Comment on Taxation Simplified

Ajay vishwas commented on 06 Mar 2014, 12:34 AM

Can the Assessing Officer add the Difference between actual income and disclosed income in the assessment proceedings?
{Let us assume that the Turnover of the assessee is Rs. 50 Lakhs and all the receipts are by cheque and the same is deposited in the only Bank account maintained by the assessee. There are no outstanding receipts at year end.
All the payments for expenses on revenue account are through cheques debited to the same account and there are no outstanding expenses at year end. The total expenses are Rs. 25 Lakhs.
Thus the balance of Rs. 25 Lakhs as per his bank account is the income as per the records of assessee.
He filed Return u/s 44AD declaring of Rs. 4 Lakhs @ 8% of Turnover.
Can the AO add the difference of Rs. 21 Lakhs to the income of assessee?}
◊First of all the assessee, being covered by section 44AD, is under no obligation to maintain books of accounts u/s 44AA.
Secondly, the turnover being less than Rs. 1 Crore and declared income not being less than 8% of Turnover, Section 44AB is not applicable to the assessee.
◊ Further the assessee is given the option u/s 44AD (1) to declare higher income. The word used is 8% OR higher income.
Thus, the option is with the assessee to disclose higher income OR to file Return disclosing the income @ of 8% of Turnover.
Here the assessee is free to exercise any option at his will. He may morally show actual income and pay tax on it as an Honest citizen of the country, but such Honesty is not digressed even if he files return @ 8% as he is legally correct. (Here the decision of Honourable Supreme Court in case of Dr. Qureshi can be recalled where the apex court, condemning the High Court, held that “cases have to be decided on merits and legality instead of morality”.)
Legally he is given the option by the statute and such an option cannot be equated with obligation cast upon the assessee. There is a definite difference between OPTION and OBLIGATION and an Option granted to the assessee cannot be construed to be his obligation when his actual income is more than 8% of Turnover.
◊ Also, the AO cannot make any addition on this count as there is no provision under the Act permitting to make such addition.
◊ Further, the words used are “higher income claimed to have been earned by the assessee”.
Here if the assessee has not made a claim in the Return of Income regarding any higher income, it implies there is no claim for Higher Income made by assessee. AO cannot claim that the assessee has earned higher income, because under the statue, he is not entitled to do so.
Here is the link sir

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