TaxTMI 
TaxTMI 
2026 (2) TMI 1450
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....nd any material to support the contention of the department that assessee had suppressed her NP or turn-over or had any other income." 2. The Ld. Accountant Member did not accept the questions so proposed by the Ld. Judicial Member and proceeded to frame separate questions of difference, which are reproduced as under:- "a) Whether or not the Income-Tax Department has a right to call for information and details from the assessee as to satisfaction of all the criteria of eligibility as specified u/s 44AD of the 1961 Act being met by the assessee before granting benefit to the assessee of availing the Special provisions for computing profit and gains of business on presumptive basis as stipulated u/s 44AD of the 1961 Act? b) Whether in the instant case, based on the facts and circumstances of the case, the assessee has or has not satisfied all the eligibility criteria as prescribed under the Special provisions for computing profit and gains of business on presumptive basis as stipulated u/s 44AD of the 1961 Act'? c) Whether the non-eligible turnover as considered by my Id. Brother Hon'ble Judicial Member is to be restricted to turnover as is specified u/s....
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....g considered the submissions of the assessee, partly allowed the appeal of the assessee, thereby, he sustained the addition made qua the net profit and deleted addition made in respect of income from house property. Aggrieved against this, the assessee preferred appeal before the Tribunal. Thus, the primary grievance of the assessee before the Tribunal was that the Ld. CIT(A) erroneously sustained the net profit rate at 30% of gross business receipts as estimated by the Assessing Officer as against the net profit rate of 25.79% disclosed by the assessee despite the fact that the business receipts of the assessee are assessed at the presumptive rate under section 44AD of the Act. 4. The explanation regarding the lower net profit rate disclosed by the assessee as compared to the average net profit rate, it was stated before the Assessing Authority that there was a substantial increase in overall turnover and, at the same time, during the relevant period there was stiff market competition, particularly towards the later part of the year. This explanation was not found acceptable by the lower authorities and proceeded to adopt average net profit. The Ld. Members who had originally h....
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.... profit it has given a positive response and sale of the assessee has gone up by 61% from Rs. 83,01,922 to Rs. 1,35,49,571 during the year under assessment as compared to immediate preceding year. (d) The overall profitability of the assessee has gone up during the year under assessment from Rs. 27,79,322 to Rs. 34,95,279, an increase by 26% as compared to immediate preceding year." The Assessing Officer (AO) not satisfied with the explanation offered by the appellant arbitrarily applied NP rate of 30%, based on the average of the previous three years, and made an addition of Rs. 5,69,592 to her income. This action was taken by LAO without disputing the declared turnover or identifying any discrepancies in records. Further, there was no material with the LAO to form an opinion that the NP rate should be more than what has been declared by the appellant. Aggrieved from the above order of the LAO, Appellant filed an appeal before the Ld. CIT (A). Before the Ld. CIT(A). Appellant filed her written submission before the Ld. CIT (A) reiterating the fact that the since she had filed her return of income u/s 44AD and declared the net profit more than th....
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.... ?2 crores. The profit declared at 25.79% exceeded the statutory requirement of 8%, hence the income was to be deemed as accepted under the presumptive scheme. Invalid Estimation by AO: The Tribunal observed that there is no provision under Section 44AD that permits the AO to estimate a higher income once the declared profit exceeds 8% of turnover. It was reiterated that disclosures made in compliance with Section 44AD(1) are to be accepted and cannot be tinkered with. No Adverse Inference from Survey: The survey conducted u/s 133A did not reveal any undisclosed income, bogus expenses, or any other irregularity. The AO's reliance on non-furnishing of detail of gross receipt was misplaced and in violation of Section 44AD, which does not mandate maintenance of books once the profit exceeds the prescribed limit. Violation of Legal Provisions: The action of the AO and lower authorities was held to be without sanction of law and contrary to the statutory provisions of presumptive taxation under Section 44AD. After the above observation Hon'ble JM Sir directed the AO to delete the addition o....
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....or a sum higher than the aforesaid sum claimed to have been earned by the eligible assesses shall be deemed to be the profit and gains of business or profession chargeable to tax under the head "Profits and gains of business or profession". Thus, by deeming fiction, the income is brought to tax. Section 143(3) read with Section 143(2) and 142(1) deals with procedure of scrutiny assessment and are a machinery provisions, and on perusal of the aforesaid Sections, we do not find any embargo on the AO that in case of the assessee availing presumptive scheme of taxation u/s 44AD, the AO cannot look into the details of the gross turnover/gross receipts and the basis of calculation of Net Profit. Under the deeming fiction of Section 44AD, total turnover /total gross receipts of an eligible assessee from eligible business is to be considered while applying the Net Profit Rate. The eligible assessee as well as eligible business is itself defined in Explanation to Section 44AD(6), and it is within the rights of the Revenue to verify that income which is offered for taxation deeming fiction of Section 44AD is in-fact turnover/receipts of eligible business earned by eligible assessee, and that....
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....l provide adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The appeal of the assessee is allowed for statistical purposes. We order accordingly." 7. I have heard the Ld. Representatives of the parties at length and perused the materials available on record. The Ld. Accountant Member has proposed as much as five questions of difference, whereas the Ld. Judicial Member has proposed two questions. 8. The issue as to whether the receipts claimed by the assessee were out of ineligible business so as to disentitle the assessee from claiming the benefit u/s 44AD of the Act was never in dispute before the Tribunal. I have perused the orders of the lower authorities; it reveals that nowhere have they recorded any finding that the assessee's claim was based on ineligible business receipts. On the contrary, the Assessing Officer computed the net profit by applying the average net profit declared by the assessee in the preceding years. Undisputedly, in this case, the AO assessed business income u/s 44AD of the Act. It has been emphatically submitted on behalf of the assessee that the assessee is engaged in an eli....