Provisions of Section 44AD not apply when the gross receipts is above 40 lakhs. High Court remands the case back to Appellate Tribunal
ABCAUS Case Law Citation:
ABCAUS 2205 (2018) (02) HC
The Challenge/Grievance:
The appellant assessee had challenged the order passed by the Income Tax Appellate Tribunal (ITAT) in applying the provisions of presumptive taxation u/s 44AD of the Income Tax Act, 1961 (the Act) despote the fact that the gross receipts were in excess of Rs. 40 lakhs.
Brief Facts of the Case:
The income of the assessee was assessed at 8% taking note of the contract receipt of the appellant. The reliance was placed on two judgments rendered by the Tribunal itself. The Tribunal for estimating the net profit at 8% had placed heavy reliance on the interpretation given and the assistance taken with regard to the presumptive value and rate to be arrived at under Section 44AD read with the CBDT Circular and the law laid down by the Tribunal in two cases.
Observations made by the High Court:
The Hon’ble High Court noted that the one of the judgment rendered by the Tribunal have been interfered with by the division bench of the High Court wherein the issue has been remanded back to the Tribunal for reconsideration and similarly, in the second case, the question of applicability of Section 44AD on gross contract receipt above 40 lacs had been considered and decided in favour of the assessee. In the said case the High Court held that in cases, when the gross contract receipts is above 40 lacks, the provisions of Section 44AD will not apply.
The Hon’ble High Court noted that since in the case under consideration also the Tribunal had applied the provisions of Section 44AD in arriving at net profit at 8%. The Hon’ble High Court found merit in the grievance of the appellant that the law laid down now by the High Court had not properly been considered.
The Hon’ble High Court opined that as both the judgments rendered by the Tribunal have been upset and interfered with a Division Bench of the High Court, the matter should be remanded back to the Appellate Tribunal for reconsideration of the entire issue, in the light of the judgments rendered by the Division Bench.
Decision/ Conclusion/Held:
The order was quashed and remanded back to the Tribunal for reconsideration.
