01 July 2007
As per Scrutiny selection norms , income Less than 5 % on contract exceeding 1 crore is selcted for scrutiny. But Is it fair to select scrutiny even declaring income from contract exceeding 5% for firm before interest and remuneration for partners for assessment year 2006-07?
02 July 2007
Yes, a case can be selected for scrutiny in this situation. Because the AO dealing with the case also has power to excercise his discretion and select a case for scruitiny even if it does not meet the selection criteria. Secondly there are different norms for different financial years and i am not fully aware of the norms pertaining to the financial year 2006-07. But i hope the first part of my reply gives you the answer.
20 November 2007
The Cicular issued by CBDT is saying 'net profit', hence A.O. are right in selecting your case for scrutiny. However, under section 44AD, assesee are entitled for decalaring income @ 8% before charging such interest and remuneration to partners. It is surprising that in deciding the scrutiny selection criteria, how can the CBDT overlook the same.