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Tribunal Rules CPC Exceeded Authority in Misclassifying Income; Appeal Allowed Recognizing Income u/s 44AD. The Tribunal concluded that the CPC exceeded its authority under section 143(1) by applying section 44ADA based on Form No.26AS, which misclassified ...
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Tribunal Rules CPC Exceeded Authority in Misclassifying Income; Appeal Allowed Recognizing Income u/s 44AD.
The Tribunal concluded that the CPC exceeded its authority under section 143(1) by applying section 44ADA based on Form No.26AS, which misclassified contract receipts as professional income. Consequently, the Tribunal set aside the CPC's prima facie adjustment and allowed the appeal, recognizing the appellant's income declaration under section 44AD.
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.
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