O. He had not brought on record any material to show that the assessee was not engaged in contract work and construction activities. In my opinion, when the assessee offered the income u/s 44AD of the Act, there is no necessity of maintaining any books of account by the assessee. It has given option to the assessee to offer the income under the presumptive basis and the same was opted by the assessee for the assessment year under consideration. The Assessing Officer is not entitled to make any guesswork and he has to make the assessment with reference to evidence and material brought on record. There must be something more than suspicion to support the assessment. A suspicion, however, strong may not take place for proof of evidence. The conclusion which are based on surmises and conjectures, cannot take place of proof. Therefore, the assessment made by the Assessing Officer, which are predominantly influenced by suspicion, cannot be upheld. In my opinion, mere surmises and conjectures that the assessee had deposited cash in bank account whenever there is cash shortage to make payment, cannot the basis for a predetermined approach without bringing any specific transactions or evidence brought on record by the Assessing Officer to support his version. If the Assessing Officer wants to assess the income of the assessee under normal procedure, heavy burden on him to bring on record necessary material to show that the assessee is not engaged in contract work of building construction. In the present case, there is only on the basis of suspicion, made an addition after accepting the income offered by the assessee on presumptive basis u/s 44AD of the Act, which cannot be upheld. Being so, the assessment of the assessee to be made u/s 44AD of the Act and the addition u/s 68 of the Act cannot be sustained. Section 44AD provides that where the assessee is engaged in eligible business as proprietor under that section, a sum equal to 8% of the gross receipts shall be deemed to be the profits and gains of such business. Section 44AD exempts the assessee from maintenance of books of accounts. Once the income of the assessee is accepted u/s. 44AD, now the question arises for our consideration is whether the Assessing Officer could make further additions towards various discrepancies in the books of accounts of the assessee. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 12 of 25 7.1 Section 44AD of the Act gives an option to the assessee to offer income on presumptive basis. These are special provisions. The assessee has opted for the same and offered to tax income at the rate of 8% of his turnover. The issue is whether, the Assessing Officer can examine statement of accounts in such cases, make additions towards undisclosed purchases, undisclosed expenditure, under valuation of closing stock etc. In our considered opinion such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis. The Haryana High Court in the case of CIT vs. Surinder Pal Anand [2010] 192 taxmann 264), had held as follows:- “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 Tribunal that the said amount of Rs.14,95,300 was on account of business receipts had been accepted. The Ld. AR 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. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 13 of 25 7.2 The Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, order dt. 14/06/2016, held as follows:- "9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be decided by us is whether accepting the case of the assessee as taxable under the presumptive taxation as provided under section 44AD of the Act, the Assessing Officer can make addition under section 69C of the Act making the cash flow statement provided by the assessee the basis of his addition. 10. Section 44 AD of the Act reads as under: "44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profit and gains of business or profession". (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.” 10. The provision of the above section are quite unambiguous to the effect that in case of an eligible business based on the gross receipts/total turnover, the income under the head ‘profits & gains’ of business shall be deemed to be @ 8% or any higher amount. The first important term here is 'deemed to be’ which proves that in such cases there is no income to the extent of such percentage, however, to extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it is quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 14 of 25 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it, which reads as under: "44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get them audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts.” 7.3 Now coming to the argument of the learned D.R. that the addition has been made under section 68 of the Act, on which there is no bar even though income offered under section 44AD of the Act, I am quite in agreement with the same. The only fetter provided under section 44AD of the Act are the applicability of provisions of sections 30 to 38 of the Act. The provisions of section 68 of the Act reads as under: “Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 15 of 25 Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.” 