Case Law Details
Perizad Zorabian Irani v. PCIT (Bombay High Court)
The provision applicable to petitioner is clause (b) of Section 44AB which provides, every person carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. Profession is defined under Section 2(36) of the Act as under: “Profession includes vocation”. The income earned by petitioner as remuneration received as working partner or partners’ remuneration, cannot be held as carrying on profession as well as business simultaneously in different field. That is because the provisions of Section 44AB(a) which says “every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year” and clause (b) of Section 44AB which says “every person carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year”, are mututally exclusive, i.e., the former dealing with the assessee carrying on business and later dealing with the profession. None of the clauses under Section 44AB envisages the situation where the assessee is carrying on both the profession as well as business. In a matter which is similar to this matter at hand, where the scope of Section 44AD of the Act came up for consideration, is the judgment of Madras High Court in Anandkumar Vs. Assistant Commissioner of Income Tax1. In that case, the assessee was an individual and a partner in some partnership firms. The assessee filed his return of income of assessment year under consideration admitting a total income of Rs.43,53,066/-. The assessment was selected for scrutiny and it was finalised under Section 143(3) of the Act, disallowing the claim made by the assessee under Section 44AD of the Act. While filing the return of income, the assessee had applied the presumptive rate of tax at 8% under Section 44AD and returned Rs.4,68,240/- as income from the remuneration and interest received from the partnership firm. The Assessing Officer did not agree with the assessee and opined that Section 44AD is available only for an eligible assessee engaged in an eligible business and that the assessee was not carrying on business independently but only as partner in the firm. The Assessing Officer further held that the assessee did not have any turnover and receipts on account of remuneration and interest from the firms cannot be construed as gross receipts mentioned in Section 44AD of the Act. This was challenged by the assessee before Commissioner of Income Tax (Appeals), who rejected the appeal and later before the ITAT, which also rejected the assessee’s challenge to the findings of the Assessing Officer. Before the High Court, counsel for the Revenue submitted that the assessee was not doing any business but the firm was carrying on business in which the assessee is a partner and, therefore, the condition that it should arise from an eligible business was not satisfied. The submissions thereon of the Revenue are totally contrary to the submissions made in the case at hand where, the Revenue is wanting to add the income received as remuneration from the partnership firm as professional income. The Madras High Court while upholding the contentions of Revenue observed that the assessee should establish that he is an eligible assessee engaged in an eligible business and such business should have a total turn over or a gross receipt. Admittedly, the assessee who was an individual in that case was not carrying on any business and the remuneration and interest received by the assessee from the partnership firm cannot be termed to be a turn over of the assessee (individual). The court concluded that the Revenue was right in its contention that remuneration and interest from the partnership firm cannot be treated as gross receipt of the assessee.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning an order dated 25th March 2021 passed by respondent no.1 u/s 264 of the Income Tax Act 1961 (the said Act), rejecting the revision application filed by petitioner challenging the order dated 25th February 2020 passed under Section 139(9) by respondent no.2 treating the return of income filed by petitioner for A.Y.-2017-2018 as invalid. The reason why return of income was treated as invalid was because according to respondent, petitioner failed to get her accounts audited u/s 44AB though her gross receipts / turnover after including remuneration received from partnership firm was more than the threshold limit of Rs.50,00,000/-.
2. Petitioner is an individual deriving her income under the heads salary, income from house property, business / profession and income from other sources. Petitioner is an Actor by profession. Petitioner also is a partner in two partnership firms namely M/s Zorabian Sales and Marketing and M/s Zorabian Foods.
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