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Facts
The assessee declared total turnover of Rs. 42,61,003/- and offered income u/s.44AD @8%. The AO noted system information for shares transactions amounting to Rs. 5,24,27,992/- and applied 8% to work out profit. The assessee contended that the department did not share these details.
Held
The Tribunal noted that the AO made additions without sharing transaction details. The CIT(A) accepted the turnover but estimated profit at 50% without valid reasons. The Tribunal found that since the assessee opted for presumptive taxation u/s. 44AD, the statutory rate of 8% should be accepted.
Key Issues
Whether the CIT(A) was justified in estimating profit at 50% when the assessee had opted for presumptive taxation under Section 44AD and declared income at 8%?
Sections Cited
44AD, 143(3), 68, 271(1)(c), 288A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘E‘ BENCH
Before: SHRI AMIT SHUKLA & SHRI RATNESH NANDAN SAHAY
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 07/12/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s.143(3) for the A.Y.2015-16. 2. In the aforesaid case the assessee had declared income from transaction in derivatives (futures) transactions Krimesh Ramesh Divecha, Mumbai declaring total turnover of Rs.42,61,003/- and offered income u/s.44AD @8% during the A.Y.2015-16. The ld. AO noted that there were some 15 page of the system information pertaining to the shares transaction under the assessee’s PAN which works out to Rs.5,24,27,992/- and based on such information on the system, he has applied 8% and worked out the profit of Rs.41,94,239/-.
The ld. Counsel for the assessee submitted that at no point of time the department had shared these details for the alleged share transaction of Rs.5,24,27,992/-. However, Ld. AO without elaborating or confronting the details had made the addition in the following manner:- 3. On perusal of the unsigned submission of the assessee dated 13.08.2016, placed on record, the assessee among various submissions has also stated that the assessee has chose to calculate the profit @ 8% of the turnover u/s.44AD of the I.T. Act, 1961 and hence no books of accounts were maintained. Summary of the futures transaction of profit @ 8% is as below for F.Y.2014-15.
Broker Turnover Profit@8% ICICI Direct.com 35,10,669.25 2,80,853.54 Sharekhan 2,29,585.75 18,366.86 South Asian stock 5,20,748.00 41,659.84 Total 42,61,003.00 3,40,880.24
The assessee's individual transaction statement available on the system, contradicts the assessee's submission relevant to the current year. The 15 pages of the system information pertaining to the shares transaction as available on the system under the assessee's PAN works out to Rs.5,24,27,992/ and Krimesh Ramesh Divecha, Mumbai based on the assessee's submission to work out profit @ 8% u/s.44AD, the same comes to Rs.41,94,239/-. The assessee's working as reported in the order sheet notings dated 21.11.2017 and submission dated 13.08.2016 is Rs.42,61,003/ on which profit @ 8% is shown at Rs.3,40,880.24. The profit as per transaction recorded in the stock exchange works out to Rs.41,94,239/-. Thus, based on the facts and admission of the assessee/AR the difference of Rs.38,53,359/- is added to the total income of the assessee u/s. 68 of the I.T.Act and penalty proceedings u/s.271(1)(c) is initiated. The assessee's AR has neither filed any computation of income wherein the total income of the assessee is recomputed based on details/ material available on record:- Total income as per return filed on 07.09.2015 Rs.26,52,806 Add. Difference on account of 8% u/s.44AD Rs.38,53,359 Total assessed income Rs.65,06,165 Rounded off u/s.288A to Rs.65,06,170 ”
4. Even before the ld. CIT(A) also, these details of alleged transactions have not been verified and ld. CIT(A) has simply held that profit is estimated @50% on the total turnover declared by the assessee i.e.42,61,003/- without assigning any reasons. The relevant observation of the ld. CIT(A) reads as under:-
“5.5 I have carefully considered the facts of the case, assessment order and submission made by the appellant. The assessee derives income from Salaries. The assessee has shown loss under the head Income from House Property. The business income has been set off against the losses of previous year. As per the information available on the system under the assessee's PAN, the share transactions works out to Krimesh Ramesh Divecha, Mumbai Rs.5,24,27,992/- while the assessee has declared the profit @ 8% that comes out to Rs3,40,880/- In the return of income, the business income is shown as under 53 In a case where regular books of account of business or profession are No Account Case not maintained, furnish the following information for previous year 2014–15 in respect of business or profession 53a Gross receipts 53a 0 53b Gross profit 53b 340880 53c Expenses 53c 0 53d Net profit 53d 340880 It has been revealed that the gross receipts have been declared as NIL. Moreover, the assessee couldn't reconcile the total transactions of Rs.5,24,27,992/- during the assessment proceedings as well as during the appellate proceedings. Considering the above discrepancies, it would be reasonable to estimate the profit @ 50% of the total turnover i.e. Rs.42,61,003/- and that comes out to Rs.21,30,501.5. So the addition of Rs. 17,89,621.26 is confirmed and the appellant get relief of Rs.20,63,738/-.
6. In the result, the appeal is partly allowed.”
After considering the aforesaid finding given in the impugned order, first of all, we find that ld. AO has made addition without sharing any information about the alleged transaction available on the system. The ld. CIT(A) on the other hand had accepted the total turnover of Rs.42,61,003/- as disclosed by the assessee, however, without assigning any reason he has estimated profit rate of 50%. If the turnover has been accepted by the ld. CIT(A), then there is no justification of applying such a huge profit rate of 50% and Krimesh Ramesh Divecha, Mumbai since assessee has opted for presumptive taxation u/s.44AD, then 8% as provided in the statute is liable to be accepted.
In the result, appeal of the assessee is allowed.
Order pronounced on 29th May, 2024.