K H & ASSOCIATES ,MUMBAI vs. CIT (A), MUMBAI

Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has upheld the taxing of the amount of Rs.8,35,111/- under section 44ADA of the Act by dismissing the appeal. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeal.

I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.

At the very outset, the Ld. A.R. for the assessee challenging the impugned order passed by the Ld. CIT(A) contended that he has been wrongly treated as a professional by the Ld. CIT(A) rather he is only into the business of liasoning and consulting relating to construction industry viz. to get various types of approvals from various local authorities [Brihanmumbai Municipal Corporation) (BMC), Slum Rehabilitation Authority (SRA), Maharashtra Housing and Area Development Authority (MHADA) etc.] for their projects or plans which are prepared by their professional architects. The assessee being conversant with development laws and local Marathi language is in position to get things done faster, which is precisely a liasoning work which does not require any professional qualification or technical knowhow.

Undisputedly, while processing the return of income filed by the assessee, CPC, Bangalore has invoked the provisions contained under section 143(1)(a)(vi) which was applicable for A.Y. 2017-18 only, the year under consideration, as the same were thereafter abolished and made the adjustment under section 44ADA of the Act. It is also not in dispute that the assessee was in receipt of Rs.9,63,855/- out of which it offered to pay presumptive tax under section 44AD of the Act on Rs.8,35,111/- and an income of Rs.59,236/- was offered under the head “income from business or profession”. It is also not in dispute that CPC while passing the order under section 154 (supra) has taxed the entire receipt of Rs.8,35,111/- (on which TDS has been deducted under section 194J) by applying the provisions contained under section 44ADA of the Act and not under section 44AD of the Act as claimed by the assessee.

In the backdrop of the aforesaid facts and circumstances of the case the sole question raises for determination in this case is: “as to whether the assessee is entitled to be taxed on its entire receipt of Rs.8,35,111/- under section 44ADA of the Act as TDS was deducted on the said amount under section 194J of the Act.”

CPC, Bangalore as well as Ld. CIT(A) have proceeded to tax the amount of Rs.8,35,111/- by treating the assessee as “professional” and taxed him under section 44ADA of the Act on the ground that the same was in the nature of professional receipt in view of form 26AS wherein TDS was deducted on these payments under section 194J of the Act and further observed that the assessee has wrongly applied the provisions contained under section 44AD of the Act.

First of all it is to be deduced from the facts on record and law applicable thereto as to whether the assessee who claims himself to be into liasoning and consulting business, falls under the category of “professionals”.

Under section 44AA of the Act definition of “professional” is given which is as under: “44AA. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.” 11. Vide notification No.S.O.17(E) [No.1619] dated 12.01.1977 some other professions have been notified which is as under: “SECTION 44AA OF THE INCOME-TAX ACT, 1961 - 'OTHER PROFESSIONS' NOTIFIED UNDER SUB-SECTION (1) FOR THE PURPOSES OF COMPLIANCE OF REQUIREMENT NOTIFICATION NO. S.O. 17(E) [NO. 1619], DATED 12-1-1977 In exercise of the powers conferred by sub-section (1) of section 44AA of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby notifies for the purposes of the said sub- section the following professions, namely: (a) the profession of authorised representative; and (b) the profession of film artist. Explanation : In this notification,— (a) "authorised representative" means a person, who represents any other person, on payment of any fee or remuneration, before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy; (b) "film artist" means any person engaged in his professional capacity in the production of a cinematograph film, whether produced by him or by any other person, as—

Bare perusal of the provisions contained under section 44AA and notification No.17E(supra) goes to prove that assessee being into liasoning and consulting relating to construction industry does not fall under the definition “professional” because assessee is not a qualified person, in any manner whatsoever so as to treat him at par with other professionals viz. legal, medical, engineering, architect etc.

Merely because of the fact that deductor of the assessee have deducted the tax under section 194J instead of section 194C, as is evident from 26AS entire receipt of the assessee cannot be brought to tax as a professional.

Even otherwise deductor of the assessee was not under the control of assessee who is required to file his return of income on the basis of his business and document available with him, who has opted to pay the presumptive tax under section 44AD of Rs.8,35,111/- and an income of Rs.59,236/- was offered under the head “income from business or profession”. Even otherwise adjustment made by the CPC under section 143(1)(a)(vi) is beyond the scope of section and power of CPC. Furthermore, instead of

In view of what has been discussed above, adjustment made by CPC under section 143(1)(a), under which only prima-facie adjustment which is apparent on record can be made in the form of arithmetic error or erroneous deductions etc., is not sustainable in the eyes of law, hence ordered to be deleted.

Resultantly, the appeal filed by the assessee is allowed.