Presumptive taxation under section 44AD bars item-wise expense scrutiny and ad hoc disallowance once eligibility is accepted.

An assessee returning income under the presumptive scheme of section 44AD, and accepted by the Revenue as eligible for that scheme, cannot be subjected to separate scrutiny of individual expenses or ad hoc disallowance under sections 28 to 43C. Once income is computed on the presumptive basis, separate item-wise examination of expenditure is inconsistent with the scheme. The addition sustained on estimation was therefore deleted, and the issue was decided in favour of the assessee.

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Issues: Whether an assessee who filed return of income under section 44AD of the Income-tax Act, 1961, as an eligible assessee on presumptive basis, could be subjected to separate examination of individual expenses and ad hoc disallowance, and whether the addition sustained on estimation was liable to be deleted.

Analysis: The return had been filed under the special presumptive scheme of section 44AD, and the Revenue did not dispute the assessee's eligibility under that provision. Once income is offered under the presumptive scheme, the assessee is not entitled to claim separate deductions under sections 28 to 43C of the Income-tax Act, 1961, and the Revenue cannot, after accepting the assessee as an eligible assessee under section 44AD, make item-wise scrutiny of expenditure and sustain ad hoc disallowances separately.

Conclusion: The addition sustained by the CIT(A) was directed to be deleted and the issue was decided in favour of the assessee.

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