Income Declared Under 44AD Cannot Be Taxed Again Under Section 68:

 

Facts of the Case:
The assessee, a production supervisor working with a fashion designer, received ₹14.76 lakhs in professional fees (TDS deducted u/s 194J, reflected in Form 26AS).
However, she failed to file her return of income u/s 139(1) for AY 2015–16 within the due date.

The AO noticed based on the information:
Cash deposits and TDS entries in Form 26AS.

Reassessment was initiated u/s 148.
The assessee responded by filing the return under presumptive taxation u/s 44AD, offering 8% of gross receipts as income.

The AO rejected this and treated ₹14.73 lakhs as unexplained cash credits u/s 68, arguing:
– No books of account were maintained
– Income was from professional services (TDS u/s 194J)
– Identity/genuineness/creditworthiness not proved

Core Legal Issue:
Can income disclosed under Section 44AD be taxed again as unexplained cash credit u/s 68, particularly when no books of account are maintained?

Assessee’s Stand:
All receipts were disclosed and taxes paid under 44AD.
Applicability of Section 44AD vs 44ADA is not relevant for Section 68.
No books were maintained, and Section 68 requires entries in books — hence, the addition was invalid.

ITAT’s Ruling:
Section 44AD was rightly applied.
Books of account not maintained → Section 68 not applicable.
Addition of ₹14.73 lakhs under Section 68 was deleted.

Key Quote from ITAT:
“When the assessee has disclosed the receipts in the return and opted for presumptive taxation, the question of making an addition u/s 68 for the same receipts does not arise.”

In short, when income is offered under 44AD and no books are maintained, Section 68 cannot be invoked. This is a strong precedent in support of presumptive taxation compliance.

The copy of the order is as under:

1689330410-ITA 766 Mehjabeen Masood Khan@44AD @ CORRECTED FINAL