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the aforesaid section only the method of calculation of gross receipts would be under scrutiny and the amount of cash withdrawn would not matter.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

[CAGOPALJI AGRAWAL]

I think there is no need of confusion. The case will be covered under section 69 as the AO would not be satisfied with your source. Even AO may ask the assessee to file the reply that no expenses have been incurred in the business which will prove that the transactions are bogus.

AI Summary

Deeming provisions in presumptive taxation: unexplained asset accumulation can be taxed as unexplained income after scrutiny. Under the presumptive taxation deeming regime the prescribed computation governs taxable income; cash withdrawals do not by themselves alter that computation, but unexplained acquisition of assets from receipts can be treated as unexplained income, prompting the assessing officer to seek explanations and make additions to net worth if sources remain unsatisfied.