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2025 Supreme(Online)(ITAT) 2743
INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
SHRI WASEEM AHMED, ACJ, SHRI KESHAV DUBEY, J
PRAKASH PRAVEEN KUMAR BANGALORE – Appellant
Versus
INCOME TAX OFFICER WARD - 2(2)(3) BANGALORE – Respondent
ITA 636/BANG/2024
Sri Balram R Rao, A.R., Shri V. Parithivel, D.R.
The court ruled that without corroborative evidence, bank credits cannot be treated as unexplained investments, affirming the application of presumptive taxation under Section 44AD of the Income Tax Act.
Headnote:(A) Income Tax Act, 1961 - Sections 44AD and 69 - Assessment Year 2018-19 - Appeal against the order of CIT(A) dismissing the assessee's appeal for disallowance of income. The assessee, engaged in electrical contracting, declared income under presumptive taxation, but faced additions for undisclosed bank credits and investments. The court found the additions unsupported by evidence, ruling that mere bank credits do not constitute unexplained investments. (Paras 3.1, 6.1, 6.2, 6.3)
(B) Presumptive Taxation - Under Section 44AD, no detailed accounts are required if gross receipts are below Rs.2 Crore, and the profit chargeable to tax is a percentage of gross receipts. The court emphasized that the provisions of Section 44AD override other sections in such cases. (Paras 6.2, 6.3)
Facts of the case:
The assessee filed a return declaring an income of Rs.3,58,610 and was subjected to scrutiny due to guidelines, resulting in disallowances amounting to Rs.96,34,320. The CIT(A) upheld the assessment based on lack of substantiation by the assessee.
Findings of Court:
The court found no merit in the additions made by the AO due to lack of corroborative evidence, ruling that the income declared under presumptive taxation was valid.
Issues: The main issues were the legality of the additions made under Section 69 and the applicability of presumptive taxation under Section 44AD.
Ratio Decidendi: The court held that without evidence, mere bank credits cannot be deemed as unexplained investments, and reaffirmed the applicability of Section 44AD for presumptive taxation.
Result: Appeal allowed.
ORDER
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the Order of the learned CIT(A)/NFAC vide DIN and Order No. ITBA/ NFAC/S/250/2023-24/1062487523(1) dated 12.03.2024 for the Assessment Year (in short “AY”) 2018-19 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
2. The assessee has raised following grounds of appeal:
3. The assessee is an Individual who is engaged in the business of electrical contract works under the name & style of: M/S INDUSTRIAL SERVICES. During the year under consideration, the assessee has supplied and installed electrical works on contract basis to Government banks and other institutions. The assessee raised the invoice on actual contract work done, correspondingly the contractee party makes the payment after deducting the TDS u/s 194C.
3.1 For the year under appeal, the assessee has e-filed his return of income in ITR-4 on 30-07-2018 declaring total income of Rs.3,58,610/-. Thereafter, the case was selected under the guideline of the CBDT letter in F. NO.225/169/ 2019/ ITA -II, dated 5th September 2019. Under the above guidelines the case was selected with approval of PCIT / CIT on 28/09/2019, and accordingly notice under section 143(2) of the Act was issued by the Jurisdictional Assessing Officer, and it was served through e- filing account of the assessee on 28/09/2019, as well as an intimation issue of notice was served through SMS alert on the registered mobile number to the assessee on 28/09/2019 and the assessee replied the said notice on 08/10/2019. Thereafter notice u/s. 142(1) of the Act along with questionnaires were issued on and the assessee filed part responses time to time. However, the last questionnaires dated 16/04/2021 was not replied by the assessee. Eventually, a show cause notice (SCN) with the proposal of addition of Rs. 92,75,710/-, was issued on 20-4-2021, and the assessee did not respond due to covid Pandemic.
3.2 Thereupon, the A.O. has concluded the assessment proceedings by passing the impugned order u/s. 143(3) r.w.s. 144B of the Act, dated 22/04/2021 by making a solitary disallowance of Rs.96,34,320/- u/s 69 of the Act under various heads as stated below:
Total income as per ITR.....Rs.3,58,610/-
Undisclosed Bank Credits u/s 69...Rs.60,56,515/-
Undisclosed Investments u/s 69... Rs.20,09,195/-
Undisclosed Time Deposits u/s 69... Rs.12,10,000/-
3.3 Aggreived by the assessment completed u/s 143(3) r.w.s. 144B of the Act dated 22.4.2021 the assessee preferred an appeal before the ld. CIT(A)/NFAC. The ld. CIT(A) dismissed the appeal of the assessee on the ground that assessee has failed to substantiate the source and therefore, there is no merit in the ground raised by the assessee.
4. Before us, ld. A.R. of the assessee submitted that assessee is in the business of electrical contract work and filed his return of income u/s 44AD of the Act on presumptive basis. Therefore, the addition made u/s 69 of the Act is illegal and bad in law as the assessee is not required to maintain any books of accounts. Further, ld. AR submitted that the GST case was with regard to alleged availing of the input tax credit by showing bogus purchase which the assessee has categorically denied by appearing before the GST authority but the ld. AO on a wrong presumptions treated the assessee as bogus seller and had added once in the head of “Bank credits” of Rs.60,56,515/- and another as unexplained investment of Rs.20,09,195/- for issuing fake invoice. Further, the ld. A.R. of the assessee submitted that since the assessee has declared its income under presumptive basis, there is no scope of declaring fixed deposits in the return of income and further as the interest income during the financial year 2017-18 was not received and accordingly, the same has been declared in the next year.
5. The ld. D.R. on the other hand supported the orders of the authorities below.
6. We have heard the rival submissions and perused the materi
