Selvakumar Arumugam Vs ACIT (ITAT Chennai)
SEO Title: ITAT Chennai Allows 50% Professional Income Claim Under Section 44ADA
SEO Description: ITAT Chennai directs 50% of a doctor’s professional receipts to be assessed as income, while dismissing unpressed grounds on other additions.
Summary: This appeal by the assessee, a Doctor by profession, challenged the CIT(A)/NFAC order dated 13.12.2025 for AY 2018-19. The assessee had not filed a return of income, and the Assessing Officer, after receiving information regarding professional fees and share transactions and after the assessee failed to respond to notices, completed the assessment under sections 147 read with 144, determining income at Rs.38,48,710/-. Before the CIT(A), the assessee contended that 50% of professional receipts should be assessed under the presumptive provisions of section 44ADA and that, in respect of share transactions, only the difference between purchase and sale values should be considered. The CIT(A) rejected these contentions and upheld the additions.
Before the Tribunal, the assessee submitted that the professional receipts of Rs.35,01,500/- were within the threshold stated under section 44ADA and that the provision did not mandate filing of a return as a condition for its application. The assessee also submitted that in subsequent years 50% of professional receipts had been offered as income under section 44ADA and accepted by the Revenue under section 143(1).
The Tribunal clarified that it was not deciding whether the assessee could formally avail the statutory benefit of section 44ADA in the absence of a return. Instead, it considered whether the entire gross professional receipts could, on the facts, automatically be treated as net professional income. It held that merely because the assessee had not filed the return, the entire gross receipts could not automatically be treated as net professional income. Considering the nature of the profession, the assessee’s offer to adopt 50% of the receipts as income, payment of tax on such income and the consistent treatment accepted by the Revenue in subsequent years, the Tribunal considered adoption of 50% of the receipts to be a reasonable basis. It therefore directed the Assessing Officer to adopt Rs.17,50,750/-, being 50% of Rs.35,01,500/-, as professional income.
The assessee did not advance arguments concerning the other additions sustained by the CIT(A), and the related grounds were dismissed as not pressed. Consequently, the appeal was partly allowed. The order was pronounced on 19.08.2026 at Chennai.
List of Cases Discussed / Relied Upon
- None were discussed or relied upon in the supplied material.
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Chennai ITAT: Entire Gross Professional Receipts Cannot Be Taxed Merely Because Doctor Failed to File ITR; 50% of Receipts Accepted as Reasonable Income
In Selvakumar Arumugam v. ACIT, ITA No. 128/Chny/2026 (AY 2018-19), order dated 19.08.2026, the Chennai ITAT considered whether the entire professional receipts of ₹35.01 lakh of a doctor could be assessed as income merely because he had not filed his return of income and had not participated in the assessment proceedings.
The reassessment was completed ex parte under Sections 147 r.w.s. 144, assessing income at ₹38.48 lakh. The AO treated the doctor’s entire professional receipts as taxable income. Before the CIT(A), the assessee contended that under Section 44ADA, only 50% of gross professional receipts should be treated as presumptive income. The CIT(A) rejected the contention principally on the ground that Section 44ADA could be availed only where the assessee had actually filed a return declaring income on presumptive basis.
The ITAT made an important distinction. It expressly stated that it was not deciding the larger legal question whether Section 44ADA can formally be claimed without filing a return of income. Rather, the question was whether, in a best-judgment assessment, the entire gross receipts could automatically be regarded as net professional income. The Tribunal held that mere non-filing of the return does not justify treating 100% of professional receipts as income, ignoring the expenditure ordinarily involved in earning those receipts.
The Tribunal also considered that the assessee had offered 50% of the receipts as income before the CIT(A), had discharged tax on such income, and in subsequent assessment years had consistently filed returns under Section 44ADA declaring 50% of professional receipts as income, which had been accepted by the Department under Section 143(1). Though such subsequent acceptance did not by itself confer a statutory right to Section 44ADA for the year under appeal, it was a relevant circumstance for estimating reasonable professional income.
Considering the totality of circumstances, the ITAT held that 50% of the gross receipts constituted a reasonable basis for determining professional income and directed the AO to assess only ₹17,50,750, being 50% of ₹35,01,500, instead of taxing the entire receipts.
The other grounds concerning the assessee’s share transactions were dismissed as not pressed, and the appeal was partly allowed
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 13.12.2025 for Assessment Year (AY) 2018-19.
2. The assessee is a Doctor by profession and did not file the return of income. The AO received information that the assessee has received substantial amount of professional fees and that the assessee has also entered into certain purchase and sale of shares. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of notice u/s. 148 of the Act. The assessee neither filed the return of income nor responded to any of the notices issued by the A.O and therefore the A.O completed the assessment u/.s 147 r.w.s 144 of the Act assessing the income at Rs.38,48,710/-. Aggrieved, the assessee filed further appeal before the CIT(A). Before the CIT(A), the assessee submitted that as per the provisions of section 44ADA only 50% of the fees received is assessable to tax on presumptive basis. With respect to the addition made towards share transactions, the assessee submitted that only the difference between the purchases and the sale value can be added since the cost of acquisition is form the known source. The CIT(A) however held that the provisions of section 44ADA can be applied only when the assessee files the return of income declaring income on presumptive basis. The CIT(A) further held that since the assessee neither filed the return nor cooperated during the assessment proceedings, the addition made by the AO towards profession charges is to be upheld. The CIT(A) also upheld the other additions/disallowances made by the A.O. The assessee is in appeal before the Tribunal against the order of the CIT(A) raising the following grounds of appeal: “1. Learned Commissioner of Income-tax is not justified in confirming that gross professional fee receipts of Rs. 35,01,500 constituted taxable Income, while Income-tax is chargeable on net income alone, even in assessment made under section 144.
