India, Aug. 15 -- In a significant observation, the Income Tax Appellate Tribunal has held that all bank deposits under Section 44 AD cannot automatically be treated as taxable income, while stressing that authorities must determine their source and nature before making additions.

The ruling came in the case of a Surat fruit trader, who had opted for the presumptive taxation scheme under Section 44AD of the Income Tax Act. While the trader had declared a mere Rs.14.57 lakh in his Income Tax Return (ITR), the tax department assessed his income to be approximately Rs.5.09 crore, Navbharat Times reported. The amount he was allegedly assessed at was more than 34 times his declared income.

Section 44 AD provides a presumptive taxation system...