The DCIT, 1(1), v. M/s Bridgestone Corporation Japan,

ITA 393/IND/2007 | 2004-2005
Pronouncement Date: 24-02-2010 | Result: Dismissed

Appeal Details

RSA Number 39322714 RSA 2007
Assessee PAN AAGFR7501K
Bench Indore
Appeal Number ITA 393/IND/2007
Duration Of Justice 2 year(s) 8 month(s) 10 day(s)
Appellant The DCIT, 1(1),
Respondent M/s Bridgestone Corporation Japan,
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 24-02-2010
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 2004-2005
Appeal Filed On 13-06-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER ITA NO.69/IND/2010 ASSESSMENT YEAR 2005-06 M/S. RAJESH TRADERS 1551 NEEM GALI MHOW (PAN AAGFR 7501 K) .APPELLANT VS ITO-5(3) INDORE .RESPONDENT APPELLANT BY : SHRI S.S. DESHPANDE CA RESPONDENT BY : SMT. APARNA KARAN SR. DR O R D E R THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER O F THE LEARNED FIRST APPELLATE AUTHORITY DATED 12.11.2009 ON THE GROUND THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DISMI SSING THE APPEAL AGAINST LEVY OF PENALTY U/S 271(1)(B) OF THE ACT. D URING HEARING OF THIS APPEAL I HAVE HEARD SHRI S.S. DESHPANDE LD. COUNS EL FOR THE ASSESSEE AND SMT. APARNA KARAN LD. SR. DR. THE CRUX OF THE ARGU MENTS ADVANCED BY MR. DESHPANDE IS THAT THE ASSESSEE IS A PARTNERSHIP FIRM EXECUTED GOVT. CONTRACTS AND DECLARED INCOME AT 8% AS THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS AND FILED THE RETURN U/S 44AD OF THE ACT. MY ATTENTION WAS ALSO INVITED TO TDS CERTIFICATE (PAGE 4 & 5 OF THE PAPER BOOK). IT WAS PLEADED THAT SEC.44AD IS A PRESUMPTION TAXATION TH EREFORE THERE IS NO 2 QUESTION OF FIXATION OF CASE OR ISSUANCE OF NOTICE TO THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE INVITED MY ATTENTION TO PA GE 6 OF THE PAPER BOOK (REPLY FILED BY THE ASSESSEE). IT WAS ALSO PLEADED THAT FOR EARLIER ASSESSMENT YEAR ALSO THE ASSESSEE FILED THE RETURN U/S 44AD OF THE ACT @8% AND ALSO DID NOT MAINTAIN ANY ACCOUNT. IT WAS A LSO PO THAT ON QUANTUM APPEAL THE ADDITION WAS DELETED BY THE TRI BUNAL. A STRONG PLEA WAS RAISED THAT ULTIMATELY A REFUND OF RS.46 238/- AS CLAIMED BY THE ASSESSEE WAS ALLOWED. ON THE OTHER HAND THE LD. SR. DR STRONGLY DEFENDE D THE IMPUGNED PENALTY BY CONTENDING THAT IT WAS THE DUTY OF THE A SSESSEE TO RESPOND THE NOTICES ISSUED BY THE DEPARTMENT THEREFORE PENALT Y WAS RIGHTLY LEVIED. PLEA WAS ALSO RAISED THAT EVEN 44AD CASES CAN BE SE LECTED FOR SCRUTINY. THE IMPOSITION OF PENALTY WAS DEFENDED AS THERE WAS NON-COMPLIANCE BY THE ASSESSEE. IT WAS FAIRLY ADDED THAT THE QUANTUM APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE BY TRIBUNAL. 2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. R EPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON TH E FILE. BRIEF FACTS ARE THAT THE ASSESSEE DECLARED TOTAL INCOME OF RS.17 27 7/- IN ITS RETURN FILED ON 31.3.2006 WHICH WAS PROCESSED U/S 143(1) ON 9.8. 