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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
Assessee by : Shri Rasesh Shah- CA Respondent by : Miss Anupama Singla – Sr. DR सुनवाईक�तार�ख/ Date of Hearing : 23/09/2020 घोषणाक�तार�ख/Date of Pronouncement : : 16/10/2020 आदेश / O R D E R PER Dr. A. L. SAINI, ACCOUNTANT MEMBER:
By way of this appeal, the assessee has challenged correctness of the order dated 10.06.2016 passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act 1961 (in short “the Act”), for the assessment year 2013- 14. Grievances raised by the assessee are as follows: “[1] On the facts and in the circumstances of the case, as well as law on the subject; the learned Assessing Officer erred in applying the provisions of section 40(a)(ia) of the I.T. Act though it is not applicable to the assessee as the return of income was filed u/s.44AD of the Act declaring the profit more than @ 8% as per the provisions of law. [2] On the facts and in the circumstances of the case, as well as law on the subject, the learned Assessing Officer erred in disallowing interest expense amounting to Rs.10,12,346/- and Job work expenses of Rs.1,46,718/- u/s.40(a)(ia) of the Act without considering the facts of the case favorably. [3] On the facts and in the circumstances of the case, as well as law on the subject, the Honorable CIT (A)-2, Surat erred in confirming the addition made by the A.O. without considering the facts of the case favorably.
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar Your appellant therefore prays that looking to the facts and circumstances of the case, the addition made by the A.O. to the tune of Rs.11,59,064/- is required to be deleted.” Your appellant further reserves his right to add; alter or to amend any of the aforesaid grounds at the time of hearing of an appeal.”
Although in this appeal the assessee has raised multiple grounds of appeal, as noted above, but at the time of hearing, the solitary grievance of the assessee has been confined to the issue that since the assessee has filed return of income under section 44AD ‘Special provision for computing profits and gains of business on presumptive basis’ and declared the profit more than @ 8% as per the provisions of law therefore other additions made by the assessing officer to the tune of Rs.11,59,064/- (Interest expense amounting to Rs.10,12,346 + Job work expenses of Rs.1,46,718/- u/s.40(a)(ia) of the Act ) should be deleted.
3. The appeal arises this way. During the assessment year under consideration, the assessee was engaged in the business of manufacturing and sale of art silk grey fabrics. While doing scrutiny assessment, it was noticed by the assessing officer that assessee had taken total loan of Rs. 62/- lacs from Reliance Capital Limited bearing account no. RLLPSUR000195785 & RLLPSUR00199531. Assessee had made payment of interest of Rs.6,91,664/- to Reliance Capital during the year under consideration and debited above amount in profit and loss account. Further, it is also noticed that during the year under consideration assessee had paid total interest of Rs.3,20,682/- to various unsecured loan parties and paid total job work of Rs.1,46,718/- as twisting and weaving job work. The Assessing Officer (AO) noticed that assessee failed to make TDS on these interest payments to NBFC, Reliance Capital, various unsecured loan parties and contractor in contravention of the provisions of sections 194A/194C of the I.T. Act 1961. The ld. assessing officer further noticed that turnover of the assessee exceeded the monetary limits specified under clause (a) or clause (b) of section 44AB, during the financial year immediately preceding the financial year in which such interest is credited or paid, therefore the assessee shall be liable to deduct income tax
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar under section 194A/194C of the Act. The assessing officer observed that turnover of the assessee for AY. 2012-13 i.e. immediately preceding Financial Year 2011-12 was at Rs.1,17,61,829/- which was more than the monetary limit under section 44AB of the Act, therefore assessee should have deducted TDS on these payments, however, the assessee had failed to make TDS on these payments to NBFC, Reliance Capital, various unsecured loan and Contractor in contravention of the provisions of section 194A and 194C of the I.T. Act 1961. Therefore, assessing officer issued a show cause notice to the assessee to explain the reasons for non-deduction of TDS.
