The case ITA No. 1107/DEL/2021 involves the appeal filed by Puneet Jain against the assumption of jurisdiction under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr.CIT), Ghaziabad. The appeal is directed against the order passed by the Pr.CIT questioning the eligibility for presumptive taxation under Section 44AD for the assessment year 2011-12. The appeal was filed on 14th September 2021, and the final tribunal order was pronounced on 23rd November 2022.
Puneet Jain, the appellant, filed his original return of income on 21st June 2011, declaring an income of Rs. 1,59,880. Subsequently, proceedings under Section 147 were initiated, and a notice under Section 148 was issued on 26th March 2018. The appellant was asked to explain cash deposits aggregating to Rs. 53,64,835 in his bank account. In response, the appellant stated that he was a commission agent at Kirana Mandi, Ghaziabad, and the cash deposited represented sale proceeds of goods on which he declared a profit under Section 44AD of the Act. The assessment was completed on a total income of Rs. 4.30 lakhs after making an addition of Rs. 2,70,120.
The primary issue in this case revolves around the eligibility of the appellant to opt for the presumptive taxation scheme under Section 44AD. The Pr.CIT assumed jurisdiction under Section 263, questioning the validity of the assessment order passed by the Assessing Officer (AO) under Section 147 read with Section 143(3) of the Act.
Aggrieved by the order of the Pr.CIT, Puneet Jain filed an appeal with the Income Tax Appellate Tribunal (ITAT), Delhi Bench “H”. The appeal, numbered ITA 1107/DEL/2021, was heard on 21st November 2022, and the order was pronounced on 23rd November 2022.
During the hearing, the appellant’s representative argued that the Pr.CIT erred in assuming jurisdiction under Section 263 and issuing directions to the AO. It was contended that the assessment order was valid and that the appellant had provided complete details supporting his claim under Section 44AD.
The respondent, represented by the Departmental Representative (DR), supported the findings of the Pr.CIT. The DR argued that the appellant, being a commission agent, was not eligible to opt for the presumptive taxation scheme under Section 44AD, as the scheme specifically excludes persons earning income in the nature of commission or brokerage.
The Tribunal observed that the appellant had indeed deposited cash amounting to Rs. 53,64,835 in his bank account. It was noted that the appellant had filed a revised return under Section 44AD only after receiving the notice under Section 148, claiming the cash deposits as business receipts and declaring profit at 8% under Section 44AD.
The Tribunal highlighted that Section 44AD(6)(ii) specifically excludes persons earning income in the nature of commission or brokerage from opting for the presumptive taxation scheme under Section 44AD. Therefore, the assessment order passed by the AO without examining this exclusion was erroneous and prejudicial to the interests of the revenue.
The Tribunal concluded that the Pr.CIT was correct in assuming jurisdiction under Section 263, as the AO had failed to recognize that the appellant, being a commission agent, was not eligible for presumptive taxation under Section 44AD. The appeal of the assessee was accordingly dismissed, upholding the order of the Pr.CIT.
This case highlights the importance of understanding the eligibility criteria for presumptive taxation schemes under the Income Tax Act. It underscores that income from commission or brokerage is specifically excluded from the benefits of Section 44AD. The decision provides clarity on the application of Section 263 and the responsibilities of the AO in ensuring compliance with the provisions of the Act.
The order was pronounced in the open court on 23rd November 2022 by Shri N.K. Billaiya, Accountant Member, and Shri Kul Bharat, Judicial Member.
This case serves as a precedent for similar disputes regarding the eligibility for presumptive taxation schemes. It reinforces the principle that the benefits of Section 44AD cannot be extended to persons earning income from commission or brokerage, ensuring that taxpayers adhere to the specified criteria.
The decision in this case can guide future cases involving similar issues, providing a clear interpretation of the legislative intent and application of amendments. It highlights the Tribunal’s role in ensuring justice by adhering to established legal principles and precedents.
Puneet Jain vs Pr.CIT, Ghaziabad – ITA 1107/DEL/2021 – Presumptive Taxation Eligibility
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