2024 (5) TMI 441 - AT - Income Tax

Tribunal Rules CPC Exceeded Authority in Misclassifying Income; Appeal Allowed Recognizing Income u/s 44AD.

Prashant Vinayak Adhav Versus Ward-12 (1), Pune

The Tribunal concluded that the CPC exceeded its authority under section 143(1) by applying section 44ADA based on Form No.26AS, which misclassified ... Scope of adjustments u/s. 143(1) - Applicability of presumptive provisions of tax u/s. 44ADA - appellant had not disclosed the income on presumptive basis u/s. 44ADA but under the provisions of section 44AD - contention of the appellant that Form No.26AS was wrongly uploaded by the deductor showing the contract receipts as professional receipts - whether the CPC was justified in invoking the provisions of section 44ADA? - HELD THAT:- CPC had travelled beyond the scope of power of adjustment prescribed u/s. 143(1) of the Act. Therefore, the prima-facie adjustment made by the CPC vide intimation u/s. 143(1) is hereby set-aside. Appeal filed by the assessee stands allowed. Issues involved: Appeal against order of National Faceless Appeal Centre regarding assessment year 2017-18.Summary:The appellant, engaged in contract execution business, filed income return u/s. 44AD but CPC assessed income at 50% of gross receipts u/s. 143(1). Rectification petition was rejected u/s. 154. Appeal before CIT(A)/NFAC dismissed for non-prosecution. Appellant did not appear for appeal hearing. Issue: Applicability of presumptive provisions u/s. 44ADA. CPC invoked 44ADA based on Form No.26AS showing contract receipts as professional. Appellant failed to prove income source. CPC's adjustment u/s. 143(1) beyond scope. Adjustment set aside. Appeal allowed.In the present appeal, the issue revolved around the contention that the CPC wrongly applied the provisions of section 44ADA of the Act based on the information in Form No.26AS, which incorrectly categorized the contract receipts as professional receipts. The appellant, although unable to provide evidence supporting the income source from contract execution, had declared income u/s. 44AD, not u/s. 44ADA. The Tribunal determined whether the CPC was justified in invoking section 44ADA, highlighting the scope of adjustments u/s. 143(1) and the limitations on such adjustments.The Tribunal found that the CPC had exceeded the prescribed scope of power of adjustment u/s. 143(1) by invoking section 44ADA based on the information in Form No.26AS. Therefore, the prima-facie adjustment made by the CPC was set aside, and the appeal filed by the assessee was allowed.