7.4 The crucial words in the said section for the purposes of present appeal are 'any previous year’ an A.O. has found any sum credited in the books of account of the assessee. But can I say on the facts and circumstances of the present case that the A.O. has found any sum credited in assessee’s books of account. Therefore, in the present case, the provisions of section 68 of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses. 7.5 Applying the propositions of law laid down in the above case law cited supra to the facts of the case on hand, I delete the addition in question. 7.6 Even otherwise, in the present case, the Assessing Officer found certain deposits as unexplained in the bank account of the assessee with ICICI Bank, Dharwad branch at Rs.9.16 lakh. In my opinion, when moneys are deposited in the bank account, the relationship that is constituted between the banker and the customer is one of the debtor and creditor and not of trustee and beneficiary. Applying this principle, the bank statements supplied by the bank to its constituent is only a copy of the constituent’s account in the books maintained by the bank. It is not as if the bank statements are maintained bythe bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. Therefore, the bank statements supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, nor a book maintained by the assessee or under his instructions. As such, addition u/s 68 of the Act of the amount entered only in the bank statements was not justified. My this view is fortified by the judgment of the Hon’ble Bombay High Court in the case of CIT v. Bhaichand H.Gandhi [141 ITR 67 (Bom.)] and also the judgment of the Hon’ble Allahabad High Court in the case of Smt.Sarika Jain v.CIT (407 ITR 254). The Hon’ble Allahabad High Court held that the Tribunal is not competent to sustain the addition u/s 69A of the Act after deleting the said addition made by the A.O. and confirmed by the CIT(A) u/s 68 of the Act, the entire order of the Tribunal stands vitiated in law. Being so, the amount found credited in the bank account of the assessee cannot be made an addition u/s ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 16 of 25 68 of the Act. Accordingly, I am inclined to delete the addition made u/s 68 of the I.T.Act.” 7.1 The same view was taken by the Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, order dt. 14/06/2016, held as follows:- "9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be decided by us is whether accepting the case of the assessee as taxable under the presumptive taxation as provided under section 44AD of the Act, the Assessing Officer can make addition under section 69C of the Act making the cash flow statement provided by the assessee the basis of his addition. 10. Section 44 AD of the Act reads as under: "44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profit and gains of business or profession". (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.” 10. The provision of the above section are quite unambiguous to the effect that in case of an eligible business based on the gross receipts/total turnover, the income under the head ‘profits & gains’ of business shall be deemed to be @ 8% or any higher amount. The first important term here is 'deemed to be’ which proves that in such cases there is no income to the extent of such percentage, however, to extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it is quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation. 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 17 of 25 it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub-section (5) of the said section will be applicable to it, which reads as under: "44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get them audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts.” 7.3 Now coming to the argument of the learned D.R. that the addition has been made under section 68 of the Act, on which there is no bar even though income offered under section 44AD of the Act, I am quite in agreement with the same. The only fetter provided under section 44AD of the Act are the applicability of provisions of sections 30 to 38 of the Act. The provisions of section 68 of the Act reads as under: “Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 18 of 25 (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.” 7.4 The crucial words in the said section for the purposes of present appeal are 'any previous year’ an A.O. has found any sum credited in the books of account of the assessee. But can I say on the facts and circumstances of the present case that the A.O. has found any sum credited in assessee’s books of account. Therefore, in the present case, the provisions of section 68 of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses. 7.5 Applying the propositions of law laid down in the above case law cited supra to the facts of the case on hand, I delete the addition in question. 