2006. THE ASSESSEE FILED ITS RETURN U/S 44AD BY DEDUCTING TAX AT SOURC E @8% AS THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNTS. I HAVE SEEN FORM NO.16A DATED 30.12.2005 (CERTIFICATE OF DEDUCTION TAX AT SOURCE U/S 203 OF THE IT ACT 3 1961) WHEREIN THE AMOUNT OF RS.6 13 519/- WAS PAID/ CREDITED AND RS.36 599/- WAS DEDUCTED AS TAX AT SOURCE AND WAS P AID TO THE CENTRAL GOVT. THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1 ) ON 11.5.2007 REQUIRING THE ASSESSEE TO FURNISH DETAILS TO WHICH THE ASSESSEE ATTENDED THE PROCEEDING ON 25.9.2007 AND SOUGHT ADJOURNMENT. HOWEVER THE ASSESSEE VIDE LETTER DATED 26.12.2006 ADDRESSED TO THE ITO BY CLAIMING THAT THE ASSESSEE IS EXECUTING GOVT. WORKS AND FURT HER CLAIMED THAT THE ASSESSEE HAS FILED THE INCOME-TAX RETURN BY DEDUCTI NG THE TAX @8% U/S 44AD OF THE ACT AND ALSO POINTED OUT THAT THE ASSES SEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS. IT WAS SPECIFICALLY REQUESTE D THAT UNDER THE AFOREMENTIONED FACTS NECESSARY ORDER MAY BE PASSED . THE CONTENTS OF THE LETTER WERE NOT CONTROVERTED BY THE REVENUE BEI NG FACTUALLY CORRECT. THE INCOME WAS FINALLY ASSESSED AT RS.1 01 800/- AN D EVEN THE TRIBUNAL DELETED THE ADDITION IN QUANTUM APPEAL. THERE IS NO DISPUTE TO THE FACT THAT ULTIMATELY THE REFUND OF RS.46 238/- AS CLAI MED BY THE ASSESSEE WAS ALLOWED. THE RELEVANT PORTION OF THE ORDER DATE D 6.5.2009 (ITA NO.148/IND/2009) IS REPRODUCED HEREUNDER FOR READY REFERENCE AGAINST WHICH NO CONTRARY DECISION WAS BROUGHT TO MY NOTIC E. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)- II INDORE DATED 11 TH AUGUST 2008 FOR THE ASSESSMENT YEAR 2005-06 CHALLENGING THE ORDER OF THE LD.CIT(A) IN WRONGLY A DDING PARTNERS INTEREST AND SALARY U/S 185(5) OF THE INCOME-TAX AC T 1961. 2. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PA RTIES PERUSED MATERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE OBSERVATIONS OF THE AUTHORITIES BELOW. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME U/S 44AD SHOWING 8 % NET PROFIT BEING CIVIL CONTRACTOR OF 4 GARRISON ENGINEERING MHOW. THE ASSESSEE DID NOT MA INTAIN REGULAR BOOKS OF ACCOUNT AND FILED STATEMENT OF PAYMENTS AN D COPY OF TDS ALONGWITH RETURN OF INCOME. THE AO PASSED EX PARTE ORDER U/S 144 OF THE INCOME-TAX ACT 1961 AND ENHANCED RECEIPTS OF THE ASSESSEE TO RS. 35 LAKHS AND APPLIED 8 % PROFIT ON THE RECEIPTS. TH E INCOME WAS WORKED OUT AT RS. 2.80 LAKHS. THE AO ALLOWED DEDUCT ION OF INTEREST AND SALARY PAID TO THE PARTNERS BEING THE ASSESSEE PARTNERSHIP FIRM. THE LD.CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE WI TH REGARD TO ESTIMATION OF WORK DONE BY THE ASSESSING OFFICER U/ S 144 OF THE INCOME-TAX ACT 1961 AND NOTED THAT ON THE FACE OF THE DETAILS FILED IN THE TDS CERTIFICATE THE AO SHOULD NOT HAVE ENHANCE D THE INCOME OF ASSESSEE WITHOUT BRINGING ADEQUATE MATERIAL ON RECO RD. THEREFORE ESTIMATION OF WORK DONE BY THE ASSESSING OFFICER WA S NOT AS PER SECTION 144 OF THE INCOME-TAX ACT 1961. THE ADDITI ON WAS ACCORDINGLY DELETED. THE LD.CIT(A) HOWEVER ISSUED A SHOW CAUS E NOTICE FOR ENHANCEMENT OF INCOME FOR DISALLOWING PAYMENT OF IN TEREST SALARY ETC. PAID TO THE PARTNERS BECAUSE THE SAME ARE NOT ALLO WABLE AS PER THE PROVISIONS OF SECTION 184(5) OF THE INCOME-TAX ACT 1961. THE LD.CIT(A) DECIDED THE ISSUE IN THE IMPUGNED ORDER I N RESPECT OF TWO OF THE ASSESSEES I.E. M/S. SUNRENDRA SINGH BHATIA AND M/S. RAJESH TRADERS (APPELLANT IN APPEAL BEFORE ME ). THE LD.CI T(A) IN VIEW OF THE PROVISIONS OF SECTION 184(5) READ WITH SECTION 144 OF THE INCOME-TAX ACT 1961 DISALLOWED THE CLAIM OF ASSESSEE WITH RE GARD TO INTEREST AND SALARY PAID TO THE PARTNERS. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT-SE T SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS ORDER OF I.T.A.T. INDORE SMC II BENCH IN THE CASE OF M/S. SUNRENDRA SINGH BHATIA FOR THE SAME ASSESSMENT YEAR IN I.T.A.NO. 495 & 494/IN D/2008 DATED 26 TH DECEMBER 2008. THE LEARNED DEPARTMENTAL REPRESENTA TIVE DID NOT DISPUTE THE SAME. 5. ON CONSIDERATION OF THE ABOVE FACTS I AM OF THE OP INION THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY6 THE ORDER OF I.T.A.T. SMC II BENCH INDORE IN THE CASE OF M/S. SURENDRA SINGH BHATIA (SUPRA) IN WHICH IN PARA 9 THE TRIBUNAL HEL D AS UNDER :- AFTER HEARING THE RIVAL CONTENTIONS I NOTED THAT THE BUSINESS OF THE ASSESSEE WAS ONLY TO OBTAIN CONTRACT FROM THE GOVER NMENT AND NOT FROM THE PRIVATE PARTIES. DETAILS WERE FURNISHED BY ENCLOSING OF TDS CERTIFICATES. THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT. THEREFORE THE INCOME HAS BEEN DISCLOSED BY THE ASS ESSEE AS PER THE PROVISIONS OF SECTION 44AD OF THE ACT. FURTHER THE NECESSARY DETAILS HAVE ALSO BEEN SUPPLIED BY THE ASSESSEE VIDE LETTER DATED 26.12.2006. IN SUCH CIRCUMSTANCES THE AO SHOULD HAVE FRAMED AS SESSMENT U/S 143(3) AND NOT EX-PARTE U/S 144 OF THE ACT. THE CIT (A) HAS RIGHTLY DELETED THE ADDITION AS THE SAME WAS MADE WITHOUT A NY BASIS. HOWEVER THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING EX-PARTE ORDER U/S 144 OF THE ACT. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AS THE SAME WAS MADE WITHOUT ANY BASIS. HOWEVER THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING EX-PARTE ORDER U/S 144. AS ALREADY MENTIO NED THAT NECESSARY COMPLIANCE HAS BEEN MADE BY THE APPELLANT AND ALL T HE DETAILS WERE AVAILABLE IN THE RETURN OF INCOME. THEREFORE I HOL D THAT THE 5 ASSESSMENT HAS ERRONEOUSLY BEEN MADE U/S 144 AND TH E SAID ORDER SHOULD HAVE BEEN COMPLETED UNDER THE PROVISIONS OF SECTION 143(3) OF THE ACT. CONSEQUENTLY THE DISALLOWANCE OF INTEREST AND SALARY MADE BY THE LD.CIT(A) U/S 184(5) OF THE INCOME-TAX ACT 196 1 IS REVERSED AND THE ADDITION MADE ON THIS ACCOUNT IS DIRECTED TO BE DELETED. THUS THIS APPEAL OF THE ASSESSEE IS ALLOWED. 6. I MAY ALSO NOTE HERE THAT THE LD.CIT(A) SPECIFICALL Y NOTED FOR DELETING THE ADDITION ON MERIT THAT THE ESTIMATION OF WORK DONE BY THE ASSESSING OFFICER IS NOT AS PER SECTION 144 OF THE INCOME-TAX ACT 1961 BECAUSE OF THE TDS CERTIFICATE FILED ON THE R ECORD ALONGWITH RETURN OF INCOME. THE ABOVE FINDING OF THE LD.CIT(A ) ARE NOT IN CHALLENGE BEFORE THE TRIBUNAL. IT WOULD THEREFORE PROVE THAT THE LD.CIT(A) HIMSELF WAS NOT SATISFIED WITH THE FINDIN G OF THE AO IN REGARD TO APPLICATION OF PROVISION OF SECTION 144 O F THE INCOME-TAX ACT 1961. THEREFORE THE SAME PROVISION