TaxTMI 
TaxTMI 
2005 (10) TMI 208
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....t, it was conceded by Shri Hiteshbhai P. Patel, one of the partners of the assessee-firm, that it had collected on-money amounting to Rs. 9,04,380 outside its regular books of account, and which would be declared/shown as its income for the year in its books and the tax return for the year. However, while the assessee did include the said amount as a part of its gross receipts (which even after the inclusion of the said amount fell below Rs. 40,00,000, i.e., the threshold limit for the non-application of section 44AD) it returned its income on the basis of applying the presumptive rate of 8 per cent (on the enhanced turnover of Rs. 38,29,380), i.e., at Rs. 3,06,350 (before deduction in respect of remuneration and interest to partners), as against its net profit of Rs. 4,54,195 as per its books (Profit & Loss account), i.e., after providing for Rs. 5,19,310 in respect of interest and salary to partners. The Assessing Officer found this as unacceptable, and proceeded to frame the assessment on the basis of the assessee's books, further adding a sum of Rs. 60,000 out of the labour expenses of Rs. 5,76,470, being unverifiable, i.e., at an income of Rs. 5,14,195. Aggrieved, the assessee....
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....nd rather, in the facts of the case, the higher income resulted only on account of the disclosure made on survey. It was further contended that the interpretation as being sought to be placed by the lower authorities would tantamount to penalizing a person who maintains the books of account, as against one who does not, and in the instant case would operate to defeat the provision of law; the assessee being obliged to maintain the books for several other reasons as well viz., Sales-tax, Professional-tax, etc. The learned D.R., on the other hand, relied upon the orders of the authorities below, contending that the assessee ought to have, rather, disclosed the entire amount of on-money as its income, in terms of its statement on oath. 6. We have heard the rival submissions and perused the material on record. It would be useful and pertinent to recount the facts of the present case. The assessee a partnership firm, entered into a construction agreement with two Associations (registered as non-trading corporations) viz. Chanchalba Association and Jayant Association, on 21-3-1992, for developing of lands admeasuring 2010 sq.yds. and 1005 sq.yds. belonging to the two Associations respec....
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....rvey, and the disclosure made thereat, would have declared only a turnover of Rs. 29.25 lakhs, while by its own admission its turnover for the year works to Rs. 38.29 lakhs. As such, we do not consider it to be a case that fully fits into the scheme of section 44AD, for which, undoubtedly, faithful recording of the turnover (and other relevant financial parameters) is essential. Whenever the law provides any concession(s) from its rigors, the observance and satisfaction of the qualifying criteria are presumed as, as also contended by the assessee, correctly met, i.e., without any doubt, as the law contemplates a true disclosure, and in any case are subject to scrutiny/verification. As afore-stated, in the present case, the same cannot be said for sure, and as such, in our considered opinion, the assessee having failed to record its turnover correctly in its books, it cannot be said to be a case to which section 44AD of the Act is strictly applicable. 8.1 However, shall decide this appeal by considering the assessee's case on merits, i.e., as pleaded it before us. Section 44AD(1) reads as: "Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an....
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.... would apply to an assessee engaged in such business, only, if the assessee chooses to be taxed at lower than the presumptive rate of 8 per cent. This is, to our mind, clearly in the nature of a, and the only, concession accorded by the statute to the relevant class of assessees, to which assertion of the assessee there can be no doubt, it being statutorily recognized/enacted. However, the moot point remains if the reverse is also true, i.e., where the assessee, despite the said concession, chooses to maintain the books of account, preferring to rely thereon for various other purposes, both apart from, and under the Act (e.g. interest on partner's capital, which would come to be worked out at a sum inclusive of their share in the net profit as disclosed per the said books), can it ignore the book results and claim to be entitled to a lower presumptive rate of income than that revealed by such books. To our mind, clearly not. The law does not accord a privileged status to the assessees engaged in this line of business, but only, considering the vagaries that attend thereto, drawn a higher bar for the purpose of maintenance of books, i.e., than that normally obtains under section 44A....
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....to be done, higher capital/income generated. For, why would an assessee, its receipt being same/fixed, choose to be assessed at a higher income, and consequently, bear a higher tax liability, i.e., if no other advantage/benefit accrues to it? The said concession, or its equivalent of standard deduction at 92 per cent, cannot be taken or assumed as a matter of prescription/right, the matter being subject to factual considerations, and the limited right granted cannot transgress the basic or the fundamental scheme of the Act. 10. That apart, we also consider that the assessee's claim does not stand the test of section 44AD itself. This is so as section 44AD(1) itself provides for a case where the assessee chooses to declare a higher income, which would, in that case, be deemed as the income chargeable to tax under the head 'Profits and gains of business or profession' in preference to the presumptive income equal to 8 per cent (of the gross receipt). The return of income is not a single document consisting of just the relevant prescribed form, but, rather, is a comprehensive document, including within its ambit several other documents, i.e., as are deemed necessary by law to substan....
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.... assessee declared its income at the presumptive rate under section 44AD of the Act. The ITAT held that in view of that section 158BB itself provides for computation of income in accordance with the provisions of Chapter IV-D (of the Act), of which section 44AD as a part, the same shall have to be respected or accorded precedence. As such, the assessee cannot be called upon to explain its entries of expenditure with reference to its books of account. We find that, in the facts of the case, the said order, rather than assisting the assessee's case supports the view taken by this Bench. 12.2 The second case i.e., Sitaram Parita v. Asstt. CIT [1994] 51 ITD 65 (Indore) the view taken was that the assessment under the Act shall have to be in terms of section 44AC (prescribing the presumptive rate in respect of profits from business of trading in certain goods), even if the assessee's books disclosed a higher income. And which, we find for the same reason to be, rather, supportive of the view advanced in this order. 12.3 The last case cited is that of Oil India Ltd. v. CIT [1995] 212 ITR 225, where with reference to the discharge of the tax liability of a non-resident by the assessee-c....