7.6 Even otherwise, in the present case, the Assessing Officer found certain deposits as unexplained in the bank account of the assessee with ICICI Bank, Dharwad branch at Rs.9.16 lakh. In my opinion, when moneys are deposited in the bank account, the relationship that is constituted between the banker and the customer is one of the debtor and creditor and not of trustee and beneficiary. Applying this principle, the bank statements supplied by the bank to its constituent is only a copy of the constituent’s account in the books maintained by the bank. It is not as if the bank statements are maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. Therefore, the bank statements supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, nor a book maintained by the assessee or under his instructions. As such, addition u/s 68 of the Act of the amount entered only in the bank statements was not justified. My this view is fortified by the judgment of the Hon’ble Bombay High Court in the case of CIT v. Bhaichand H.Gandhi [141 ITR 67 (Bom.)] and also the judgment of the Hon’ble Allahabad High Court in the case of Smt.Sarika Jain v.CIT (407 ITR 254). The Hon’ble Allahabad High Court held that the Tribunal is not competent to sustain the addition u/s 69A of the Act after deleting the said addition made by the A.O. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 19 of 25 and confirmed by the CIT(A) u/s 68 of the Act, the entire order of the Tribunal stands vitiated in law. Being so, the amount found credited in the bank account of the assessee cannot be made an addition u/s 68 of the Act. Accordingly, I am inclined to delete the addition made u/s 68 of the I.T.Act.” 8.1 A similar issue also came up for consideration before the Cochin Bench of the Tribunal in the case of Thomas Eapen in ITA No. 451/Coch/2019 wherein it was held as follows:’ 9. We have heard the rival submissions ad perused the record. The assessee offered income u/s. 44AD, the assessee being a small trader in medicine. There is no dispute that the assessee falls under the provision of sec. 44AD since the turnover of the assessee is less than Rs. 1 crore from eligible business. The Assessing Officer also accepted that the assessee’s case falls under the purview of section 44AD and computed the income declared by the assessee at Rs.3,37,160/- and thereafter made addition towards undisclosed profit u/s. 68 of the Act. In other words, the Assessing Officer has not at all rejected the books of accounts of the assessee. Section 44AD provides that where the assessee is engaged in eligible business as proprietor under that section, a sum equal to 8% of the gross receipts shall be deemed to be the profits and gains of such business. Section 44AD exempts the assessee from maintenance of books of accounts. Once the income of the assessee is accepted u/s. 44AD, now the question arises for our consideration is whether the Assessing Officer could make further additions towards various discrepancies in the books of accounts of the assessee. 9.1 . Section 44AD of the Act gives an option to the assessee to offer income on presumptive basis. These are special provisions. The assessee has opted for the same and offered to tax income at the rate of 8% of his turnover. The issue is whether, the Assessing Officer can examine statement of accounts in such cases, make additions towards undisclosed purchases, undisclosed expenditure, under valuation of closing stock etc., The turnover declared by the asscssee is accepted by the revenue. In our considered opinion such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis. The Haryana High Court in the case of CIT vs. Surinder Pal Anand [2010] 192 taxmann 264), under identical circumstances had held as follows'.- “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 assessce 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 ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 20 of 25 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. assessee before the Commissioner of Income-tax (Appeals) and the Tribunal that the said amount of Rs.14,95,300 was on account of business receipts had been accepted. The Ld. AR 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. 9. In view of the above position, we are unable to hold that any substantial question of law arises in this appeal. 10. The appeal is dismissed." 9.2 The Chandigarh Bench of the Tribunal in the case of Nand Lal Popli vs. DC1T in ITA Nos. 1161 & 1162/Chd/2013, order dt. 14/06/2016, held as follows:- "9. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The issue to be decided by us is whether accepting the case of the assessee as taxable under the presumptive taxation as provided under section 44AD of the Act, the Assessing Officer can make addition under section 69C of the Act making the cash flow statement provided by the assessee the basis of his addition. 10. Section 44 AD of the Act reads as under: "44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profit and gains of business or profession". (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.” 10. The provision of the above section are quite unambiguous to the effect that in case of an eligible business based on the gross ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 21 of 25 receipts/total turnover, the income under the head ‘profits & gains’ of business shall be deemed to be @ 8% or any higher amount. The first important term here is 'deemed to be’ which proves that in such cases there is no income to the extent of such percentage, however, to extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of something which actually is not. Therefore, it is quite clear that though for the purpose of levy of income tax 8% or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation. 