Section 44AD(5) — the law in short
What the courts have decided on section 44AD(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Neeraj v PCIT — a s.263 revision directing a s.68 addition against a s.44AD return quashed for want of jurisdiction
ITATHelps taxpayerNo later treatment found
The Principal Commissioner has revised my client's assessment under s.263 and directed the officer to tax his cash deposits under s.68, although he filed under s.44AD and keeps no books. Can that order stand?
The Delhi Bench quashed it. Once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits; an assessee under s.44AD computes income as a percentage of turnover and is not required to maintain books of account, so the Principal Commissioner's direction to make a s.68 addition was questionable and the revision order suffered from a lack of requisite jurisdiction. The Bench recorded that it has consistently held that invocation of s.263 is not permissible in cases where the assessee files his return under s.44AD.
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Statutory position — s.44AD(4) and s.44AD(5): the five-year lock-out, and why the books-and-audit duty bites only if total income exceeds the exemption limit
CBDT Circulars & InstructionsCuts both ways
My client filed under s.44AD for two years and then declared below eight per cent in the third. What happens to him for the next five years, and does he now have to get audited?
By s.44AD(4), an eligible assessee who has declared profit in accordance with s.44AD and who, in any of the five assessment years relevant to the succeeding previous years, declares profit NOT in accordance with s.44AD(1), is shut out of s.44AD for the five assessment years subsequent to the assessment year in which he broke ranks. By s.44AD(5), that assessee must keep books under s.44AA(2) and get them audited and reported under s.44AB only if his total income exceeds the maximum amount which is not chargeable to income-tax — a condition that both the department and the assessee routinely read out of the sub-section.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
