2020 (2) TMI 837 - HC - Income Tax

Deemed profit in Section 44AD - profit earned by the appellant is more than the percentage of profit - appellant, submits Subsection 5 thereof was not applicable to the assessment of the assessee s income for the subject assessment year - Whether assessee was not required to maintain audited books of account in respect of the transaction -, the appellant is aggrieved for non-admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 HELD THAT - Same should be borne in mind by the learned tribunal in deciding the matter afresh as we propose to direct. Part of the impugned order dated 24th August, 2018 which relates to the questions formulated in paragraph 7 of the petition is set aside with a direction upon the tribunal to reconsider the matter afresh, deciding the applicability of Section 44AD particularly sub-Section 5 thereof, by admitting additional evidence as prayed for under Rule 29 of the said Rules, 1963 and also dealing with the questions of law and facts raised in paragraph 7 of the petition by a reasoned order within six months of communication of this order.

Summary

Issues Involved:
1. Interpretation of Section 44AD of the Income Tax Act, 1961 regarding deemed profit percentage.
2. Admissibility of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.

Interpretation of Section 44AD:
The appellant argued that the profit earned exceeded the stipulated percentage in Section 44AD, making Subsection 5 inapplicable and negating the need for audited books of account. The tribunal's insistence on audited books was deemed a legal error, as the income should have been determined from the maintained books of account. The court acknowledged the significance of these points and directed the tribunal to reconsider the matter, focusing on the applicability of Section 44AD, specifically Subsection 5. The tribunal was instructed to admit additional evidence as per Rule 29, while addressing the legal and factual issues raised in the petition within six months.

Admissibility of Additional Evidence:
The appellant was aggrieved by the non-admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The court recognized the importance of this issue and directed the tribunal to reconsider the matter, allowing the admission of additional evidence as requested. The tribunal was instructed to provide a reasoned order addressing the questions of law and facts raised in the petition within six months of the court's communication of the order.

Conclusion:
The High Court of Calcutta, comprising Justice I. P. Mukerji and Justice Md. Nizamuddin, set aside part of the impugned order and directed the tribunal to review the matter afresh, considering the interpretation of Section 44AD and the admissibility of additional evidence. The appeal and stay application were disposed of accordingly, emphasizing the importance of proper assessment based on the relevant legal provisions and evidence.