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CA Pratibha Goyal | Apr 20, 2022 | Views 139561

Provisions of Presumptive Taxation (Section 44AD) cannot be applied to commission agents: ITAT

Provisions of Presumptive Taxation (Section 44AD) cannot be applied to commission agents: ITAT

The issue in this appeal of the assessee is as regards to the order of CIT(A) confirming the action of AO in computing the profits and gains of business on a presumptive basis on Section 44AD of the Act by applying profit rate @ 8% of total turnover.

Facts of the Case

Income Tax Appellant Tribunal (ITAT) noted that the assessee is an individual and is engaged in the commission agency business of agricultural produce and earning income as a commission agent. The AO noticed that the assessee has filed his return of income on 27.11.2018 admitting taxable income at Rs.2,84,824/-. During scrutiny assessment proceedings, the AO noticed that the assessee carried on business, and total credit comes to Rs.1,58,01,195/- after deducting sweep transfer out of total credit in the bank account at Rs.3,28,51,635/-. The AO computed the profit and gains of business on a presumptive basis after applying the provision of section 44AD of the Act and assessed the net profit equal to 8% of the total credits of Rs.1,58,01,195/- and thereby added the estimated income at Rs.9,79,272/- and assessed total income at Rs.12,64,096/-.

Aggrieved assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the AO. Aggrieved, the assessee is in appeal before the Tribunal.

ITAT Order

4. We noted that the legal position is very clear that profit rate as mentioned in the provisions of Section 44AD of the Act, cannot be applied to commission agents who are doing business of agency commission or earning commission income only in view of provisions of Section 44AD(6)(iii) of the Act. Hence, as canvassed by ld. counsel for the assessee, a reasonable profit can be estimated. Accordingly, we estimate the profit at the rate of 4% of total credits determined by the AO at Rs.1,58,01,195/-, after deducting sweep transfers. The AO will recompute the income accordingly.

5. In the result, the appeal filed by the assessee is allowed for statistical purposes.

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