The tribunal contended that the assessee must prove their eligibility for the presumptive taxation scheme under section 44AD by providing evidence, as this scheme is intended to ease compliance for small taxpayers

The Ahmedabad bench of Income Tax Appellate Tribunal(ITAT) upheld the lower authorities’ decision to treat Rs. 21,51,200 as unexplained cash credit under Section 68, as the assessee failed to provide legitimate sources or proof of the cash deposits, despite attempting to claim the benefits of a presumptive taxation scheme under Section 44AD of the Income Tax Act,1961. Anish Rajnikant Shah,the appellant-assessee,  the Assessing Officer (AO) noticed a cash deposit of Rs.21,51,200/ in the assessee’s IDBI bank account. Since the assessee did not file a return of income for the assessment year(A.Y.) 2011-12  and the source of the deposit was unexplained, the assessment was reopened under section 147 of the Act. Following prior approval from the Principal Commissioner Of Income Tax (PCIT), a notice under section 148 was issued on 29.03.2018, but it was returned unserved. Ready to Grow? Choose a Course That Fits Your Goals! The AO issued statutory notice under section 142(1), during the reassessment proceedings, which the assessee did not comply with. A show cause notice(SCN) dated 30/10/2018 was issued asking why the cash deposit of Rs. 21,51,200 should not be treated as unexplained under section 68. The assessee then filed a return, paid Rs. 23,790 in tax, and claimed the cash was deposited over 8 years ago and could not be explained. The assessee proposed taxing 8% of the total cash and cheque deposits, amounting to Rs. 3,82,112. The AO rejected this and added Rs. 21,51,200 as unexplained cash credit under section 68, as the assessee could not prove the source or genuineness of the deposit. Ready to Grow? Choose a Course That Fits Your Goals! The assessee dissatisfied with the decision of the AO filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)]. The CIT(A) upheld the AO’s addition of Rs. 21,51,200 as unexplained cash credit under section 68. The CIT(A) observed that the assessee did not provide any documentary evidence supporting the claim that the cash deposits came from their fruit and vegetable business. The CIT(A) rejected the assessee’s claim of cash deposits from a fruit and vegetable business, noting the absence of a return of income under section 139, and insufficient evidence for the presumptive taxation scheme under section 44AD and dismissed the appeal. The assessee being aggrieved with the decision of the CIT(A) filed an appeal before the Tribunal. Ready to Grow? Choose a Course That Fits Your Goals! The tribunal noted that the assessee had not filed any Return Of Income(ROI)  for any assessment year prior to the aforementioned A.Y and for the impugned A.Y.,a return was filed only in response to the notice issued by the AO under section 148. The tribunal observed that the declared nature of the business was ‘Share Trading (code 0204)’, not trading in fruits and vegetables, upon reviewing the ITR filed by the assessee. The tribunal also contended that for availing presumptive scheme of taxation under section 44AD,the assessee must be engaged in an eligible business. The tribunal held that when an assessee benefits from a tax scheme such as section 44AD, they must fully prove their eligibility according to the scheme’s provisions. This requirement is reinforced by the Constitutional Bench judgment of the Hon’ble Supreme Court in Commissioner of Customs v. Dilip Kumar. Ready to Grow? Choose a Course That Fits Your Goals! The tribunal contended that despite the previous provisions of section 44AD(5) not requiring books of accounts, the assessee still needed to prove their eligibility and explain the cash deposits of Rs. 21,51,200. Since the assessee did not meet these requirements, the provisions of section 68 were correctly applied. A single bench of Ramit Kochar (Accountant Member) on reviewing both the sides dismissed the appeal as the assessee could not prove the sources or legitimacy of the cash deposits, and the authorities’ actions were deemed appropriate