The notice issued u/s 139(9) of the Income Tax Act,1961 can be challenged by way of filling the following reply:
" Respected Sir,
The assessee viz, is engaged in the business of trading of files and other stationary items and has filled his Income Tax Return for AY 2018-19 by filling Form ITR-3.
It has earned income by way of Profits and Gains from Business & Profession and is having its gross annual receipts (turnover) for the relevant AY, less than Rs. 2 Crores. Thus, it has opted to file it’s Income tax return opting for special provision for computing profits and gains of business on presumptive basis u/s 44AD of the Income Tax Act,1961. The provisions of section 44AD provide for estimation of net profit of 8 per cent on gross receipts, in case where the assessee is involved in specified businesses and turnover from the business does not exceed specified limit.
The assessee has correctly disclosed its gross annual receipts (turnover) and has admitted not less than 8/6 per cent net profit and thus has complied with the provisions of the Income Tax Act,1961. The turnover of the assessee is less than Rs. 2,00,00,000/- (Two Crore) and hence, as the books of accounts were not produced, the income was rightly assessed on presumptive basis.
Section 44AD of the Income Tax Act 1961 provides for a minimum 8%/6% rate of deemed profit in case of small traders / businessmen being an Individual / HUF or a Partnership Firm (provided that turnover, total sales or gross receipts for the financial year 2016-17 should not exceed Rs. 2 crores). A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account. In case of a person engaged in a business and opting for the presumptive taxation scheme of section 44AD, the provisions of section 44AA relating to maintenance of books of account will not apply. In other words, if a person adopts the provisions of section 44AD and declares income @ 8%/6% of the turnover, then he is NOT required to maintain the books of account as provided under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD .
And thus, the assessee is NOT required to get his books of accounts audited under Section 44AB since it has already shown more than 8%/6% net profit of the gross receipts or total turnover under section 44AD of the Act. Thus, based on the aforementioned facts and provision of the law it is requested to your honour to kindly accept the response u/s 139(9) as valid one and process the return."
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