11. Putting the above analysis, in converse, it can be easily inferred that the same is also true for the expenditure of the assessee. If 8% of gross receipts are 'deemed' income of the assessee, the remaining 1 92% are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92% of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that the expenditure may be less than 92% or it may also be more than 92% of gross receipts. 12. Further, on the reading on the substantive part of the provision, it is quite clear that an assessee availing the benefit of such presumptive taxation can claim to have earned income @ 8% or above of the gross receipts. In that case, the provisions of sub- section (5) of the said section will be applicable to it, which reads as under: "44AD (5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in subsection (1) and whose total income exceeds the maximum amount which is not chargeable to income- tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB." 13. From the combined reading of sub-section (1) and sub-section (5), it is apparent that the obligation to maintain the books of account and get them audited is only on the assessee who opts to claim the income being less than 8% of the gross receipts.” 9.3 . Now, applying the above to the facts of the present case, we observe that the Assessing Officer, for making the impugned addition has stated that there was total deposit of Rs.94,04,685/- and the assessee has only explained Rs.66,10,379/- and Rs.27,94,306/- , being balance unexplained, which is a totally wrong premise. If the income component is estimated, how the expenditure component on the basis of said income can be considered to have ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 22 of 25 been ‘actually incurred’ and it is only presumption that an amount of 92% of gross receipts was incurred by the assessee as expenditure. We must also observe here that this is not a case, where the Assessing Officer has doubted the gross receipts or gross turnover of the assessee. In fact, accepting the same, estimating income @ 8% on the same at presumptive rate, he preferred to make further addition under section 68/69A of the Act. The argument of the learned D.R. that the turnover of the assessee has been doubted by the Assessing Officer is totally ill-found, in view of the same. 9.4 Further, it is a fact on record that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD of the Act. The section also does not put obligation on the assessee to maintain books of account, more so, in view of the fact that his income has been assessed as per section 44AD of the Act, he cannot be punished for not maintaining the same. 9.5 Now coming to the argument of the learned D.R. that the addition has been made under section 69A of the Act, on which there is no bar under section 44AD of the Act, we are quite in agreement with the same. The only fetter provided under section 44AD of the Act are the applicability of provisions of sections 30 to 38 of the Act. The provisions of section 69A of the Act reads as under “Unexplained expenditure, etc.- Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explantation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assesses for such financial year; Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 9.6 The crucial words in the said section for the purposes of present appeal are 'any financial year’ an assessee has incurred any expenditure. But can we say on the facts and circumstances of the present case that the assessee has incurred any expenses. From an analysis of section 44AD of the Act contained hereinabove, we have already held that the assessee had not incurred the expenses to the extent of 92% of the gross receipts. Therefore, in the present case, the provisions of section 69A of the Act cannot be applied. Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would also defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 23 of 25 presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses, the Assessing Officer could have made the addition under section 69A of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act. No such exercise has been done by the Assessing Officer in this case. 9.7 Applying the propositions of law laid down in the above case law lo the facts of the case on hand, we delete the addition in question. The Assessing Officer nor the CIT(A) have given any reason as to why the provisions of Section 44AD of the Act are not applicable to this case. This ground of appeal of the assessee is allowed.” 8.2 In view of the above decisions, I am of the opinion that once the assessment of the assessee was completed u/s. 44AD, there cannot be any application of sec. 68/69A of the I.T. Act. Being so, I direct the AO to delete the addition made by the AO and confirmed by the CIT(A) at Rs.3 lakhs. Thus, this ground of appeal of the assessee is partly allowed.” 