Difference amount undisclosed income treatment

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This discussion clarifies the treatment of the difference between declared presumptive profit and actual profit under Section 44AD of the Income Tax Act. While Section 44AD allows for presumptive income calculation (6% or 8% of turnover), it also permits declaring actual profit if it exceeds the presumptive amount. If the department detects a higher profit than declared, it may be considered undisclosed income. However, case laws suggest this benefit for small traders might not always be treated as undisclosed income.

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

07 September 2021 Sir,
It assess sales turnover rs:65 lacs sec 44ad profit declared 8 percent rs:5,20,000/ -
.but actual profit amount rs:7 lacs
Question:
Assess difference amount rs:1,80,000/-(rs:7 lacs -5,20,000/- ) treatment undisclosed income in it act.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

07 September 2021 No, it will not be considered as undisclosed income under income tax act.

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VISHNU PRASAD GHUWALEWALA

VISHNU PRASAD GHUWALEWALA (Expert)

08 September 2021 Sir, 44AD says presumptive income has to be calculated either 6% for turnover through cheque or 8% for turnover in Cash or the "actual profit" if it is more than presumptive income. In given case if the the extra income got detected by department than it will be treated as undisclosed income.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

08 September 2021 It's the benefits given to small traders hence it will not be considered as undisclosed income case laws are there.

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