My client is a civil contractor.He is entrusted with road, canal, building maintenance work etc. During the financial year 2005-06 he earned a total gross contract receipts of Rs.3800000/-. He filed his return of income under sec 44AD declaring his income as 8@ of 38 lakhs. During that year he claimed deduction under Sec 80C for LIC premium and tution fee of 1 child paid. Now this is selected for scrutiny on AIR basis. Does the concerned income tax officer have the dicretion to make an addition stating that there are no books of accounts maintained? What could be the basis on which the addition would be held valid? It is advisable to go for an appeal in case of an adverse order?
15 November 2008
Addition will not sustain for want of books in a case covered u/s 44AD. But the transactions covered in AIR if not proved with details and source etc addition may attract. In case of an adverse order the entity has the right to appeal but advise is subject to the merit of the case.
15 November 2008
Assessee filing return u/s 44AD is required to maintain books according to the provision of section 44AA in respect of aforesaid business. So additions cannot be made in normal case scrutiny.
Addition can be made only if they will prove that the transaction covered in the AIR is not included in the Gross contract Receipts of your client.
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