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April 3, 2021

When Cash Deposit is included in Turnover which is offered For Tax than addition will not be valid under Section 44AD

When Cash Deposit is included in Turnover which is offered For Tax than addition will not be valid under Section 44AD

Fact of the case

In the said case assessee is a proprietor of Mohan Dairy located in Tijara, Alwar and carrying diary business. As per the details available with the Department, it was found that the assessee had made cash deposit of Rs. 4,00,000/- during the F.Y 2010-11 relevant to A.Y 2011-12. As the assessee has not filed his return of income, the Assessing Officer recorded the reasons for reopening stating that the assessee’s income to the extent of Rs. 4,00,000/- has escaped assessment and notice u/s 148 was issued after seeking approval from the Competent authority. In response to the notice assessee filed his return of income declaring gross receipts of Rs. 14,56,230/- from his dairy business and declared 9.28% of gross receipt as income as per provisions of section 44AD of the Act. Besides this interest from bank and other miscellaneous income amounting to Rs. 18,138/- was also declared and the assessee declared total income to the tune of Rs. 1,53,300/- which was accepted by the Assessing Officer. At the same time, the Assessing Officer made an addition of Rs. 4,98,000/- towards cash deposits and Rs. 6,40,000/- towards credits in the bank account maintained by the assessee for which an appeal has been filed with the CIT(A) and hence, the present appeal.

Issue of the case

The issue under this case made under appeal is whether cash already offered as turnover for taxation purpose will be valid as an additional income under section 44AD of the Income tax act.

Court Observation

In view of Surinder Pal Anand case the High Court observed that Once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax @ 8% 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 Commissioner of Income-tax (Appeal) 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.”

The ITAT therefore find force in the contention so advanced by the lncome tax department that the source of cash and other deposits in the bank account is out of assessee’s dairy business and gross receipts thereof have already been offered in the return of income. In light of the aforesaid discussion, the addition so made by the Assessing officer is hereby directed to be deleted.


The ITAT therefore held that the addition made by the assessing officer is unnecessary and assessee is not liable for such addition and payment of tax on such additional income. Thus, the decision was made in favour of the assessee.

Read the ITAT Order from Below Link


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