The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the Contact/ Professional Receipts reflected in the Form 26AS shall be Taxed at 8% under Section 44AD of Income Tax Act, 1961.
The assessee earned income of Rs.27,41,680/- from Mandavi Municipal Borough but had not filed his return of income. On the basis of such information, the Assessing Officer (AO) was of the view that income of assessee to that extent has escaped assessment.
The AO after recording reasons for reopened the case of the assessee under Section 147 of Income Tax Act. Notice under section 148 dated 24.12.2008 was served on the assessee.
The AO served a final show cause notice and proceeded under Section 144 of Income Tax Act for completing best judgment assessment. Further estimated the income at 8% of the total receipt on Rs.26,61,595/- received from Mandavi Municipal Borough and thereby made addition of Rs.2,12,928/-.
The AO also noted that assessee received professional/technical receipts on Rs. 80,085/- from Institute Management Committee (IMC). No reply against show cause was filed by assesse thereby Assessing Officer treated the said receipt as income of assessee.
The officer further noted that there were cash deposits in Bank of Baroda in Rs.1,19,000/-. No reply was filed against the show cause notice by assessee the Assessing Officer treated such cash deposit in bank account as income from “other sources” in the assessment order dated 24.12.2018.
On appeal before Commissioner of Income Tax (Appeals)[CIT(A], the assessee filed detailed written submission. The assessee claimed that the it is a partnership firm and total amount credit as per detailed in Form 26AS is Rs.25,31,240/- Mandavi Municipality, Rs. 80,085/- from ITI, Mandavi and of Rs.1,30,355/- from Nagar PalikaTarsadi.
The AO estimated the income of assessee under Section 44AD of Income Tax Act, while making addition on the receipt from Mandavi Municipality.
Thus, the assessee was eligible for remuneration and interest of the partnership as the contract of partnership. The assessee also furnished the working of such remuneration and interest and submitted that after allowing such interest and remuneration only of Rs. 75,257/- is eligible to be taxed.
On the second addition of Rs. 80,085/-, the assessee submitted that this is a part of professional/technical receipt which is also to be taxed @ 8% and assesse has furnished the all receipt in his submission.
The CIT(A) after considering the submissions of the assessee held that neither the Assessing Officer had invoked Section 44AD nor made addition under Section 69C of Income Tax Act. The AO, in absence of any response, made estimation of taxable profit at the rate of 8% of gross receipt from contract with Mandavi Municipal, Borough and also added Rs. 80,085/- on account of technical and professional receipt and addition of Rs.1,19,000/- on the account of cash deposits.
The CIT(A) further held that professional /technical receipt from ITI Mandavi and deposits in bank cannot be treated as covered in the contract receipt from Mandavi Municipal.
The first appellate authority also held that assessee failed to file return of income voluntarily and accordingly the assessee is not eligible for taxing professional receipt under the provision of section 44AD. Further aggrieved, the assesse filed an appeal before Tribunal.
After hearing both the parties, the tribunal observed that the assessee has shown total contract receipt/professional receipt of Rs.25,31,240/- + Rs. 80,085/- and Rs.1,30,355/-, for taxation and voluntarily offered at the rate of 8% of the presumptive income under Section 44AD. The assesse also prayed for allowing benefit of second proviso of Section 44AD which was available in A.Y.2011-12.
A Single bench of Pawan Singh (Judicial member) found merits in the submissions of the AssesseeRepresentative for the assessee that only income component is to be brought to tax and not the entire receipt.
Also, the tribunal directed the Assessing Officer to tax all the receipts contract, professional receipt shown in Form-26 AS at the rate of 8% and allow the benefit of proviso to Section 44AD(2) of Income Tax as existed during AY-2011-12.
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