Restaurant Business Eligible to Declare Income Tax on Presumptive Basis: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the restaurant is an “eligible business” to attract section 44AD of the Income Tax Act, 1961 on a presumptive basis.

The assessee firm, Hotel Deepak is engaged in the restaurant business. Pursuant to the survey action u/s.133A of the Act conducted in the business premises of the assessee dated 22.01.2018, the partner of the assessee firm Shri Chandrakant Ramanna Shetty made a voluntary declaration of Rs.26,27,872/- on the total sales of Rs.1,30,15,820/-. The assessee filed its return of income dated 30.03.2018, declaring total income of Rs.19,52,370/-. Subsequent to that, the assessment order dated 29.11.2019 was passed u/s. 143(3) of the Act determining the total income of Rs.26,27,872/- by making the addition of Rs.6,75,502/-. The assessee firm has declared its income on a presumptive based on the provision of section 44AD of the Act. The assessee has also specified that the difference in the amount declared by the partner of the assessee firm and that of return income was due to the expenses of the VAT payments which was from the coffers of the assessee and has not been collected separately in the bill, cash memo or invoice issued to the customers.

Shri M. Balaganesh, AM and Ms. Kavitha Rajagopal, JM observed that in order to attract the provisions of section 44AD, it is essential to consider whether the assessee will be an ‘eligible assessee’ and the assessee’s business is ‘eligible business’ as per Explanation (2) to section 44AD of the Act.

“Upon considering as per the said Explanation (2) to section 44AD, the assessee firm will be considered as an ‘eligible business’ to come under thepurview of section 44AD,” the ITAT said.

Allowing the plea of the assessee, the ITAT held that “the intention of the legislature in case of computing profit and gains of business on presumptive basis is to enhance the tax payers to declare income at the minimum rate prescribed u/s.44AD and also allows the assessee to offer income higher than the said prescribed rate, in case of business, whose total turnover or gross receipts in the previous year, does not exceed the amount prescribed under law. The lower authorities have not denied the fact that the assessee is an ‘eligible assessee’, carrying out ‘eligible business’ under the provisions of section 44AD of the Act. On this observation, we hold that the assessee’s declaration of income u/s. 44AD of the Act is justified and the A.O.’s contention that the assessee has not maintained its books of account in such case, is not warranted.”

To Read the full text of the Order CLICK HERE

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