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Facts
The assessee, a practicing lawyer, filed an ITR for AY 2012-13 declaring gross receipts of INR 11,45,466/- and sought a 50% deduction under Section 44ADA, citing a bona fide error in the return. The CIT(A) found actual gross receipts to be INR 22,90,932/-, rejected the Section 44ADA claim as it was not applicable for the relevant assessment year (came into effect 01.04.2017), and enhanced the total income, noting the assessee's failure to maintain books of accounts or get them audited as required by Sections 44AA and 44AB.
Held
The Tribunal agreed that Section 44ADA was inapplicable for AY 2012-13. However, it held that subjecting the entire professional receipt to tax without allowing for legitimate expenditures was unjustified. To ensure substantial justice, the Tribunal set aside the CIT(A)'s order and remanded the assessment back to the Assessing Officer for a fresh assessment to verify and allow actual expenses. The stay application filed by the assessee became infructuous and was dismissed.
Key Issues
1. Applicability of presumptive taxation under Section 44ADA for Assessment Year 2012-13. 2. Whether entire gross professional receipts can be taxed without allowing for incurred expenses, even if books of account were not maintained.
Sections Cited
Income Tax Act, 1961 Section 44ADA, Income Tax Act, 1961 Section 44AA, Income Tax Act, 1961 Section 44AB(b), Income Tax Act, 1961 Chapter VIA, Income Tax Act, 1961 Section 250(4), Income Tax Act, 1961 Section 251(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.935/Del/2024 [Assessment Year : 2012-13] & S.A.No.-108/Del/2024 [In ITA No.935/Del/2024] Satyapal Singh Chauhan, vs ITO, P-84, 2nd Floor, Behind Sheetla Ward -61(1), Mata Mandir, Pandav Nagar, Delhi. Delhi-110091. PAN-ACVPC5650K APPELLANT RESPONDENT Appellant by Shri S P S Chauhan, AR Respondent by Shri Om Parkash, Sr.DR Date of Hearing 29.05.2024 Date of Pronouncement 29.05.2024 ORDER PER KUL BHARAT, JM : The present appeal and the stay application filed by the assessee are directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 03.03.2023 for the assessment year 2012-13.
The assessee has raised following grounds of appeal:-
“Addition made by CIT(Appeal) against total income mentioned in form 26AS & TDS deducted & deposited on said income (As per Annexure- I). 2. To reass income taking Rs.11,45,466/- and not Rs.22,90,932/- and set aside order of CIT(A). 3. To allow 50% deduction/as Hon’ble I.T.A.T consider as per law towards expenses and assess tax liability and allow refund Rs.90,090/- accordingly.”
Apropos to the grounds of appeal, the assessee in person re-iterated the submissions made in the written Synopsis. He contended that there was some error in filing the Income Tax Return. The rectification could not be made. He contended that the gross receipt was INR 11,45,466/- and total tax deducted at INR 1,14,548/-. But he did not claim the deduction as provided u/s 44ADA of the Income Tax Act, 1961 (“the Act”). He further submitted that it was a bonafide error, the authorities below ought to have rectified it. He submitted that Assessing Authority ought not have subjected the entire receipts to tax. The deduction of expenses incurred for earning of such income should have been given.
On the other hand, Ld. Sr. DR for the Revenue opposed these submissions and supported the impugned order. He drew my attention to paras 9.2 to 9.3 of the order of Ld.CIT(A).
