Selvakumar Arumugam Vs ACIT (ITAT Chennai)
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