10. On the other hand, Ld. D.R. submitted that the issue may be decided in favour of the department in view of the order of the Tribunal in the case of Karan Sharma in ITA No.465/Bang/2018 dated 22.2.2021 in which it was held as under: 4. We have heard both the parties and perused the material on record. Similar issue was decided by the Tribunal, SMC Bench, Bangalore in the case of Shri Girish V Yalakkishettar Vs. ITO in ITA Nos.354/Bang/2019 Dt.27.01.2020 and the Tribunal observed that the assessee offered income to tax on presumptive basis u/s. 44AD of the Act and even after addition made by the Assessing Officer towards unexplained deposit in Bank Account is Rs.36,26,000 in the A.Y. 2013-14 and Rs.9,16,300 in the A.Y. 2014-15 to the disclosed turnover, the turnover of the assessee is less than Rs.1 Crore. As such, the Tribunal observed that income of the assessee to be assessed u/s. 44AD of the Act. The expenditure to the extent of 92% of gross receipts to be considered and income of the assessee to be estimated at 8% of the gross receipts and there is no applicability of Section 68 or 69A of the Act. For this purpose, the Tribunal relied on the judgement of Allahabad High Court in the case of Smt. Sarika Jain Vs. CIT 407 ITR 254 and also Hon'ble Bombay High Court in the case of CIT Vs. Bhaichand H GAndhi 141 ITR 67 (Bom). However in the present case, the assessee declared meager turnover as per Section 44AD of the Act at Rs.3,53,740 and disclosed profit at 55.26% of this turnover arrived at Rs.1,95,480 vide Ack. No.256979350290711 and source was explained on same day i.e. dt.29.07.2011 vide Acknowledgement No.257315590290711 ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 24 of 25 wherein declared entire receipt of 100% of Rs.3,53,740 offered as income. Now if we added the unexplained deposit in Bank Account of the assessee at Rs.1,17,52,762, the total turnover will be at Rs.1,21,06,502 and the assessee will have go out of provision of Section 44AD of the Act since the turnover is more than Rs.1 Crore. As such, in our humble opinion, the ratio laid down by the judgement relied on by the ld. Counsel for the assessee in the case of Shri Girish V Yalakkishettar Vs. ITO (supra) and Sarka Jain Vs. CIT (supra) cannot be applied. Further there is no rule that when an amount is credited in the Bank Account, it must be taken as receipt from the business. Whether the amount of deposit added u/s. 68 or 69 is income from business or income from other sources depends on the evidence and explanation furnished by the assessee. If the deposits are found in the Bank account of the assessee and the explanation as to the nature and sources of the amount is rejected by the Assessing Officer, in such an occasion, the Assessing Officer is entitled to treat the deposit as ‘income from other sources’ and not as ‘business income’. It is merely because the assessee is running a business in which found certain unexplained deposit, it does not necessarily show that such deposits represented the suppressed business receipts and there would be no error of law in regarding unexplained deposits as income of the assessee from other sources. Unless there are strong reasons for connecting unexplained deposits with known source of income of the assessee, there will be no alternative to treating them as ‘income from other sources’. “ 11. In the present case, the assessee’s claim is that the assessee offered income u/s 44 AD of the Act on presumptive basis. I have carefully gone through the statement of income filed by the assessee before lower authorities. The receipt from the civil construction was shown at Rs.30,12,500/-. Thereafter, assessee declared profit at 8% on it which works out at Rs.2,41,000/-. The assessee also shown income from various other heads like income from house property, income from other sources and it is to be noted that the income from profit & gains only offered u/s 44AD of the Act. The other incomes not fall u/s 44AD of the Act. There are various inflow and outflow to the bank account from other sources of income also. Hence, it cannot be said that the assessee’s entire income is assessed u/s 44AD of the Act. In my opinion, the assessee bound to explain the various deposits into its bank account. The assessee not offered proper explanation to the source of deposit into bank account. ITA No.1737/Bang/2019 Mr. Bhaskar Joseph, Bangalore Page 25 of 25 Hence, in the interest of natural justice, I remit this issue to the file of AO for fresh consideration with the direction to the assessee to place necessary evidence to explain the source of bank deposits. Accordingly, this ground of the assessee is partly allowed for statistical purposes. 12. Next ground for our consideration is with regard to addition of Rs.6.35 lakhs on account of negative cash balance. Assessee has not offered any explanation other than stating that this was from past savings. In the absence of documentary evidence, I am not in a position to appreciate the argument of the assessee’s counsel. Accordingly, this ground of assessee is rejected. The addition made towards negative cash balance at Rs.6.35 lakhs is sustained. This ground of assessee is rejected. 13. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 7 th June, 2022 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 7 th June, 2022. VG/SPS 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