I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The contention of the assessee in sub and substance is that the disclosed gross receipt of INR 11,45,466/- without taking benefit of provision of section 44ADA of the Act which undoubtedly, came on the Statute book w.e.f 01.04.2017. Ld.CIT(A) decided the issue by observing as under:-
9.1. “What emerges from the above is that the income of the appellant for AY 2012-13 under consideration deserves enhancement. Keeping this in view, the appellant was asked to make submissions on the basis of correct facts of the case. However, the appellant has all the time shied away from elaborating on the correct facts and kept on insisting upon Page | 2
the sole issue of the grant of 50% deduction out of Rs.11,45,466/- u/s 44ADA and urged, though erroneously, that the resultant figure of Rs.5,72,733/- should be considered for assessment of his total income. From the extant provisions of the Act applicable to the case of appellant in relation to AY 2012- 13, I find no substance in the contentions and arguments of the appellant. The appellant has not been able to disprove the fact that his gross receipts from profession was of Rs.22,90,932/- and what he has declared in Schedule- Part A- P&L of the return of income is only 50% of the same which amounts to Rs. 11.45.466/ For AY 2012-13, the provisions of section 44ADA were not even on the Statute and hence, the appellant cannot be permitted to take recourse to the provisions of this section. Since the appellant has carried on legal profession by being a practising lawyer and during the previous year 2011-12 relevant to AY 2012-13 his income from the profession exceeded Rs.1,20,000/- and the gross receipts exceeded Rs. 10,00,000/-, the appellant was statutorily bound to maintain prescribed books of accounts in terms of provisions of section 44AA of the Act read with rule 6F of the Income-tax Rules, 1902, but the appellant has failed to do that. Moreover, the "gross receipts being Rs.22,90,932/- which was more than Rs.15,00,000/- during the previous year 2011-12, the appellant was statutorily required to get his accounts audited as required u/s 44AB(b) of the Act, but this was also not done. Thus, the appellant has violated the provisions of both sections 44AA and 44AB of the Act. 9.2. What has been discussed and held in para 9.1 above, there cannot be any saving grace for the appellant in respect of his assertion that his income should be computed in terms of provisions of section 44ADA since he has not maintained any books of account in respect of his profession. In this view of the matter, the contentions and arguments of the appellant in this behalf are held to be devoid of any merits and hence, jettisoned.
9.3 In view of the above, the appellant's total income needs recomputation after taking the gross receipts at Rs.22,90,932/- as under: Gross Receipts as determined above : Rs.22,90,932/- Add: Other Income (Schedule-Part A-P&L) : Rs.66,039/- : Rs.23,56,971/- Less: Total expenditure shown in Schedule Part A-P&L of the return of income : Rs.6,36,051/- Net Profit : Rs.17,20,920/- Thus, Gross Total Income : Rs.17,20,920/- Less: Deduction under Chapter VIA : Rs.1,59,466/- Total (Taxable) Income : Rs.15,61,454/- Rounded off to : 15,61,450/- No separate deduction for donation of Rs.21,000/- is requested to be given as the same has been considered in determining the aforesaid 'net profit'. The ad hoc disallowance of Rs.3,10,000/- made by the AO in assessment stands deleted as the same was disallowed by the AO on ad hoc basis without giving any cogent reasons. 9.4 In terms of the aforesaid findings and determination, the assessment of total income stands enhanced to Rs.15,61,450/- and the same is ordered accordingly by exercise of powers u/s 250(4) read with section 251(1)(b) of the Act. Simultaneously, the disallowances made by the AO in assessment on account of denial of deduction under Chapter VIA, donation & expenses stand deleted.”
I have given my thoughtful consideration to the submissions of the parties. It is well-settled law that if the assessee under the wrong belief, has offered the entire gross receipt for taxation. In that event, the Assessing Authority is under legal obligation to allow set off such expenditure after verifying the correctness of Page | 4
the same upon representation by the assessee that any expenditure was incurred for earning of such income. In my considered view, subjecting the entire professional receipt is not justified. So far question of application of provisions of section 44ADA of the Act is concerned, it came on the Statue book w.e.f 01.04.2017, the present case pertains to AY 2012-13. Therefore, Ld.CIT(A) has rightly declined to apply the provision of section 40ADA of the Act. In view of the discussion herein before and to sub-serve the substantial justice, I hereby set aside the impugned order and restore the assessment to the file of the AO to frame assessment afresh. Grounds raised by the assessee are accordingly, allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
S.A.No.-108/Del/2024 [In ITA No.935/Del/2024]
The present stay application filed by the assessee seeking stay of disputed tax demand on the ground that the assessee erroneously offered gross-receipts for taxation. The assessee has also filed appeal against the quantum additions in ITA No.935/Del/2024 [AY-2012-13]. After considering the submissions of the parties, I have set aside the impugned order and restored the assessment to the file of AO. Under these facts, the demand created by the assessment order would not survive. The stay application filed by the assessee has now become infructuous hence, dismissed.
In the result, the S.A. filed by the assessee is dismissed as infructuous.
In the final result, the appeal of the assessee in ITA No.935/Del/2024 is allowed for statistical purposes and S.A.No.108/Del/2024 filed by the assessee is dismissed, being infructuous.
Order pronounced in the open Court on 29th May, 2024.
Sd/-
(KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI