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Facts
The assessee, a commission agent, filed an ITR-4 for AY 2017-18, later revised u/s 139(9), declaring income under presumptive basis (8% on receipts) and claiming Chapter-VIA deductions. The Assessing Officer rejected the presumptive income claim under Section 44AD, reclassified commission income received u/s 194J and 194D as income from other sources, and made additions. The CIT(A) sustained these additions because the assessee failed to submit information or comply with notices.
Held
The Tribunal noted that the assessee wrongly declared commission and professional income under Section 44AD and that financial statements filed before the Assessing Officer were not considered. Both parties agreed to remit the matter. The Tribunal remitted the issue back to the Jurisdictional Assessing Officer for a de novo assessment, directing that proper opportunity be given to the assessee to present their case and for the AO to consider the submitted financial statements.
Key Issues
Whether commission and professional income can be declared under Section 44AD of the Income Tax Act; proper consideration of financial statements and opportunity of hearing during assessment proceedings.
Sections Cited
139(9), 143(2), 142(1), Chapter-VIA, 194J, 194D, 57, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI
Assessee by Shri Anil Jain, CA Department by Shri Om Prakash, Sr. DR Date of Hearing 27/06/2024 Date of Pronouncement 12/07/2024 ORDER
PER S.RIFAUR RAHMAN, AM:
This appeal has been filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short], dated 24/08/2023 for Assessment Year 2017-18.
The brief facts of the case are, the assessee filed his return of income (ITR-4) for AY 2017-18 on 06/08/2017. The return filed by the assessee was treated as defective/incomplete and intimated to the assessee on 13/02/2018 and, the assessee has filed the revised return of income u/s 139(9) of the Income Tax Act, 1961 (‘the Act’ for short). Subsequently, the case was selected for scrutiny under CASS and notices u/s 143(2) and 142(1) were issued and served on the assessee. In response, the assessee filed the necessary information.
The assessee is involved in the activity of the ‘commission agent’ and professional others. During the course of assessment proceedings, the assessee was asked to submit the details of the commission income declared by the assessee, however, no information was filed by the assessee. The Assessing Officer observed from the return of income that assessee has declared the income under presumptive basis disclosing the income @ 8% on the total receipt of Rs.35,25,300/- which is arrived at Rs.6,52,340/- and declared the other income after claiming deduction of Rs. 1,33,000/- under Chapter-VIA of the Act. The Assessing Officer observed that assessee has receipt of Rs.3,27,000/- from AMU Airconditioning Services Pvt. Ltd. u/s 194J of the Act and Rs.31,80, 872/- from ICICI Prudential Life Insurance Company Ltd. u/s 194D of the Act and he observed that assessee has declared the same u/s 44AD of the Act. After several notices issued to the assessee, the Assessing Officer rejected the income declared by the assessee u/s 44AD of the Act and treated the income declared by the assessee as income from other sources amounting to Rs.6,52,340/- and balance claim of Rs.28,55,532/- u/s 57 of the Act. Accordingly, the total income of the assessee was determined at Rs.34,41,040/-.
Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) and before the Ld. CIT(A), the assessee has objected to the additions made by the Assessing Officer, however, the Ld. CIT(A) has issued several notices and however, assessee did not file any submissions as well as not complied to the various notices issued by the Ld. CIT(A).
Accordingly, the Ld. CIT(A) sustained the additions made by the Assessing Officer.
Aggrieved with the above order, the assessee is in appeal before us raising following grounds of appeal:-
“1. The Ld. CIT(Appeals) has erred in confirming the assessed income of Rs.3441010 as against returned income of Rs.585510. 2. The Ld. CIT(Appeals) has erred in confirming the addition made by the AO of Rs.2855532. 3. The Ld. AO and Ld. CIT(A) has erred in not allowing the proper opportunity of hearing. 4. The order of the Ld. CIT(A) is against law and facts of case. 5. The appellant craves the right to add, amend or withdraw any grounds of appeal at the time of hearing.”
6. At the time of hearing, the Ld. AR submitted that assessee has earned the income during the present Assessment Year from commission from ICICI Prudential and Ors and also earned certain professional incomes. The assessee has declared the above said income in his return of income preferring the returned income u/s 44AD of the Act. He submitted that subsequently the assessee has revised the return of income declaring the income earned under the head income from other sources. The Assessing Officer rejected the same and subsequently assessee has filed profit and loss account and balance sheet before the Assessing Officer but the Assessing Officer did not consider the above financial statements and proceeded to complete the assessment denying the legal relief available to the assessee. However, he accepted that the assessee has not represented the case before the Ld. CIT(A). He prayed that since the assessee has filed the information before AO and the Assessing Officer has not properly considered. Hence, this issue may be remitted back the Jurisdictional Assessing Officer (JAO) for proper assessment of the real income.
On the other hand, the Ld. DR objected to the submissions of the Ld. AR and submitted that the assessee has not submitted and filed the relevant information before lower authorities, however, he agreed that this issue may be remitted back to the file of the Assessing Officer.
Considered the rival submissions and material placed on record, I observed that assessee with the mistaken advises and notions had filed his return of income adopting the income as per section 44AD of the Act. As per the procedure, the assessee has to declare the gross total income and professional income declaring proper financial statement before the tax authority. He cannot declare the commission income and professional income u/s 44AD of the Act. I observed that the assessee has filed a financial statement before the Assessing Officer during the assessment proceedings itself and the same was not considered by the Assessing officer, therefore, I am inclined to remit this issue back to the file of JAO to consider the submissions of the assessee and do the assessment de novo after giving proper opportunity of being heard to the assessee. Accordingly, the appeal filed by the assessee is allowed for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purpose.
Order pronounced on 12th July, 2024.