2020 (5) TMI 454 - AT - Income Tax

Appeal Dismissed: ITAT upholds AO's assessment under Section 44AD for A.Y. 2010-11

Unity Automation Solution Ltd. Versus ITO Ward-27 (1) New Delhi

The ITAT Delhi dismissed the appeal challenging the assessment order for A.Y. 2010-11, upholding the Assessing Officer's application of Section 44AD. The ... Addition invoking provision of section 44AD - Special provision for computing profits and gains of business on presumptive basis - addition @ 8% on total receipts - HELD THAT:- AO righty invoked the provisions of Section 44AD and applied rate of 8% on the contract receipts of the assessee during the year under consideration. CIT(A) further observed that the request of the assessee to restrict the rate to 3% was never substantiated by the books of accounts nor was a part of the provisions of the Income Tax Act. Thus, there is no need to interfere with the findings of the CIT(A). Therefore, the appeal of the assessee is dismissed. Issues:1. Application of Section 44AD of the Income Tax Act for assessment.2. Rejection of books of account by the Assessing Officer.3. Disallowance of claimed loss in the Income Tax Return.4. Assessment proceedings under Section 147 for A.Y. 2010-11.5. Appeal filed before CIT(A) and subsequent dismissal.Analysis:Issue 1: Application of Section 44ADThe appeal was filed against the order passed by CIT(A) confirming the addition made by the Assessing Officer under Section 44AD of the Income Tax Act. The CIT(A) upheld the addition of Rs. 55,83,787 based on a rate of 8% applied on total receipts of Rs. 3,54,30,497 for A.Y. 2010-11. The appellant argued that Section 44AB was applicable due to gross receipts exceeding Rs. 3.50 crore, and penalty proceedings were initiated for non-filing of audit report. However, the CIT(A) found the Assessing Officer's application of Section 44AD to be correct, dismissing the appeal.Issue 2: Rejection of Books of AccountThe Assessing Officer rejected the books of account, citing dissatisfaction with their correctness or completeness, despite the appellant submitting Audited Financial Statements. The AO considered the gross receipts value from the Profit & Loss Account, even after rejecting the same. This led to the disallowance of a claimed loss of Rs. 27,49,347 in the Income Tax Return for A.Y. 2010-11. The AO's actions were contested by the appellant as being without any adverse material against them on record, alleging an unlawful application of Section 44AD.Issue 3: Disallowance of Claimed LossThe Assessing Officer disallowed the loss claimed by the appellant in the Income Tax Return for A.Y. 2010-11, amounting to Rs. 27,49,347. The appellant argued that there was no adverse material against them on record, and the AO unlawfully applied the provisions of Section 44AD of the Income Tax Act, 1961. However, the CIT(A) upheld the AO's decision, leading to the dismissal of the appeal.Issue 4: Assessment Proceedings under Section 147The appellant was assessed under Section 147 read with Section 143(3) of the Income Tax Act, 1961 for A.Y. 2010-11. The AO initiated assessment proceedings after the appellant failed to file their Income Tax Return under Section 139(1) for the said assessment year. The AO completed the assessment, considering a total income of Rs. 28,34,440, which was 8% of the total receipts of Rs. 3,54,30,497, guided by Section 44AD of the Act.Issue 5: Appeal before CIT(A) and DismissalThe appellant, being aggrieved by the assessment order, filed an appeal before the CIT(A) challenging the additions made by the AO. However, the CIT(A) dismissed the appeal, upholding the AO's application of Section 44AD and the disallowance of the claimed loss. Despite the appellant's absence during the proceedings, the CIT(A) relied on the material available on record and affirmed the AO's decision, resulting in the dismissal of the appeal.In conclusion, the appeal challenging the assessment order for A.Y. 2010-11 was dismissed by the ITAT Delhi, upholding the Assessing Officer's application of Section 44AD and the subsequent additions made, as affirmed by the CIT(A).