44 ad

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01 August 2011 An assessee has no source of income except profit from trading in shares.
The total of debit and credits of Daily profit/Loss from shares is 50 lakhs.
Bifurcation is 10 lakhs debit and 40 lakhs credit side.
In ordinary course his profit is 30 lakhs and
he has to pay tax on that.
Now suppose he opts not to keep any books of accounts, then can he take his income as 4 lakhs i.e 8% of Rs. 50 lakhs and pay tax on 4 lakhs of income.
Will this not be a loss to revenue?
Can the ITO take a stance to differ and tax the income of Rs. 30 lkahs?
Detailed answers are required from experts.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 August 2011 Will this not be a loss to revenue?

Yes. Once it may be said as a loss to revenue but revenue has guts to convert its losses into profit.

In case any investment which requires explanation from the Revenue, and could not be properly explained by the assessee on the basis of return filed by the assessee,
it will not hesitate in treating the same as unexplained investment.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 August 2011 Can the ITO take a stance to differ and tax the income of Rs. 30 lakhs?

At any time within 6 years from the end of Asst Yr. if it comes to the notice of the department that certain income has escaped assessement, it can issue notice U/s 148 to the assessee.
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Section 44AD is the "half truth".
It also contains another "half" which is beyond the truth.
That other half -sooner or later-becomes visible when such undisclosed money is invested without exercising proper care.
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Rs 30.00 lacs can go any where or any way but before disappearing, it needs to enter into banking channels. It can be traced and tracked later, where ever it goes.
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I do not say that the department will definitely catch the tax evader, but I can say that , whenever he will be caught red handed, he has to surrender not only to himself but also to his all the belongings.
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If he balances his tax payments , he can enjoy throughout his life. That's why genuine consultants are respected and paid by their clients.

Guest

Guest (Querist)

02 August 2011 Dear Sir,
Where is the tax evasion?
Everything is done perfectly as prescribed under the law.
When the Act itself gives a choice whether you want to declare 8% of your turnover or get the accounts audited and if the assessee opts for 8% - which is the law he is violating.
Entire 30 lacs will come through banking channels and the assessee should be free to use these funds as he likes as profit as prescribed under the Act on entire turnover has been paid.
How do you term this planning as tax evasion. I am at a loss to understand.

Arvind Tiwari

Arvind Tiwari (Expert)
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03 August 2011 Dear Mohit
The wording used by Section 44AD (1) Effective from Ay 11-12 has used the word " Cliams". Cliams signifies the Right not the obligation,
So you can avail the benefit of Section 44 AD.

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