Facts:
| Return filed on income 31.10.2010 |
Rs. 6,24,900/- |
| Gross receipts | More than Rs. 100,00,000/- |
| Expenses claimed
Freight |
Rs. 6.46,472/- |
| Salaries and wages | Rs. 68,34,073/- |
| Traveling expenses | Rs. 5,05,981/- |
| Other expenses | Rs. 7,82,700/- |
Whether profits of the above taxpayer can be estimated @ 8% in the case supporting documents, i. e., books of accounts, bills, and vouchers, etc. for claiming the above expenses are not submitted?
Relevant rule section 44AD:
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight percent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under subsection (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Analysis & conclusion:
As per sec. 144 of the Act, if the assessee fails to comply with the terms of a notice issued under sub-sec. (1) of sec. 142 and if the assessee fails to provide the necessary information, the Assessing Officer had liberty to pass the order on the best judgment assessment.
Secondly, if the assessee produced the books of accounts where the Assessing Officer is not satisfied with the correctness or completeness of the accounts of the assessee, or where the method of accounting provides standards as notified under sub-sec. (2), have not been regularly followed by the assessee, the Assessing Officer may make the assessment in the manner provided in sec. 145 of the Act.
Thus, in case the assessee has not produced any evidence before the Assessing Officer, therefore Assessing Officer is justified in estimating the profit at 8% even in cases of gross receipts are more than Rs, 1 crore.