In response to the show cause notice, the assessee filed written submissions before the assessing officer, which is reproduced below (to the extent relevant for our analysis): "During the year under assessment, the assessee was engaged in the business of manufacturing & sale of Art silk grey fabrics and the return of income was filed u/s 44AD of I. Tax Act, 1961 on presumptive taxation basis showing Net profit @ 8.10% of total turnover i.e. (7,48,274/- / 92,33,844/-) which is evident from the return of income filed and records available with your honour vide earlier submissions. Sir, for your ready reference the provision of section 44AD of the Income Tax Act, 1961 is reproduced hereunder. 2. Sec.44AD.(1) - (Special provision for computing profits and gains of business on presumptive basis). "Notwithstanding anything to the contrary contained in sections 28 to 43C. in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession ". Sir, it is to be worth note that – “Sub section (1) of Sec. 44AD begins with a non-obstante clause and over- rides section 28 to 43C and therefore there is no applicability of deduction of TDS.
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar Accordingly, the provisions of section 40(a)(ia), shall not be applicable in the case of the assessee as he has opted for a presumptive taxation u/s.44AD which is very clear from the above provisions.”
However, the assessing officer rejected the contention of the assessee and held that when the presumptive tax rate is applied u/s 44AD of the Act, the said sum equal to 8 % of the total turnover is deemed to be the profit and gains of such business chargeable to tax under the head "Profits and gains of business or profession". It only means that the deduction allowable u/s 28 to 43C is deemed to have been already granted to the assessee. This is because the said provision u/s 28 to 43C are provision relating to the computation of business income of the assessee. However, a perusal of the provision of sec. 40(a)(ia) shows that the said provision is a "restriction" on the allowance of a particular expenditure representing statutory liability unless the same has been fulfilled. Further the control placed by the provision of section 44AD in respect of statutory limitation holds precedence over such allowance. This is because the dues to the crown has no limitation and has precedence over all other allowance and claims. The statutory liabilities are in order even though the assessee income has been offered and assessed under the provision of section 44AD of the Act. Further, at the beginning of the year assessee never knew that his turnover will be less than limit specified under clause (a) or clause (b) of section 44AB and liabilities of TDS arise at the beginning of the year. Therefore, the said amount of Rs.11,59,064/- (Interest Expenses Rs.10,12,346 + Job work charges Rs. 1,46,718) was disallowed by assessing officer u/s 40(a)(ia) of the I.T. Act 1961 and added to the total income of the assessee.
On appeal, the ld. CIT(A) has confirmed the action of the assessing officer. Aggrieved by the order of the ld. CIT(A), the assessee in appeal before us.
Shri Rasesh Shah, learned counsel for the Assessee, apart from his verbal arguments, has also submitted written submissions before the Bench. We have gone through the written submissions of the ld Counsel and noted that the sum and substance of his arguments and written submissions is that since the assessee had filed his return of income under section 44AD of the Act, during the relevant assessment
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar year and hence the provision of section 40(a)(ia) of the Act are not applicable, as the section 44AD begins with non-obstante clause therefore overrides sections 28 to 43C of the Act and therefore provision of section 40(a)(ia) are not applicable to the assessee under consideration, hence the addition made by the assessing officer may be deleted.
