No addition of sundry creditors while making assessment under section 44AF

By | October 30, 2015

No addition can be made in respect of sundry creditors while making assessment under section 44AF

IN THE ITAT PANAJI BENCH

Good Luck Kinetic

v.

Income-tax Officer, Ward -2, Margao

GEORGE MATHAN, JUDICIAL MEMBER
AND N.K. BILLAIYA, ACCOUNTANT MEMBER

IT APPEAL NO. 26 (PNJ.) OF 2013
[ASSESSMENT YEAR 2006-07]

JUNE  15, 2015

A perusal of section 44AF clearly shows that the opening words in the said section are ‘notwithstanding anything to the contrary contained in sections 28 to 43C’. A perusal of the provisions of section 43B shows that the opening words are ‘notwithstanding anything contained in any other provisions of this Act’. As per the provisions of section 44AF admittedly once the presumptive tax provisions are applied, the income of the assessee is fixed at 5 per cent of the total turnover. The non obstante clause in section 44AF is not the only words that call for interpretation. When the presumptive tax rate is applied under section 44AF, the said sum equalling 5 per cent of the total turnover is deemed to be the profit and gains of such business chargeable to tax under the head ‘Profits and gains of business or profession’. It only means that the deduction allowable under sections 28 to 43C is deemed to have been already granted to the assessee. This is because the said provisions under sections 28 to 43C are provisions relating to the computation of business income of the assessee. However, a perusal of the provisions of section 43B shows that the said provision is a ‘restriction’ on the allowance of a particular expenditure representing statutory liability and such other expenses claimed in the profit and loss account unless same has been paid before the due date of filing the return. The statutory liability in the present case has not been paid before the due date of filing the return. Further, the non obstante clause in section 43B has a far wider amplitude because it uses the words ‘notwithstanding anything contained in any other provisions of this Act’. Therefore, even assuming that the deduction is permissible or the deduction is deemed to have been allowed under any other provisions of this Act, still the control placed by the provisions of section 43B in respect of the statutory liabilities still holds precedence over such allowance. This is because the dues to the crown have no limitation and have precedence over all other allowances and claims. In these circumstances, the disallowance made by the Assessing Officer by invoking the provisions of section 43B in respect of the statutory liabilities are in order even though the assessee’s income has been offered and assessed under the provisions of section 44AF. So far as the addition representing the sundry creditors is concerned admittedly the same cannot be made in the hands of the assessee when applying the provisions of section 44AF. This is because once the presumptive tax provision is applied, then the books of account are deemed not to be available for the purpose of computation of the profit and gains of the business. Consequently, the addition representing the sundry creditors as made by the Assessing Officer and as confirmed by the Commissioner (Appeals) is liable to be deleted.

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