Section 44AD of the Income Tax Act
Income-tax Act, 2025: s.58
Section 44AD of the Income-tax Act, 1961 corresponds to section 58 (Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents) of the Income-tax Act, 2025.
Read section 58 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 44AD is Nikunj Eximp Enterprises v. CIT (216 Taxmann 171), cited in 325 of the 2,222 judgments on BharatTax that turn on this section.
Leading authorities on Section 44AD
Purchases may be treated as genuine even if the purchase parties are untraceable or not available for verification, as long as there is no specific evidence from the parties themselves denying the transactions or proving them to be bogus.
The Assessing Officer cannot selectively accept parts of a statement or seized evidence that are favourable to the revenue while rejecting other parts favourable to the assessee without proper investigation; the evidence must be considered as a whole. Additions cannot be made based on mere presumptions or surmises without further inquiry.
A transaction is considered an adventure in the nature of trade, constituting business income, if there is a pre-determination to sell an asset at a profit. Conduct prior to purchase, as well as subsequent improvements, are relevant in determining the character of the transaction.
Where separate additions are made for suppressed profit and unexplained cash credits under section 68, the assessee can explain that the suppressed profit accounts for the cash credit, allowing for telescoping of additions to prevent double taxation.
The assessee bears the onus to establish any claim for exemption, including agricultural income, by providing proper evidence and materials. The assessing officer is not primarily burdened with proving the assessee's claims.
A transaction, even if appearing to be in the capital field or recorded as such, can constitute an 'adventure in the nature of trade,' leading to taxable income from business rather than capital gains.
A statement recorded under Section 132(4) during a search operation is not considered "books of account," "documents," or "assets found or seized" for the purpose of initiating search assessments under Chapter XIVB (e.g., Section 158BD or 153C). Such a statement is created during the search and cannot solely form the basis for assessment without other incriminating material found.
Additions to income cannot be made solely on the basis of a statement or confession recorded during a search operation. Such additions require corroborating incriminating material or other independent evidence to be permissible.
The Supreme Court clarifies the distinction between income chargeable as capital gains and income taxable as business profits, guiding the assessment of whether a transaction constitutes a transfer of a capital asset or is in the nature of trade.