On merits of the case, ld. Counsel has submitted a chart before the Bench, which is part of his written submissions and explained each addition made by assessing officer and has also furnished the justification that why the disallowance on account of non-deduction of TDS should not be made. The said chart is reproduced below: “Assessee paid the amount of Rs.11,59,064/- on account of the interest and job work charges as per following details. Sr. Nature of Addition Amount Amount Remarks No 1 Interest paid to NBFC 6,91,664 6,91,664 Interest paid to NBFC – Reliance Capital Ltd. 2 Interest on unsecured 3,20,682 1,10,396 Late payment charges to loan Purchase parties and payment to each party is below Rs.5,000/- 70,161 Interest on Unsecured Loan obtained from Bipin Thakkar – HUF 81,000 Interest on Unsecured Loan obtained from two parties. 59,125 Other interest on Unsecured Loan. 3 Job work party 1,47,718 15,038 Jobwork Charges paid to one party for which TDS provisions u/s. 194C is not applicable as the amount paid is below Rs.30,000/- 1,31,680 Other Jobwork Charges Total Addition 11,59,064 11,59,064
Miss Anupama Singla, Learned Departmental Representative for the Revenue, has contended that turnover of the assessee for AY. 2012-13 i.e. immediately preceding Financial Year 2011-12 (AY 2012-13) was at Rs.1,17,61,829/- which was Page | 5
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar more than the monetary limit under section 44AB of the Act, therefore assessee cannot take the advantage of section 44AD of the Act, hence assessee should have deducted TDS on these payments, however, the assessee had failed to make TDS on these payments therefore assessing officer has rightly disallowed these payments. She also contends that liability to deduct TDS arises at the beginning of the year and the assessee did not know whether his turnover during the assessment year 2013-14 would be within the limits of section 44AD of the Act. Since the turnover of the assessee during the previous assessment year 2012-13 was at Rs.1,17,61,829/- which was more than the monetary limit under section 44AB of the Act, hence, assessee should get his accounts audited under section 44AB of the Act and consequently the assessee is responsible to deduct the TDS on these payments.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld. CIT(A) and other materials brought on record. We note that solitary grievance of the assessee in the grounds of appeal raised by him pertains to applying the provisions of section 40(a)(ia) of the IT Act, though not applicable as per assessee, as the return of income was filed by assessee under section 44AD of the Act declaring the profit more than @8% as per the provisions of law. However, the assessing officer disallowed interest expense amounting to Rs. 10,12,346/- and job work expenses of Rs. 1,46,718/-, aggregating Rs. 11,59,064/- under section 40(a)(ia) of the Act. The contention of the assessing officer is that the provisions under sections 28 to 43C of the Act are provision relating to the computation of business income of the assessee, whereas the provision of section 40(a)(ia) of the Act is kind of a "restriction" on the allowance of a particular expenditure representing statutory liability unless the same has been fulfilled. The control placed by the provision of section 44AD in respect of statutory limitation holds precedence over such allowance. This is because the dues to the crown has no limitation and has precedence over all other allowance and claims. The statutory liabilities are in order even though the income has been offered and assessed
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar under the provision of section 44AD of the Act. Therefore, assessee can not take the shelter of provisions of section 44AD of the Act, as section 44AD of the Act can not override the provisions of section 40(a)(ia) of the Act, even if section 44AD of the Act starts with non-obstante clause.
Let us examine the contention of the assessing officer, as noted by us in above para. Undisputed facts in the assessee`s case are that during the assessment year 2013- 14 under consideration, the return of income was filed by the assessee under section 44AD of the Act, on presumptive taxation basis showing Net profit @ 8.10% of total turnover, which is evident from the return of income filed by the assessee and records available with the assessing officer. The turnover/sales of the assessee for the assessment year 2013-14 is to the tune of Rs.92,33,844/-, which is below the threshold limit of one crore rupees as prescribed in section 44AD of the Act. The assessing officer was of the view that the assessee cannot take the benefit of provisions of section 44AD of the Act therefore, the assessee was liable to deduct TDS under section 40(a)(ia) of the Act to the tune of Rs.11,59,064/-. Now, the question before us is that whether the assessee can take the advantage provided in section 44AD of the Act?
Let us, first of all, consult the provisions of section 44AD of the Act, which is reproduced below (to the extent relevant for our analysis):
“Section 44AD (1) - Special provision for computing profits and gains of business on presumptive basis. Notwithstanding anything to the contrary contained in sections 28 to 43C in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession ". We note that sub section (1) of section 44AD begins with a non-obstante clause and overrides section 28 to 43C of the Act. That is, from the bare reading of section 44AD of the Act, it can be seen that it starts with a "non obstante clause".
