2024 (11) TMI 390 - AT - Income Tax

Determination of Turnover for presumptive taxation u/s 44AD - assessee submits that receipts cannot be treated as ancillary receipts because assessee has already offered income @ 6% of the total turnover from eligible business in totality of his business income and not on item-wise basis - HELD THAT - CIT(A) after considering the sale bills and ledger account considered the case of the assessee regarding his turnover being genuine. So, this point is not in dispute that total turnover of the assessee during the year under consideration was Rs. 64,74,859/- and not Rs. 74,26,060/-. Calculation of turnover - We are in this view that Section 44AD of the Act is at all applicable to the case of the assessee for the relevant AY 2018-19. So far, the decisions relied upon by the CIT(A) are concerned, the said decision dealt in Section 80IB - As the present case is with regard to Section 44AD of the Act. There is a clear distinction in the facts of the decision of the Hon'ble Apex Court and the present case. As we have already discussed in our preceding paragraph that the assessee has offered tax which according to him inadvertently not offered earlier. He has already given a chart that he is ready to pay as per the provisions made u/s 44AD of the Act and offer to tax of total turnover considered for income @ 6%. We are in this view to accept the contention of the assessee and accordingly, the appeal of the assessee is allowed by setting aside the order of the ld. CIT(A) and the ld. AO. The ld. AO is directed to accept the new offered to tax as mentioned by the assessee in chart (supra) and give effect to. Appeal filed by the assessee is allowed.

Summary

Issues Involved:

1. Determination of the correct turnover for presumptive taxation under Section 44AD of the Income Tax Act.
2. Addition of Rs. 25,37,352/- on account of sale of license and duty drawback receipts.
3. Addition of Rs. 6,36,509/- under the head 'Income from other sources'.

Issue-wise Detailed Analysis:

1. Determination of the Correct Turnover for Presumptive Taxation:

The primary issue was the discrepancy in the turnover figures reported by the assessee and those computed by the Assessing Officer (AO). The assessee reported a turnover of Rs. 64,74,859/- for the AY 2018-19, while the AO computed it as Rs. 74,26,060/-. The AO included four sale bills that were accounted for in the previous financial year (FY 2016-17). The Commissioner of Income-tax (Appeals) [CIT(A)] directed the AO to verify these claims and delete the addition if found correct. Upon review, it was established that the correct turnover was indeed Rs. 64,74,859/-, and this was accepted by the Tribunal, confirming the CIT(A)'s decision on this point.

2. Addition of Rs. 25,37,352/- on Account of Sale of License and Duty Drawback Receipts:

The AO added Rs. 25,37,352/- to the income, which included Rs. 20,26,817/- from the sale of license and Rs. 5,10,535/- from duty drawback receipts. The CIT(A) upheld this addition. The assessee argued that these receipts were part of the gross receipts and should be taxed under the presumptive scheme of Section 44AD, which allows for taxation at 6% of the total turnover. The Tribunal referenced Section 28 of the Income Tax Act, which includes duty drawback as part of business income. The Tribunal also considered guidance from the Institute of Chartered Accountants of India and precedents from ITAT Delhi and Jaipur, which supported the inclusion of duty drawback in gross receipts. Consequently, the Tribunal accepted the assessee's contention, finding that the duty drawback and license sale receipts should be included in the presumptive taxation scheme, thereby allowing the appeal on this ground.

3. Addition of Rs. 6,36,509/- under the Head 'Income from Other Sources':

The AO added Rs. 6,36,509/- under 'Income from other sources', which included sundry balances written back and miscellaneous receipts. The assessee contended that these should be part of the business income under Section 44AD. The Tribunal, after reviewing the provisions of Section 44AD and relevant case law, concluded that the income from sundry balances written back and miscellaneous receipts should be included in the presumptive taxation scheme. The Tribunal found that these items were ancillary to the business and should be considered part of the gross receipts for presumptive taxation purposes.

Conclusion:

The Tribunal allowed the appeal, setting aside the orders of the CIT(A) and the AO. The AO was directed to accept the revised computation of income offered by the assessee, which included the turnover and additional receipts under the presumptive taxation scheme of Section 44AD. The appeal was pronounced in favor of the assessee, allowing the inclusion of all disputed receipts in the presumptive taxation framework.