Critical analysis of sec.44ad

Sir,

Under sec.44AD, a person with eligible business can show his income not less than 8% and pay tax accordingly and file his return, no books of accounts are required.

1. Suppose if the person has 60% profit from business and he shows only 20% profit under sec.44AD, Can Assessing Officer add 40% to his income and levy tax and penalty for concealment of income ?

2. Suppose a person shows 20% profit under sec.44AD which means 80% is shown as expenditure in his ITR and filed but he has 80% of gross receipts in Bank A/c not spent as expenditures and it is accumulating to the Bank account, can the Assessing Officer tax his receipts in Bank account to the extent of 80% since it is not expended ?

3. Since the section uses the wording "Notwithstanding" , can the AO invoke sections like 40A(2) and sec40A(3) to disallow any payments made ?

4. Can the assessing officer invoke any other sections for disallowance of expenses and increase the profit under sec.44AD?

5. Can the assessing officer make additions to income declared under sec. 44AD based on normal industry profit % and levy tax accordingly ?

6. Does the assesee has to prove that his profit is only 20% and show his expenses or is it enough if his gross receipts sources alone is proved with evidence ?

Thanking in advance,

For any replies

 

Replies (3)
Dear Nilesh, First of all you have to understand, all laws are made to make compliance's easy for the people. But the intention of the law is people must follow them genuinely and with not any malafide intention. The question you asked is technical in its sense. But As per income tax provisions the assessing officer has powers to ask information (if required) from the assesse. So in your case if the assesssing officer has any reason to believe that he/she needs any further information in the above mentioned case he can ask. And upon sanctification of any wrong doing, he may go for notices etc. Section 44AD is made for those people whose profit margin exceeds 8% and they have the approximate knowledge of their margins.

Thanks for your reply

 

But sir , question is , if the ACTUAL PROFIT IS 30% FOR EXAMPLE, THEN CAN WE OPT FOR 44AD AND PAY ONLY INCOME TAX ON 8% UNDER 44AD ? KINDLY RESPOND.

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