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar "Notwithstanding anything to the contrary contained in section 28 to 43C ". This goes to prove that the provisions of section 44AD of the Act overrides all other provisions contained in section 28 to 43C of the Act. Admittedly, the provisions of section 40(a)(ia) of the Act falls within this range of sections 28 to 43C of the Income Tax Act. Hence, we do not agree with the contention of the assessing officer to the effect that the assessee cannot take the benefit of provisions of section 44AD of the Act, for that we rely on the judgment of the SMC Bench, Kolkata in the case of Jaharlal Mukherjee v. ITO (in (Kolkata -Trib), A.Y.2008-09, order dated 05.08.2015, wherein it was held as follows:-
“10. Ground Nos. 3, 5, 6 and 7 are identical in nature and taken up together herein. The ld. DR did not refute the claim of the assesee in respect of applicability of section 44AD for A.Y.2008-09. For the sake of convenience the provision of section 44AD is reproduced hereunder :- "44AD (1) Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head "profits and gains of business or profession". Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or payable exceed an amount of forty lakh rupees." For the purpose of this section, the expression "civil construction includes” (a) Construction or repair of any building, bridge, dam or other structure or of any canal or road; (b) The execution of any works contract. The provision of section 44AD of the Act contemplates that the income determined under the presumptive scheme is optional and provides system of rebuttal. A person can claim that his income of the above mentioned business is lower than the specified estimate of income. In such a case, he must produce necessary evidences to prove his case duly supported by a report from an Page | 8 ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar accountant in accordance with section 44AB of the Act. The assessee is entitled to claim the benefit of presumptive tax u/s 44AD of the Act if he had reported the net profit of more than 8% of the turnover. In the instant case, the assessee had reported the net profit at 10.56% of its turnover during A.Y.2008-09. Hence, I hold that the claim made by the assessee in his income be determined in accordance with the provision of section 44AD of the Act is in order. Accordingly the ld. AO is directed to accept the taxable income reported by the assessee as income reported u/s 44AD of the Act on presumptive basis.
11. The next issue is to be decided in this appeal is as to whether the provision of section 40(a)(ia) of the Act can be made applicable for the assessee when his income is determined in accordance with the presumptive scheme u/s 44AD of the Act. From the bare reading of section 44AD of the Act, it can be seen that it starts with an "non obstante clause". "Notwithstanding anything to the contrary contained in section 28 to 43C ". This goes to prove that the provisions of section 44AD of the Act overrides all other provisions contained in section 28 to 43C. Admittedly, the provisions of section 40(a)(ia)of the Act falls within this range of sections 28 to 43C of Chapter-XVII B of the I.T. Act. When an income is presumptively taxed u/s 44AD of the Act any further business income by applying the provisions of sections 28 to 43C (including section 40(a)(ia) of the Act) would get telescoped with the presumptive income determined. For this reason, the legislature had provided section 44AD of the Act with a non obstante clause having an over riding effect over other provisions of sections 28 to 43C of the Act. It is pertinent to dwell upon the impact of non obstante clause at this stage. It is well known that the non obstante clause is a legislative device which is usually employed to give over riding effect to certain provisions over sum contrary provision that may be either in the same enactment or some other enactment to say "to avoid the operation and effect of all contrary provisions". Reliance is placed in this regard on the following decisions : (i)Union of India vs. G.M.Kokial reported in AIR 1984 (SC) 1022 at page 1026. (ii)R.M. Adaikalava, vs. State of Tamil Nadu reported in 238 ITR 263 at 674 (Madras Full Bench decision). It is well settled that while dealing with the "non obstante clause" in which the legislature wants to give overriding effect to section. "it must try to find out to the extent legislature had intended to give one provision over riding effect over another provision. Such intention of the legislature in this behalf is to be gathered from the ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar enacting part of the section. Reliance is placed in this regard on the decision of the Hon'ble Apex Court in the case of A.G. Varadarajulu vs. State of Tamil Nadu (1998) 146 CPR (SC) 117 at page 123. A clause beginning with an expression "Notwithstanding anything contained in this Act or in some particular act or in any law for the time being in force or in any contract" is more often than not appended to a section in the beginning with a view to give the enacting part of the section in case of conflict, over riding effect over the provision of the Act or the contract mentioned in the "non obstante clause." It is equivalent to say that in spite of the provision of the case or any other act in the "non obstante clause" or any contract or documents mentioned, the enactment following it will have its operation or that the provision embraced in the non obstante clause would not be impediment for an operation of an enactment. Reliance is placed in this regard on the decision of the Hon'ble Apex Court in the case of Chandavarkar Sita Ratna Rao vs. Ashalata S.Guram reported in AIR (1987) (SC) 117 at page 134. The words "shall deemed" or the key words and they are indicative of the legislative intent that the tax shall be chargeable on presumptive income, computed as per sub- section (1) of section 44AD of the Act. The very purpose of the very enactment of section 44AD of the Act is to provide hassle free proceedings. Such