CANNOT BE APPLIED FOR REJECTING THE CLAIM OF THE ASSESSEE U/S 184(5) READ WITH SECTION 144 OF THE INCOME-TAX ACT 1961. I MAY ALSO ADD HERE THAT PROVISO TO SUB SECTION (2) OF SECTION 44AD PROVIDES PROVIDED THAT WHERE THE ASSESSEE IS A FIRM THE SALARY AND INTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FROM INCOME COMPUTED UNDER SUB SECTION (1) SUBJECT TO THE CONDITIONS AND LIMITS SPECIFIED IN CLAUSE (B) OF SE CTION 40. SECTION 44AD IS COMPLETE CODE IN ITSELF AND ASSESSEE FILED RETURN OF INCOME IN THE ABOVE PROVISION WHICH IS ACCEPTED BY THE LD.CI T(A). THEREFORE THE LD.CIT(A) SHOULD HAVE CONSIDERED THE CASE OF THE AS SESSEE IN THE LIGHT OF THE ABOVE PROVISIONS OF SECTION 44AD(2) OF THE I NCOME-TAX ACT 1961. CONSIDERING THE ABOVE DISCUSSION I AM OF THE VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DISALLOWING SALARY A ND INTEREST PAID TO THE PARTNERS. 7. THE ORDER OF THE LD.CIT(A) ON THE ABOVE ISSUE IS T HEREFORE SET- ASIDE AND THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED AND ENTIRE ADDITION IS DELETED. 8. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED ON 6 TH MAY 2009. 3. IN THE AFORESAID ORDER THE RELEVANT FACTS HAVE BEEN DULY CONSIDERED WHEREIN THE ASSESSEE FILED RETURN U/S 44AD OF THE A CT BY SHOWING 8% NET PROFIT BEING CIVIL CONTRACTOR. THE BENCH HAS ALREA DY CONSIDERED THE DECISION IN THE CASE OF SURENDRA SINGH BHATIA (ITA NO.495 & 494/IND/2008) ORDER DATED 26.12.2008. THERE IS A F ACTUAL FINDING THAT NECESSARY DETAILS WERE FURNISHED BY THE ASSESSEE AN D ULTIMATELY THE ADDITION WAS DELETED. BEFORE COMING TO ANY CONCLUSI ON I AM REPRODUCING 6 HEREUNDER THE RELEVANT PROVISIONS (SEC. 44AD) WHICH IS A SPECIAL PROVISION FOR COMPUTING PROFIT AND SALES OF CIVIL CONSTRUCTIO N: 64 [ 65 SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS O F BUSINESS OF CIVIL CONSTRUCTION ETC. 44AD. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONT AINED IN SECTIONS 28 TO 43C IN THE CASE OF AN ASSESSEE ENGAGED IN THE BUSINES S OF CIVIL CONSTRUCTION OR SUPPLY OF LABOUR FOR CIVIL CONSTRUCTION A SUM EQUAL TO EIGHT PER CENT OF THE GROSS RECEIPTS PAID OR PAYABLE TO THE ASSESSEE IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BU SINESS OR AS THE CASE MAY BE A SUM HIGHER THAN THE AFORESAID SUM AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME SHALL BE DEEMED T O BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY IN CASE THE AFORESAID GROSS RECEIPTS PAID OR PAYABLE EXCEED AN AMOUNT OF FORTY LAKH RUPEES. (2) ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL FOR THE PURPOSES OF SUB-SECTION (1) BE DEEM ED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTI ON UNDER THOSE SECTIONS SHALL BE ALLOWED : 66 [ PROVIDED THAT WHERE THE ASSESSEE IS A FIRM THE SALARY AND I NTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FROM THE INC OME COMPUTED UNDER SUB-SECTION (1) SUBJECT TO THE CONDITIONS AND LIMIT S SPECIFIED IN CLAUSE ( B ) OF SECTION 40 .] (3) THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR TH E PURPOSE OF THE BUSINESS REFERRED TO IN SUB-SECTION (1) SHALL BE DE EMED TO