Loading judgment…
Facts
The assessee, a non-resident, filed an income tax return declaring professional income. The Assessing Officer invoked Section 44ADA of the Income Tax Act, 1961, on the grounds that proper books of account were not maintained, and applied presumptive taxation at 50%. The CIT(A) upheld this.
Held
The Tribunal held that Section 44ADA of the Income Tax Act, 1961, is applicable only to residents in India and not to non-residents. Therefore, invoking this section in the present case was unjustified.
Key Issues
Whether Section 44ADA of the Income Tax Act, 1961, is applicable to a non-resident assessee.
Sections Cited
44ADA, 143(1), 154, 30, 38, 44AB, 145(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S.RIFAUR RAHMAN
(Assessment Year: 2020-21) Bharat Jain, vs. ADIT – CPC, Flat No.133, Pocket G, SFS Flats, Bengaluru. Maharaja Agarsen Marg, Sarita Vihar, New Delhi – 110 076. (PAN : AAAPJ4180E) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Nitin Kanwar, Advocate Shri Shivam Jain, Advocate Shri Rajiv Kumar, Advocate REVENUE BY : Shri Ramesh Chand, Sr. DR Date of Hearing : 14.05.2024 Date of Order : 06.08.2024 O R D E R
PER S.RIFAUR RAHMAN,ACCOUNTANT MEMBER :
This appeal has been filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) [“ld. CIT(A)”, for short] dated 28.08.2024 for the Assessment Year 2020-21.
At the time of hearing, ld. AR of the assessee brought to our notice return of income filed by the assessee for the AY 2020-21 wherein the status of ITR 3 filed on 16.12.2020 with the acknowledgement no.826193800161220. With the above facts on record, he submitted that the authorities below proceeded to apply the provisions of section 44ADA of the Income-tax Act, 1961 (for short ‘the Act’) for the reason that assessee has not maintained proper books of account for carrying on the professional activities, therefore, they applied the presumptive tax @ 50%. He submitted that provisions of section 44ADA are not applicable to the non-resident and it was wrongly applied in assessee’s case. He further submitted that the ld. CIT (A) dismissed the appeal by observing as under:-
“4.2 Aggrieved by the said denial of carried forward of loss from profession of Rs.10,07,790/-, which according to the appellant was due to an erroneous entry, not appreciated by the CPC, the appellant had preferred an appeal and submitted Form No.35 together with SoF and GoA which were carefully considered. Subsequently, a paper book contained in 123 sheets of paper were submitted and the same were examined. 4.3 The solitary grievance of the assessee is that the restriction of loss to be carried forward to Rs.24,371/- as against the claim of Rs.10,31,161/- is illogical and it was due to an erroneous entry which requires to be corrected. Therefore, the examination of the entries in column nos.64 & 65 of ITR-3 plays the essential process of adjudication in the case under consideration. For easier comprehension the screenshot of the relevant columns, is captured and provided below:
4.4 It is evident from the entries in the column nos.64 & 65 of ITR-3 that the appellant had not maintained proper books of accounts in his professional activity and hence the computation of total income is made in accordance to the provision of section 44ADA on a presumptive basis. The gross receipt in the profession of the appellant is Rs.1000/- and after providing for the deduction @ 50% on the total gross receipts, the taxable income ought to be Rs.500/-, since, as per the provisions of section 44ADA, all deductions allowable u/s 30 to 38 are deemed to be allowed. 4.5 Therefore irrespective of the fact that the expenditure has been incorporated in a wrong column or otherwise, the entire claim of expenditure, cannot be allowed and therefore the restriction imposed by the CPC while processing the return of income u/s 143(1) and the subsequent rejection for rectification u/s 154 is found to be in order and does not call for any interference. The JAO is directed to compute the taxable income accordingly.
As a result, the grounds of appeal
of the appellant are dismissed.” Accordingly, he prayed that the addition proposed by the Assessing Officer and sustained by the ld. CIT (A) is not justified.
3. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
4. Considered the rival submissions and material placed on record. The assessee is a non-resident and filed the return of income as such. However, the Assessing Officer observed that assessee has declared professional income in his return of income and observed that assessee has not maintained proper books of account as per section 44ADA of the Act and accordingly, he invoked the same and proposed addition. As per the provisions of section 44ADA, this section is not applicable to the non- India which is applicable only to the professionals who were resident in India. Therefore, invoking the provisions of section 44ADA in the present case is unjustified. Accordingly, we allow the grounds raised by the assessee by deleting the addition proposed by the Assessing Officer.
5. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 6th day of August, 2025.