INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Assessee did not file return of income, despite having huge deposits in bank account - AO treated entire cash deposited in assessee's bank account as income from undisclosed sources -

Assessee did not file return and pursuant to notice issued under section 148, she contended that she declared income under section 44AD. AO treated entire deposits in her bank account as income from undisclosed sources.Held: One very glaring feature from perusal of the bank account was that assessee was paying VAT and such entries were appearing all throughout the year on various dates. Payment of VAT does indicate purchase and sale of some goods, items or services. All said factors thus, went to show that some kind of business activity was carried out by assessee. If assessee showed income under section 44AD, which was presumptive basis for taxation and looking to the nature of bank account entries and regular cash deposits and withdrawals, it showed that assessee was doing some kind of business activities and preponderance of probabilities for such activities definitely went in favour of assessee. AO tacitly accepted business income by accepting the return of income from the same deposits. AO was directed to accept income shown in return of income as business income.