Deeming Provisions

[Ramesh Das]

I would like a clarification regarding the deeming provisions of section 44 AD of the Income Tax Act, 1961.

I had earlier raised a query of whether one would have to check if the assessee has made withdrawals during the year substantiating his expenses.

As discussed before all professionals are of the view that in case of the aforesaid section only the method of calculation of gross receipts would be under scrutiny and the amount of cash withdrawn would not matter.

However, If the assessee has amassed property during the period and the same is from the gross receipts then would the case differ? As all the other revenue expenses are deemed as allowed would the net amount (income) be the only addition to Net Worth of the Assessee ?

Please clarify as I am totally confused.

Regards

Ramesh

AI Summary

Clarification Sought on Section 44AD: Are Property Acquisitions from Gross Receipts Subject to Scrutiny Under Section 69? A query was raised regarding the deeming provisions of section 44 AD of the Income Tax Act, 1961, specifically whether an assessee's withdrawals need scrutiny if they have acquired property from gross receipts. The consensus among professionals is that only the method of calculating gross receipts is scrutinized, not cash withdrawals. However, if property is acquired, it may fall under section 69, as the assessing officer might question the source of funds, suspecting bogus transactions if no business expenses are reported. The respondent advised that this situation could lead to further investigation by tax authorities.