Applicability of sec 69 in case of 44ad

CA Ankur Garg (Partner)     31 July 2018

Dear Pawan 

Agreed on above debate, even asseessee comply all the conditions of 44AD and shows 8% profit instead of 25% ACTUAL. Can asseessee use that funds to Loan to Other. 

Further Don't you think what would be source of funds of that loan Given ? Don't you think AO shall apply section 69 as unexplained investment of said laon.

If you agreed on that everybody will open a shop and will receive  1 Crore will disclose 8% Profit instaed of actual 50% or more give that loan to again director of companies and AO will given you clean order to entity.

I am not challenging the legality of 44AD. I am challenging the legality of Section 69, AO has to invokke the section becasue above loan has been given out of profits which was not offered to revenue.

I am facing the same issue. he has received the income of Rs. 50 lacs and spect only 15lac. and has given loan of Rs. 2000000 and balance in the bank account. what to do.

Regards

Ankur Garg

Regards

Ankur Garg

Saifullah Khalid (Autodidact/Curious )     31 July 2018

Originally posted by : CA Ankur Garg
	Dear Pawan  Agreed on above debate, even asseessee comply all the conditions of 44AD and shows 8% profit instead of 25% ACTUAL. Can asseessee use that funds to Loan to Other.  Further Don't you think what would be source of funds of that loan Given ? Don't you think AO shall apply section 69 as unexplained investment of said laon. If you agreed on that everybody will open a shop and will receive  1 Crore will disclose 8% Profit instaed of actual 50% or more give that loan to again director of companies and AO will given you clean order to entity. I am not challenging the legality of 44AD. I am challenging the legality of Section 69, AO has to invokke the section becasue above loan has been given out of profits which was not offered to revenue. I am facing the same issue. he has received the income of Rs. 50 lacs and spect only 15lac. and has given loan of Rs. 2000000 and balance in the bank account. what to do. Regards Ankur Garg

YES the AO can invoke sec 69 or sec 68 when the assesse is not able to relate the sum received or sum spent to the gross receipts of the bussiness...its obvious that word  "  unexplained " will be applicable to his receipts/expenses/investment when he can not relate the amounts to his bussiness receipts ... you can refer to this case law  >>>   https://indiankanoon.org/doc/131006805/
Above case law will also help understand about the legal interpretation of words "Deemed" in context of sec 44AD ....hope that will help ...

Advise : My advise to all those people who are having good profit percentage of net profit and still want to get benefits of "presumptive taxation"... to avoid any dispute TRY as much as you can to get your bussiness receipts only through Banking / electronics modes as the receipts through banking/electronics mode are easy to relate with sales/bills ..on the other hand cash receipts (though one can maintain a cash book) are always controversial and questionable...