Presumptive taxation does not bar Sec 68 additions: Mumbai ITAT
ITAT Mumbai Recently have given a ruling that says that presumptive taxation does not bar Sec 68 additions. It was in the case of Hemant Shah HUF (ITA No. 4516/MUM/2024).
Let us have a short review of the case.
Facts:
1. The assessee filed ROI under Section 44AD, declaring presumptive income.
2. The case of the assessee was reopened under Section 148, based on DRI & Insight Portal findings related to accommodation entries and bogus purchases from Namo Diamonds Pvt. Ltd., allegedly linked to Antique Exim Pvt. Ltd.
3. AO made an addition of ₹53,09,550 under Section 68, treating the purchases as fictitious since the seller entity was not found at the given address.
4. Assessee maintained that Section 44AD has a non-obstante clause. No addition can be made under Section 68 when presumptive taxation is opted, as no books of account are required to be maintained.
5. The assessee also claimed that payment for purchases was made via banking channels in the subsequent year, which was not verified by the AO.
ITAT Mumbai held as below:
1. Neither in section 68, nor in section 44AD, there is an express prohibition that an addition relating to cash credit cannot be made where appellant opts for presumptive taxation method.
2. The assessee did maintain books, invoices, bank statements, etc., and had in-fact produced the same, contradicting the usual 44AD stance of no books maintained.
3. The matter is remanded to the AO to verify, genuineness of banking channel payments for the alleged purchases and corresponding sales of diamonds and full trail of transactions.
4. Recent Bombay HC judgment in PCIT vs. Buniyad Chemicals Ltd (19.03.2025) to be considered by AO during re-verification.
Conclusion:
This ITAT order seems to be at odds with atleast these judgments:
CIT v Surinder Pal Anand [2010] 192 Taxman 264 (P&H); CIT v Pradeep Shantilal Patel [2014] 42 taxmann com 2/221 Taxman 436 (Guj): Nand Lal Popli v DCIT [2016] 71 taxman com 246/160 ITD 413 (Chd.-Trib.); Thomas Eapen v ITO [2020] 113 taxmann com 268/180 ITD 741 (Cochin-Trib.)].
However the facts of this case are entirely different and each case needs to be studied independently without reaching to any judgement.
The copy of the order is as under:
