Income Tax Assessment: Take presumptive rate of 8% u/s 44AD in absence of record; says ITAT

Income Tax Appellant Tribunal (ITAT) Surat in the matter of Ravindranath J. Mishra vs ITO has retreated the finding of Hon’ble Delhi High Court in the case of Commissioner of Income-tax-XII vs. Subodh Gupta [2015] 54 taxmann.com 343 (Del) that in absence of material to show net profit rate, the presumptive net profit rate of 8% as stipulated in section 44AD could be taken for estimation of income.

Mr. Pawan Singh; Judicial Member considering the facts and circumstances of the present case directed the Assessing Officer to restrict the addition to the extent of 8% and re-computed the assessment in terms of the above condition.

Brief facts of the case that assessee’s case was re-opened for assessment year 2010-11 by recording reasons that as per details in ITS data, the assessee has received contractual receipt of Rs.8,95,080/- from Paras Pumps Pvt. Ltd. The Assessing Officer further recorded that no return of income was filed by assessee for assessment year under consideration. On the basis of information available on ITS data, the Assessing Officer was of the view that income of assessee has escaped assessment to the extent of contractual receipt of Rs.8,95,080/-. Notice under section 148 of the Act was issued and served upon the ae on 31.03.2017. The Assessing Officer recorded that no response was made on the part of assessee. The Assessing Officer issued notice under section 133(6) to Paras Pumps Pvt. Ltd., wherein it was confirmed that assessee performed the duty (contractual obligation) and all payments were made to him.

The Assessing Officer further noted that several notices issued to the assessee and on the basis of statement reflected in Form 26AS about contractual payments of Rs.8,96,080/-. The Assessing Officer made addition of entire sum.

Aggrieved by the addition in the assessment order passed on 29.09.2017, the assessee filed appeal before Ld. CIT(A). The appeal of assessee was migrated to NFAC/Ld. CIT(A). The assessee filed written submission along with documents while filing his appeal. In the written submission, the assessee stated that during the year under consideration, the assessee stated that during the year under consideration, the received gross receipt to the tune of Rs.8,96,080/- from Paras Pumps Private Limited, though assessee filed his return of income and he has filed his return manually on 05.11.2022 in the office of Income Tax Officer, Ward-3 Vapi, copy of acknowledgement was provided. The case was re-opened solely on the reasons that assessee has not filed his return of income and notice under section 148 was issued on 31.03.2017. The addition was made by Assessing Officer for the want of compliance and entire contractual receipts was added to the income of the assessee, which is once again added to the total income of assessee.

The NFAC/Ld. CIT(A) after considering the submission of assessee noted that claim of assessee that he has filed his return manually for assessment year 2010-11, but the assessee failed to provide copy of such return with acknowledgement. The assessee failed to discharge onus by producing cogent evidence and explanation thereto. The NFAC/Ld. CIT(A) further held that assessee failed to produce books of account, audit report and invoice with documentary evidence that in absence of evidence the addition made by Assessing Officer was confirmed. Further aggrieved the assessee has filed present appeal before the Tribunal.

On merit, the Ld. AR of the assessee submits it is settled law that entire contractual receipt cannot be treated as income and only income component on presuming net profit @ 8% as prescribed in under section 44AD would be taken as an estimation of income. The same was upheld by the tribunal who allowed the appeal of the assessee.

Citation: Ravindranath J. Mishra Vs. Income Tax Officer(ITAT Surat); ITA No.271/SRT/2022; 2010-11; 29.12.2022

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