Facts of the Case

The assessee, Shri Ravinder Kumar, had not filed his Income Tax Return for AY 2010-11. Based on information received through the NMS system, the Assessing Officer identified cash deposits of ₹15,86,000 in the assessee’s bank account during the relevant period.

The case was reopened under Sections 147 and 148. Despite multiple notices under Section 142(1), the assessee failed to appear. Subsequently, a return declaring income of ₹1,26,999 under Section 44AD was filed.

Due to non-compliance, the AO completed assessment under Section 144 and added ₹15,86,000 as unexplained cash credit under Section 68, determining total income at ₹17,13,000.

Issues Involved

  1. Whether cash deposits in bank account can be treated as unexplained under Section 68.
  2. Whether the assessee can claim benefit of Section 44AD without substantiating business activity.
  3. Whether reassessment and best judgment assessment were valid in absence of compliance.
  4. Whether any substantial question of law arises under Section 260A.

Petitioner’s Arguments

  • Cash deposits were from sales of a kiryana (general store) business.
  • Income was declared under presumptive taxation scheme (Section 44AD @ 8%).
  • No requirement to maintain books of accounts or explain each cash entry.
  • AO did not provide sufficient opportunity to submit documents.

Respondent’s Arguments

  • Assessee failed to comply with repeated statutory notices.
  • No documentary evidence such as purchase bills, books of accounts, or proof of business was produced.
  • Cash deposits remained unexplained and were rightly added under Section 68.
  • Findings of AO, CIT(A), and ITAT were concurrent and factual. 

Court Findings / Order

The Delhi High Court dismissed the appeal and upheld the addition.

Key findings:

  • Assessee failed to produce any evidence supporting the claim of business income.
  • No purchase bills or books of accounts were furnished to establish nexus between cash deposits and sales.
  • Non-compliance with statutory notices justified best judgment assessment under Section 144.
  • Concurrent findings of fact by lower authorities cannot be interfered with.
  • No substantial question of law arose for consideration under Section 260A. 

Important Clarification by Court

  • Merely claiming benefit under Section 44AD does not exempt the assessee from explaining suspicious cash deposits when questioned.
  • The burden of proof under Section 68 remains on the assessee.
  • Absence of supporting documents breaks the nexus between cash deposits and business receipts.
  • Presumptive taxation cannot be used as a shield for unexplained cash credits.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:224-DB/SVN14012020ITA82020_151338.pdf

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