HAVE BEEN CALCULATED AS IF THE ASSESSEE HAD CLAIMED AND HAD B EEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF THE DEPRECIATIO N FOR EACH OF THE RELEVANT ASSESSMENT YEARS. (4) THE PROVISIONS OF SECTIONS 44AA AND 44AB SHALL NOT APPLY IN SO FAR AS THEY RELATE TO THE BUSINESS REFERRED TO IN S UB-SECTION (1) AND IN COMPUTING THE MONETARY LIMITS UNDER THOSE SECTIONS THE GROSS RECEIPTS OR AS THE CASE MAY BE THE INCOME FROM THE SAID BU SINESS SHALL BE EXCLUDED. 67 [(5) NOTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS SECTION SHALL APPLY WHERE THE ASSESSEE CLAIMS AND PRODUCES EVIDENCE TO PROVE THAT THE PROFITS AND GAINS FROM THE AFORESAID BUSIN ESS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON THE 1ST DAY OF APRIL 1997 OR ANY EARLIER ASSESSMENT YEAR ARE LOWER THAN THE PROFITS AND GAINS SPECIFIED IN SUB-SECTION (1) AND THEREUPON THE ASSESSING OFFICER SHALL PROCEED TO MAKE AN ASSESSME NT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE AND DETERMINE THE SU M PAYABLE BY THE ASSESSEE ON THE BASIS OF ASSESSMENT MADE UNDER SUB- SECTION (3) OF SECTION 143.] 68 [(6) NOTWITHSTANDING ANYTHING CONTAINED IN THE FORE GOING PROVISIONS OF THIS SECTION AN ASSESSEE MAY CLAIM LOWER PROFIT S AND GAINS THAN THE 7 PROFITS AND GAINS SPECIFIED IN SUB-SECTION (1) IF HE KEEPS AND MAINTAINS SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIR ED UNDER SUB- SECTION (2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB .] EXPLANATION. FOR THE PURPOSES OF THIS SECTION THE EXPRESSION CIVIL CONSTRUCTION INCLUDES ( A ) THE CONSTRUCTION OR REPAIR OF ANY BUILDING BRIDG E DAM OR OTHER STRUCTURE OR OF ANY CANAL OR ROAD; ( B ) THE EXECUTION OF ANY WORKS CONTRACT.] THE FOLLOWING SECTION 44AD SHALL BE SUBSTITUTED FOR THE EXISTING SECTION 44AD BY THE FINANCE (NO. 2) ACT 2009 W.E. F. 1-4-2011 : SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS O F BUSINESS ON PRESUMPTIVE BASIS. 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 EIG HT PER CENT 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 EL IGIBLE 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 DEEM ED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTI ON UNDER THOSE SECTIONS SHALL BE ALLOWED : PROVIDED THAT WHERE THE ELIGIBLE ASSESSEE IS A FIRM THE SAL ARY AND INTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FRO M THE INCOME COMPUTED UNDER SUB-SECTION (1) SUBJECT TO THE CONDI TIONS AND LIMITS SPECIFIED IN CLAUSE ( B ) OF SECTION 40 . (3) THE WRITTEN DOWN VALUE OF ANY ASSET OF AN ELIGI BLE BUSINESS SHALL BE DEEMED TO HAVE BEEN CALCULATED AS IF THE ELIGIBLE A SSESSEE HAD CLAIMED AND HAD BEEN ACTUALLY ALLOWED THE DEDUCTION IN RESP ECT OF THE DEPRECIATION FOR EACH OF THE RELEVANT ASSESSMENT YE ARS. (4) THE PROVISIONS OF CHAPTER XVII-C SHALL NOT APPL Y TO AN ELIGIBLE ASSESSEE IN SO FAR AS THEY RELATE TO THE ELIGIBLE B USINESS. (5) NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREG OING PROVISIONS OF THIS SECTION AN ELIGIBLE ASSESSEE WHO CLAIMS THAT HIS PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS ARE LOWER THAN THE PROFI TS AND GAINS