Expenses related to contract - disaalowed

[vivek choudhary]

RETURN WAS FILED UNDER 44AD, CONTRACT RECEIPT WAS 37LACS. FIRSTLY A.O. TREATED CONTRACT RECEIPT AS UNEXPLAINED INVESTMENT U/S 69. AFTER APROACHING C.I.T (APPEALS) IT ORDERED THAT TREATING CONTRACT RECEIPT AS UNEXPLAINED NVESTMENT HAS NO MERIT, BUT HE DISALLOWED THE EXPENSES SHOWN IN PROFIT AND LOSS ACCOUNT RELATED TO CONTRACT AND THUS ENHANCED THE APPEAL. WHEN a return is filed u/s 44AD, then how the expenses shown in Profit/loss account be disallowed.

AI Summary

Tax Dispute: Contract Expenses Disallowed Under Section 44AD; Receipt Not Unexplained Investment Per CIT(A) Ruling A query was raised regarding the disallowance of expenses related to a contract in a tax return filed under Section 44AD, where a contract receipt of 37 lakhs was initially treated as unexplained investment under Section 69 by the Assessing Officer. Upon appeal, the Commissioner of Income Tax (Appeals) ruled that the receipt should not be treated as unexplained investment but disallowed the related expenses, enhancing the appeal. A reply clarified that under Section 44AD(6) of the Income Tax Act, an assessee can claim lower profits if proper books are maintained and audited, as specified in the Act.