proceedings are made to complete the assessment provided the conditions laid down in such enactment are fulfilled. The assessment of income under presumptive basis u/s 44AD is similar to the income determined on an estimated basis by the AO after rejecting the books of account of the assessee. Once the books are rejected the doors of the AO are closed for looking after other provisions of the Act which are relevant for determining the business income of the assessee, unless or otherwise specifically provided in the provisions of section 44AD of the Act itself such as allowance of interest and remuneration to partners in the case of a partnership firm. Reliance is placed in this regard on the decision of Hon'ble Andhra Pradesh High Court in the case of Indwell Constructions vs CIT reported in 232 ITR 776 (AP), wherein Lordships had held as under :- "The pattern of assessment under the Income-tax Act, 1961, is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D of the Act. Section 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Income-tax Officer may reject those books and estimate the income to the best of his judgment. When such an Page | 10 ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar estimate is made, it is in substitution of the income that is to be computed under section 29. In other words all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account." This decision supports the view that when the assessee cannot claim any expenses after applying the net profit rate, then the AO too cannot make addition after applying the net profit rate. Even if the assessee commits any default under Chapter XVIIB of the Act with regard to the TDS provision, it is only for the TDS officer to take suitable action on the assessee, the doors of the AO are absolutely shut when the income is determined on presumptive basis u/s 44AD of the Act. In view of the aforesaid facts and circumstances, the legal provision of section 44AD of the Act shows an overriding effect over other provisions contained in section 28 to 43C of the Act, I hold that the provisions of section 40(a)(ia) of the Act cannot be invoked in the instant case as the income is directed to be determined on presumptive basis u/s 44AD of the Act. Accordingly, ground Nos.3,5,6 and 7 are allowed in favour of the assessee. The next issue to be decided in this appeal is as to whether section 40(a)(ia) of the Act, in fact and circumstances of the instant case, are applicable in respect of amounts payable on the date of balance sheet and not on the amounts paid before the end of the previous year. This issue does not warrant any deliberation as I have held in the facts and circumstances of the case, the provisions of section 40(a)(ia) per se are not applicable as the income of the assessee is directed to be determined u/s 44AD on presumptive basis. Accordingly, this ground becomes infructuous. Ground Nos.9 to 12 were withdrawn by the ld. AR during the course of hearing and has recorded the statement from the bar. Ground Nos. 9 to 12 are dismissed as not pressed.
We note that assessing officer in his order dated 8.02.2016, vide Para No. 7.6 at Page 7 of the assessment order, wherein the assessing officer has stated that assessee’s turnover for Assessment Year 2012-13 was at Rs.1,17,61,829/-, which was more than the monetary limit under sections 194A/194C of the Act, therefore assessee is liable to deduct TDS. We note that, first of all, the turnover of Rs.1,17,61,829/- relates to Assessment Year 2012-13 and it does not relate to Assessment Year 2013-14 which is under consideration. Therefore, the said turnover of Rs.1,17,61,829/- which does not relate to Assessment Year 2013-14 should not be utilized by the assessing officer to make the assessee responsible to deduct the TDS and to get the accounts audited under section 44AB of the Act. The turnover/sales of the assessee for the assessment year
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar 2013-14 is to the tune of Rs.92,33,844/-, which is below the threshold limit of one crore rupees as prescribed in section 44AD of the Act, therefore the assessee has opted the benefit of provisions of section 44AD of the Act. The turnover of the previous Assessment Year 2012-13 should not be utilized by the assessing officer to make the assessee liable to deduct TDS in the Assessment Year 2013-14, as each Assessment Year is a different assessment unit. Thus, it is abundantly clear from the above facts that since the assessee’s turnover for the Assessment Year 2013-14 is to the tune of Rs.92,33,844/- and the assessee had filed the return of income on presumptive basis u/s.44AD of the Act, therefore assessee is entitled to take the benefit of the provisions of section 44AD of the Act, and hence assessee is not liable to deduct TDS under section 40(a)(ia) of the Act. For that we rely on the judgement of the Co-ordinate Bench of ITAT Kolkata in the case of ITO v. Mark Construction (2012) 23 taxmann.com 398 (Kol.), wherein it was held as follows:-
“6. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that the observations made by ld. CIT(A) in the impugned order which are incorporated in the preceding paragraphs, in our opinion, is in accordance with law. In the case of CIT vs Surendra Paul reported in 242 CTR 61 (P&H) the Hon'ble Punjab and Haryana High Court has held that once under the special provision of section 44AD of the IT Act exemption from maintenance of books of accounts have been provided and the presumptive tax at 8% of the gross receipts itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposits in the bank unless such entries had no nexus with the gross receipts. In the present case though from the details filed by assessee the ld. AO observed that no TDS has been recovered, in our opinion, since assessee has disclosed the profits more than 8% of the gross receipts and there is no dispute in receipt of the gross receipts the addition made by ld. CIT(A) u/s 40(a)(ia) of the IT Act is not sustainable. Therefore we confirm the action of ld. CIT(A) and dismiss the appeal of the revenue.
