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Facts
The assessee, a contractor, filed its return of income for AY 2017-18, declaring income at 8% of gross receipts under Section 44AD. However, the CPC added the entire contract amount to the assessee's income. The CIT(A) dismissed the assessee's appeal for non-response due to the counsel's hospitalization.
Held
The Tribunal noted that Section 44AD allows for presumptive taxation without detailed accounts and that the assessee's counsel's hospitalization was a reasonable cause for delay. The matter was set aside to the CIT(A) for a fresh decision.
Key Issues
Whether the entire contract amount can be added to income when income was offered under presumptive taxation scheme (Section 44AD)? Was the dismissal by CIT(A) justified due to counsel's hospitalization?
Sections Cited
44AD, 143(1), 250
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सुनवाई की तारीख/Date of Hearing : 13/03/2025 उदघोषणा की तारीख/Date of Pronouncement : 20/03/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 22/12/2022 pertaining to Assessment Year 2017-18. 2. In the present appeal Assessee has raised the following grounds of appeal:
1. The Assessee is a Contractor and have taken contracts of PWD and Public Health Department with material. The Assessee filed return of Income Calculating 8 % income on gross receipts of Rs. 53,24,667/-. However, vide intimation order dated 27- 03-2019 whole contract amount of Rs. 53,24,667/- is added.
2. That the contract amount included material and labour costing. No material cost of labour charges, so paid by the Assessee have been deducted. Rather whole contract amount is added which is unsustainable.
3. That the bills of work have been duly submitted in the relevant Government Department and only then the amount of such contracts were released by such Govt. Department. Thus, the expenses are wholly legible and as such the addition made is unsustainable.
4. That the Income computed on the amounts of Contracts was as per Section 44AD of The Income Tax Act. The income was computed at 8 % of gross receipts of contract money of Rs. 53,24,667/- Thus the addition made as per Intimation order dated 27-3-19 is liable to be deleted.
That the AO has arrived to the decision merely on the basis of presumption. There is no reference to any document or statement.
6. That the counsel for the Assessee was also hospitalized in the month of October to December 2022 as having severe pain in Gall Bladder due to Stones. He was operated for the same. 7. That the CIT (A) Karnal has erred in ignoring/ mis-appreciating the legal position while deciding the appeal and confirming the addition. 8. That the Appellant-Assessee prays your good-self to accept the appeal and quash the additions. 3. Briefly the facts of the case are that the assessee is a contractor engaged in executing contracts for the Public Works Department (PWD) and Public Health Department, filed its return of income for the Assessment Year 2017-18 on 08.07.2017, declaring a total income of Rs. 4,30,110/-. The income was computed under Section 44AD of the Income Tax Act, 1961, at 8% of the gross receipts of Rs. 53,24,667/-. However, the Centralized Processing Center (CPC) issued an intimation order dated 27.03.2019 under Section 143(1) of the Act, adding the entire contract amount of Rs. 53,24,667/- to the income declared by the assessee. This resulted in an addition of Rs. 48,98,667/- (Rs. 53,24,667 - Rs. 4,26,000).
Against the order passed by the Ld. AO the assessee went in appeal before the Ld. CIT(A), who has since dismissed the appeal of the assessee on the grounds that the assessee failed to respond to notices issued under Section 250 of the Act and did not provide any submissions or evidence to support its case.
5. Aggrieved by the order of the Ld. CIT(A) the assessee came in appeal before the Tribunal.
During the course of hearing the Ld. AR submitted that the tax was wrongly calculated in his case because in the calculation there is no mention of actual expenditure incurred and paid by the assessee. It was also submitted that bills for the work completed were duly verified by the government departments, and payments were released only after verification, which substantiates the legitimacy of the expenses. The assessee also submitted that the CIT(A) dismissed the appeal without considering the merits of the case, as the assessee was unable to respond to notices due to the hospitalization of its counsel.
Per contra, the Ld. DR supported the order of the CIT(A), stating that the assessee failed to provide any evidence or submissions to substantiate its claim, despite multiple opportunities. Ld. DR also submitted that the addition made by the CPC was in accordance with the provisions of the Income Tax Act, as the assessee did not provide any details of expenses incurred.
We have heard the rival contention and perused the material available on the record. In the present case we find that the assessee computed its income under Section 44AD of the Income Tax Act, which allows for presumptive taxation at 8% of gross receipts for eligible businesses. The provisions of Section 44AD are designed to simplify the taxation process for small businesses and contractors, and the assessee is not required to maintain detailed books of accounts or provide evidence of expenses. We also find that the assessee's counsel was hospitalized during the relevant period, which is a reasonable cause for the delay in responding to the CIT(A)'s notices. In light of the above, we are of the considered view that the matter is accordingly set aside to the file of the Ld. CIT(A) to decide the same afresh after providing reasonable opportunity to the assessee.
In the result, appeal of the Assessee is allowed for statistical purposes.