ITAT Orders Recalculation of Presumptive Income u/s 44 After Spotting Turnover Discrepancy [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer to recalculate the taxable income of the appellant under the presumptive taxation scheme of Section 44AD of the Income Tax Act, 1961, after finding a mismatch in the turnover figures declared.

Mintu Mallick, appellant-assessee a trader dealing in building materials, had declared his income for the Assessment Year 2017–18 under Section 44AD, showing a turnover of ₹53.89 lakh. However, during assessment proceedings, the Income Tax Officer observed that the Profit & Loss Account disclosed a higher turnover figure of ₹79.86 lakh. This discrepancy led to an addition of ₹25.97 lakh to the assessee’s income, treating it as unexplained.

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The assessee contested this addition before the National Faceless Appeal Centre (NFAC), but failed to secure relief. The CIT(A) upheld the assessment order, primarily on the ground that the assessee had not provided any written submissions or explanation to justify the difference in turnover.

Challenging this before the ITAT, the assessee’s counsel argued that the higher turnover figure was correctly reflected in the Profit & Loss Account and available on record. He contended that the discrepancy was unintentional and occurred due to an error on the part of the tax consultant in reporting the lower figure in the computation of income.

The Tribunal noted that the turnover of ₹79.86 lakh was indeed part of the record and should have been taken as the basis for computing presumptive income. It held that the Assessing Officer was not justified in treating the difference as undisclosed income, especially when the higher turnover figure was available on file and not concealed.

The bench, comprising Pradip Kumar Choubey (Judicial Member) and Sanjay Awasthi (Accountant Member), observed that while the assessee had wrongly computed the turnover for presumptive taxation, there was no indication of concealment.

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The Tribunal found merit in the argument that the proper course was to recalculate the presumptive income using the correct turnover of ₹79.86 lakh, instead of making an outright addition.

Accordingly, the ITAT set aside the addition and remanded the matter back to the Assessing Officer with clear instructions to recompute the income under Section 44AD based on the correct turnover. The appeal was thus partly allowed.

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