Presumptive tax : Civil construction business : S. 44AD of the Income-tax Act, 1961 : A.Y. 2005-06 : Assessment of income at 8% u/s.44AD : Assessee is not under any obligation to explain individual entry of cash deposit in bank, unless such entry has no n

[CIT v. Surinder Pal
Anand, 192 Taxman 264 (P&H)]

The assessee is in the
business of civil construction. For the A.Y. 2005-06, the income of the assessee
from civil construction business was computed at the presumptive rate of 8% of
the gross receipts u/s.44AD of the Income-tax Act, 1961. The AO made an addition
in respect of the cash deposited in the bank account during the year. On appeal,
the Commissioner (Appeals) held that the assessee was not required to maintain
regular books of account as the return had been filed u/s.44AD and the turnover
was below Rs.40 lakhs. It was also recorded that since the cash deposits in the
bank statement were lower than the business receipts shown by the assessee and
in the bank statement there were withdrawals as well as deposits, the addition
was unjustified. The Tribunal upheld the order of the Commissioner (Appeals).

On appeal by the Revenue,
the Punjab and Haryana High Court upheld the decision of the Tribunal and held
as under :

“(i) Ss.(1) of S. 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% of the gross amount 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 S. 28 to S. 43C. This
income is to be deemed to be the profits and gains of the said business
chargeable to tax under the head ‘Profits and gains of business or
profession’. However, the said provisions are applicable where the gross
amount paid or payable does not exceed Rs.40 lakhs.

(ii) Once under the
special provision, exemption from maintenance of books of account has been
provided and presumptive tax at the rate of 8% of the gross receipt itself is
the basis for determining the taxable income, the assessee is not under any
obligation to explain individual entry of cash deposit in the bank, unless
such entry has no nexus with the gross receipts.

(iii) In the instant case,
the stand of the assessee before the Commissioner (Appeals) and the Tribunal
that the amount in question was on account of business receipts had been
accepted. The Revenue could not show with reference to any material on record
that the cash deposits were unexplained or undisclosed income of the assessee.

(iv) Therefore, no
question of law arose from the Tribunal’s order and the Revenue’s appeal was
to be dismissed.”