Case Law Details
Shri Thomas Eapen Vs ITO (ITAT Cochin)
The assessee offered income u/s. 44AD, the assessee being a small trader in medicine. There is no dispute that the assessee falls under the provision of sec. 44AD since the turnover of the assessee is less than Rs. 1 crore from eligible business. The Assessing Officer also accepted that the assessee’s case falls under the purview of section 44AD and computed the income declared by the assessee at Rs.3,37,160/-and thereafter made addition towards undisclosed profit u/s. 68 of the Act. In other words, the Assessing Officer has not at all rejected the books of accounts of the assessee. Section 44AD provides that where the assessee is engaged in eligible business as proprietor under that section, a sum equal to 8% of the gross receipts shall be deemed to be the profits and gains of such business. Section 44AD exempts the assessee from maintenance of books of accounts. Once the income of the assessee is accepted u/s. 44AD, now the question arises for our consideration is whether the Assessing Officer could make further additions towards various discrepancies in the books of accounts of the assessee.
Section 44AD of the Act gives an option to the assessee to offer income on presumptive basis. These are special provisions. The assessee has opted for the same and offered to tax income at the rate of 8% of his turnover. The issue is whether, the Assessing Officer can examine statement of accounts in such cases, make additions towards undisclosed purchases, undisclosed expenditure, under valuation of closing stock etc., The turnover declared by the assessee is accepted by the revenue. In our considered opinion such additions go against the spirit of the Act. Section 44AD of the Act was introduced to help the small traders who have difficulties in maintaining books of account and other records. Tax is levied on presumptive basis.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against the order of the CIT(A), Kottayam dated 06/08/2018 and pertains to the assessment year 2015-16.
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While it is clear order, stating that, once the 44AD is availed to file return, and 8% income is declared, AO cannot add any income, irrespective of what is actual profit. So, in nutshell, there is no need to declare actual income, as no audit is done. Only important is the actual receipts should match with the receipts you are offering in the return. Law is clear, judgements are clear, then why some CA’s keep telling that actual income should be offered ?.