2022 (5) TMI 1216 - AT - Income Tax

Assessment u/s. 44AD on presumptive basis - Estimation of profit - assessee before us made statement at bar that he has maintained books of account, which were produced before the AO during scrutiny assessment proceedings and even now he is ready to produce before the AO, in case the matter is remanded back to the file of the AO - HELD THAT - As it is clear that the assessee can declare lower profit also in case the assessee has maintained books of account and in this case, as claimed by the assessee before Bench that he has maintained books of account, in that eventuality we are of the view that the orders of lower authorities needs set aside. Hence, the orders of lower authorities are set aside and matter remanded back to the file of the AO for making assessment on the basis of books of account. Accordingly, the AO will reframe the assessment after allowing reasonable opportunity of being hearing to the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
1. Assessment made under section 44AD despite maintaining books of account as per section 44AA.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai arose from the order of the Commissioner of Income Tax (Appeals) confirming the assessment made by the Income Tax Officer under section 44AD of the Income Tax Act, 1961. The only issue raised by the assessee was against the action of the assessing officer in making the assessment under section 44AD on a presumptive basis, despite the fact that the assessee had maintained books of account as required under section 44AA. The assessing officer had computed the profit rate at 8% and made an addition to the income. The Commissioner of Income Tax (Appeals) upheld the assessing officer's action, stating that since the turnover was below Rs. 1 crore and the assessee's business fell under the eligible category as per section 44AD, the provisions of that section were applicable.

The assessee contended that since books of account were maintained and produced during the scrutiny assessment, the assessment should have been made as per the normal provisions of the Act and not under section 44AD. The Appellate Tribunal noted that the assessee had indeed maintained books of account, which allowed for the declaration of lower profits as per section 44AD(5) if the total income exceeded the exempted limit. Therefore, the Tribunal set aside the orders of the lower authorities and remanded the matter back to the assessing officer for making the assessment based on the books of account. The assessing officer was directed to reframe the assessment after providing a reasonable opportunity for the assessee to be heard.

In conclusion, the appeal of the assessee was allowed for statistical purposes by the Appellate Tribunal ITAT Chennai, emphasizing the importance of making assessments in accordance with the provisions of the Income Tax Act based on the maintenance of books of account as required by law.