2. Learned Commissioner of Income-tax (Appeals) ought to have recognized that Section 44ADA envisages adopting only fifty percent of total gross receipts as taxable income, even without necessity to evidence expenses incurred.
3. View of Learned Commissioner of Income-tax (Appeals) that benefits of Section 44ADA are available only when books of account are maintained and return of income is filed is not approved by the Section.
4. Holding both purchases of equity shares made for Rs. 1,14,446 and sales of Rs. 1,23,975 as taxable is not correct, instead of the difference of Rs. 9,529 alone.
5. Treating cost of equlty shares of Rs. 1,14,446 as unexplained investment under section 69A is not proper, while professional income exceeding this amount was available.
6. For these and other reasons, which may be stated at the time of hearing of the appeal, it is prayed that the income assessed may kindly be reduced by Honourable Income Tax Appellate Tribunal.”
3. The Ld. Authorized Representative (AR) of the assessee submitted that the assessee being a Doctor by profession is covered under the provisions of Section 44ADA of the Act and that the conditions stated therein in terms of overall profession receipts being less than 50 lakhs is also fulfilled. The Ld. AR further submitted that the section does not mandate that the assessee ought to have filed the return of income to avail the benefit of presumptive taxation and therefore rejecting the assessee’s claim on the said ground by the CIT(A) is legally not tenable. The Ld. AR also submitted that the assessee has not maintained any books of accounts and therefore has offered 50% of his professional receipts as the income. The Ld. AR brought to our attention that in subsequent years the assessee has filed the return of income by offering income on presumptive basis u/s. 44ADA of the Act and the revenue has processed the return u/s.143(1) accepting the income of the assessee. The Ld. AR accordingly argued that even on the principle of consistency, the income offered for the year under consideration has to be accepted by the Revenue and addition made at 100% of receipts cannot be sustained.
4. The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.
5. We have heard the parties and perused the material available on record. The assessee is a Doctor by profession and the professional receipts as reflected in Form 26AS are Rs.35,01,500/-. The assessee did not file the return of income and also did not comply with the notices issued by the A.O. during the assessment proceedings. The A.O., therefore, treated the entire professional receipts as the income of the assessee. Before the CIT(A), the assessee submitted that 50% of the professional receipts may be considered as income, referring to the presumptive basis provided u/s.44ADA of the Act. The CIT(A), however, rejected the claim mainly on the ground that the assessee had not filed the return of income. In the present appeal, we are not called upon to decide the question as to whether the assessee could formally avail the benefit of section 44ADA in the absence of a return filed by him. The question before us is whether, on the facts of the case, the entire gross professional receipts of Rs.35,01,500/- can be treated as the income of the assessee. The assessee had himself offered 50% of the professional receipts as income before the CIT(A) and has also submitted that the corresponding tax liability has been discharged. In our considered view, merely because the assessee had not filed the return of income, the entire gross professional receipts, cannot automatically be treated as the net professional income of the assessee. It is also relevant to consider the submission of the Ld. AR that in the subsequent assessment years, the assessee has filed returns and offered 50% of the professional receipts as income under the presumptive provisions of section 44ADA and the same has been accepted by the Revenue while processing the returns u/s.143(1) of the Act. Though we are conscious that such acceptance in the subsequent years cannot, by itself, confer the statutory benefit of section 44ADA for the year under consideration, it is certainly a relevant circumstance for considering the reasonableness of the income offered by the assessee, particularly when the assessee is carrying on the same profession and there is no material to suggest any material change in the nature of the professional activity or the manner of earning the receipts. Considering the totality of the facts, viz., the nature of the assessee’s profession, the assessee’s own offer before the CIT(A) to adopt 50% of the professional receipts as income, the payment of tax on such income and the consistent treatment followed and accepted by the Revenue in the subsequent assessment years, we are of the view that adoption of 50% of the gross professional receipts would be a reasonable basis for determining the professional income for the year under consideration. Accordingly, we direct the A.O. to adopt Rs.17,50,750/-, being 50% of the professional receipts of Rs.35,01,500/-, as the income from profession. The grounds raised by the assessee on this issue are accordingly allowed.
6. During the course of hearing, the ld AR did not present any arguments with regard to the other additions sustained by the CIT(A). Accordingly, the grounds raised pertaining to the same are dismissed as not pressed.
7. In result the appeal of the assessee is partly allowed.
Order pronounced on 19th day of August, 2026 at Chennai.