We note that assessing officer also took the stand and contended that “the dues to the crown has no limitation and has precedence over all other allowance and claims”. We note that provisions of section 44AD have been enacted by the Legislature/Crown to provide benefit to small businessmen in terms of cost savings. A Page | 12
ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar small businessmen having turnover below the specified limit, say, in assessee`s case the turnover/sales is below one crore rupees, therefore he need not to maintain books of accounts and need not to get the books of accounts audited from a Chartered Accountant, under section 44AB of the Act, this way, there is a cost saving in the hands of the assessee (small businessmen). This benefit (cost saving) has been provided by the Legislature/Crown to the small businessmen in India by enacting the provisions of section 44AD of the Act. Therefore, at the cost of repetition we state that the Legislature/Crown has enacted the provisions of section 44AD of the Act with a "non obstante clause". "Notwithstanding anything to the contrary contained in section 28 to 43C ". This goes to prove that the provisions of section 44AD of the Act overrides all other provisions contained in section 28 to 43C of the Act. At this juncture it is also important to note that Article 265 of the Constitution of India lays down that, “No tax shall be levied or collected except by authority of law”. The Hon’ble Supreme Court of India has held that the provision under Article 265 of the Constitution of India is applicable not only for levy but also for the collection of taxes and the expression “assessment” within its compass covers both the aspects carried out by the executive functionary [Chottabhai Vs. Union of India 1962 SCR Supl.2 1006]. Therefore, it is required that whole of the process of taxation must follow the procedures which are valid under the law and must adhere to law i.e. substantive one as well as procedural one too. Therefore, in other words it is provided in the Constitution of India that every step should be taken to ensure that levy and collection of the taxes is strictly in accordance with law – not only substantive one but the procedural law, as well. Therefore, we do not agree with the statement of the assessing officer to the effect that “the dues to the crown has no limitation and has precedence over all other allowance and claims.” The assessee’s turnover for the Assessment Year 2013-14 is to the tune of Rs.92,33,844/- which is below one crore rupees, the threshold limit prescribed u/s 44AD of the Act and the assessee had filed the return of income on presumptive basis u/s.44AD of the Act therefore assessee is entitled to take the benefit of the provisions of section 44AD of the Act. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the ITA 2126/Ahd/2016 Assessment Year.2013-14 Bipinchandra Hiralal Thakkar considered view that the assessee is entitled to take the benefit of the provisions of section 44AD of the Act. Based on the above factual position narrated above and precedents applicable to the facts, it is abundantly clear that assessee is not liable to deduct TDS under section 40(a)(ia) of the Act, therefore we delete the addition of Rs.11,59,064/-. As we have allowed the assessee`s appeal on legal ground, therefore all other issues on merits of the additions, in the impugned assessment proceedings are rendered academic and infructuous.
In the result, the appeal filed by the assessee is allowed.
Order is pronounced on 16/10/2020, as per Rule 34 of Income Tax Appellate Tribunal, Rule 1963.