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4. That having regard to the facts and circumstances of the case and in any view of the matter Ld CIT (A) was unjustified and legally wrong to confirm the impugned additions of alleged credits U/s 69 of the Act."

2. The facts are that for the assessment year 2006-07, the assessee filed his return, income on 31/03/2007 in which taxable income is shown at Rs.1,98,457/-. The assessee has shown in his return income from contract business as per provisions of section 44AD of the income Tax Act. The case was selected for scrutiny. A notice u/s 143(2) as well as notice u/s 142(1) dated 13/05/2008 was served on the assessee. As per query No. 7 of the said notice, the assessee was asked to file balance sheet for the relevant assessment year and also complete names and addresses of all the debtors and creditors, if any. Since the assessee's turnover was below 40 lac and he was not maintaining any books of account, he filed on 06/08/2008, a balance sheet prepared on estimated basis. Vide order sheet entry dated 06/08/2008, the assessee was asked by the AO to clarify the source of the opening capital and to furnish confirmations for the unsecured loans shown in that estimated balance sheet. The assessee filed a revised estimated balance sheet, since certain discrepancies in the earlier estimated balance sheet had come to light. The assessee also filed confirmations for the unsecured loans from his father and mother, as appearing in the earlier estimated balance sheet.

4. The AO also made an addition of Rs.5,62,000/- U/s 69 of the Act towards wages and other expenses payable, on the ground that it was shown in the first balance sheet filed, which changed to Rs. 10,66,200/- in the revised balance sheet and the assessee did not furnish any evidence for such revision.

5. Before the ld. CIT(A), the assessee challenged all the additions. It was submitted that the additions made u/s 69 of the Act were wrong and illegal; that any addition u/s 68/69 was possible only when the books of account are maintained, but the assessee did not maintain any books, being covered under the presumptive scheme of taxation u/s 44AD of the Act; that the AO also did not ask the assessee to produce any books of account, but insisted on him to file the balance sheet; that the accountant, in the absence of proper and regular books of account, filed an estimated balance sheet to comply with the direction of the AO; that later on, when the assessee discovered some discrepancies, a revised balance sheet was also filed; that the AO was injudicious in making the additions on the basis of the first estimated balance sheet without any independent, corroborative and supporting evidence or material to support such various additions. The assessee also made specific submissions on each of the additions. The assessee also relied on certain decisions to support his argument that maintenance of accounts is a sine qua non for any addition u/s 68/69 of the Act.

8. The ld. Counsel for the assessee has contended that the Assessing Officer erred in making addition, u/s. 69 of the Act, of Rs.1,75,000/-, as sustained by the learned CIT(Appeals), in respect of alleged deposit from Smt. Usha Malhtora; that the Assessing Officer erred in making addition, u/s. 69 of the Act, of Rs. 5,16,000/-, sustained by the learned CIT(Appeals), in respect of alleged deposit from Mr. Mahesh Malhtora; that since income was computed u/s. 44AD, there was no justification for making addition u/s 69 Rs. 6,91,000/-; that since income was computed u/s 44AD, the Assessing Officer was not justified in compelling the assessee for filing the Balance Sheet; and that in the interest of justice, the assessment should not be based on balance sheet (estimate).

12. Now, once the addition is not sustainable under section 69, all questions raised by the AO or the ld. CIT(A) become otiose.

13. The impugned addition, being alleged as "unexplained cash credits", could only be made u/s 68 of the Act. However, Sec 68 stipulates that if any sum is found credited in the books of account maintained by the assessee and he offers no explanation, or his explanation is not found satisfactory, such sum could be deemed to be income of the assessee. In the present case, since the assessee's gross receipts were below Rs.40 lac, he has not been shown to maintain any books. The ld. CIT(A)'s observation in para 4.1.4 of his order, that there is no proposition in law for non maintenance of accounts for cases falling u/s 44AD, is incorrect. The provisions of sub section 5 of Sec. 44AD read with those of Sec. 44AA (2)(iv) statutorily mandate the maintaining of books of account for the cases filling u/s 44AD only when the net profit is less than 8%. In other words, where the case is covered by Sec 44AD, i.e., where the turnover is below Rs. 40 lacs and the declared net profit is 8% or more, no books of account are required to be maintained.