SPECIFIED IN SUB-SECTION (1) AND WHOSE TOTAL INCOME EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X SHALL BE REQUIRED TO KEEP AND MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-SECTION (2) OF SECTION 44AA AND GET THEM AUDITED AND FURNISH A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB. EXPLANATION. FOR THE PURPOSES OF THIS SECTION ( A ) ELIGIBLE ASSESSEE MEANS 8 ( I ) AN INDIVIDUAL HINDU UNDIVIDED FAMILY OR A PARTNE RSHIP FIRM WHO IS A RESIDENT BUT NOT A LIMITED LIABILITY PARTNERSHIP FIRM AS DEFINED UNDER CLAUSE ( N ) OF SUB-SECTION (1) OF SECTION 2 OF THE LIMITED LI ABILITY PARTNERSHIP ACT 2008 (6 OF 2009); AND ( II ) WHO HAS NOT CLAIMED DEDUCTION UNDER ANY OF THE SE CTIONS 10A 10AA 10B 10BA OR DEDUCTION UNDER ANY PROVISIONS O F CHAPTER VIA UNDER THE HEADING C . - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES IN THE RELEVANT ASSESSMENT YEAR; ( B ) ELIGIBLE BUSINESS MEANS ( I ) ANY BUSINESS EXCEPT THE BUSINESS OF PLYING HIRIN G OR LEASING GOODS CARRIAGES REFERRED TO IN SECTION 44AE; AND ( II ) WHOSE TOTAL TURNOVER OR GROSS RECEIPTS IN THE PRE VIOUS YEAR DOES NOT EXCEED AN AMOUNT OF FORTY LAKH RUPEES. A PROVISION OF SUBSTITUTION WAS MADE BY THE FINANC E (2) ACT 2009 BUT THAT IS W.E.F. 1.4.2011. ADMITTEDLY SEC. 44AD IS A SPECIAL PROVISION FOR COMPUTING PROFIT AND GAIN OF BUSINESS ON PRESUM PTIVE BASIS THEREFORE I AM OF THE VIEW THAT WHEN THE AMOUNT EQ UAL TO 8% OF THE TOTAL TURNOVER OR GROSS RECEIPTS IT SHALL BE DEEMED TO BE PROFIT AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROFESSION CONSEQUENTLY WHERE IS THE QUESTION OF FIXATION OF CASE ESPECIALLY WHEN THE GROSS RECEIPTS IS BELO W PRESCRIBED LIMIT. EVEN OTHERWISE THERE IS NO LOSS TO THE REVENUE AS ULTIMATELY A REFUND OF RS.46 238/- AS CLAIMED BY THE ASSESSEE WAS ALLOWE D. IN SUCH A SITUATION THE RATIO LAID DOWN IN THE CASE OF K.C. BUILDERS VS. ACIT (265 ITR 562) (SC) SUPPORTS THE CASE OF THE ASSESSEE. IN THE PRESENT APPEAL THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUN TS AND THE ASSESSEE IS FILING RETURN AS PER PROVISIONS OF SEC. 44AD (PRESU MPTIVE TAXATION @8%) THEREFORE NO PENALTY U/S 271(1)(B) IS EXIGIBLE THA T TOO WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD ESPECIALLY WHEN IDE NTICALLY THE 9 DEPARTMENT HAD BEEN ALLOWING THE CLAIM OF THE ASSES SEE AND THE ASSESSEE DULY RESPONDED TO THE NOTICES ISSUED TO HI M AS CONTAINED IN THE COMMUNICATION DATED 26.12.2006 (PAGE 6 OF THE PAPER BOOK) THEREFORE THERE IS NO VIOLATION OF SUB-CLAUSE (B) OF SEC. 271 (1) OF THE ACT. EVEN OTHERWISE THE WORD MAY HAS BEEN USED IN THE IMPU GNED SEC. WHICH IS DISCRETIONARY AND NOT MANDATORY THEREFORE IT CAN BE SAID THAT SUCH DISCRETION HAS TO BE USED JUDICIOUSLY BY KEEPING IN VIEW THE OVERALL FACTS. IT IS NOT THE CASE THAT THE ASSESSEE DID NOT RESPON D AT ALL TO THE NOTICE ISSUED TO HIM THEREFORE THIS APPEAL OF THE ASSESS EE IS ALLOWED. FINALLY THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.2.2010. (JOGINDER SINGH) JUDICIAL MEMBER FEBRUARY 24 2010 {VYAS} COPY TO APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE