Notice u/s 139(9)of income tax act, 1961

This query is : Resolved

Minati Kundu (Querist)
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15 January 2018 The assessment Year 2017-18
Filed ITR form type ITR-4
Source of Income- LIC Agent

Error Code 86

Error Description- As per Section 44AD(6) of the Income Tax Act, 1961, the
provisions of Sec.44AD are not applicable to – (1) persons
carrying on professions that are referred to in
Sec.44AA(1), (2) persons earning income in the nature of
commission or brokerage, and (3) persons carrying on any
agency business.As seen from the return of income filed,
the nature of business code mentioned is 00301 General
Commission Agents, which falls in the categories
mentioned above. Hence, the provisions of Sec.44AD are
not applicable, in your case.

Probable resolution- As the provisions of Section 44AD are not applicable, in
your case, the claim of computing profits and gains of
business on presumptive basis, under this special provision
is not allowable. Hence, the above defect has to be
corrected by way of computing the profits and gains of
business under the normal provisions and not under
Sec.44AD and offering the same.

1) Please let me know what am I missing.
2) How to filed under the normal provisions?

Mayur Gondaliya

Mayur Gondaliya (Expert)
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16 January 2018 The provisions of section 44AD are applicable to such resident assesses who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. The presumptive taxation scheme under these provisions can be opted for by the eligible assessees who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB. The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

> Business of plying, hiring or leasing of goods carriages referred to in section 44AE.

> A person who is carrying on any agency business.

> A person who is earning income in the nature of commission or brokerage

Minati Kundu

Minati Kundu (Querist)
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16 January 2018 I am a LIC Agent. I don't have any other source of Income. My Gross Turnover or Gross Receipts Rs. 94550 & earlier during e-Filing I putted Presumptive income under section 44AD Rs. 93500. So, now how can I correct the defect? How can I compute the profits and gains of business under the normal provisions?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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04 August 2024 You received a notice under Section 139(9) of the Income Tax Act for the assessment year 2017-18, with error code 86 indicating that Section 44AD is not applicable to your case. Here's a structured approach to resolve this issue:

### **Understanding the Issue:**

1. **Error Code 86 Explanation:**
- **Section 44AD:** This section provides for the presumptive taxation scheme for small businesses. However, it does not apply to certain categories of taxpayers, including:
- Professionals referred to in Section 44AA(1).
- Individuals earning income in the nature of commission or brokerage.
- Individuals carrying on agency businesses.

- **Your Case:** As an LIC agent, you fall into the category of income from commission or brokerage, and thus, Section 44AD is not applicable to you.

### **Steps to Resolve the Defect:**

#### **1. **Review and Correct the Return:**

- **Revise the ITR:**
- Log in to the [Income Tax e-Filing Portal](https://incometax.gov.in/iec/foportal).
- Navigate to “e-File” > “Income Tax Return” > “Revised Return.”
- Select the relevant Assessment Year (AY 2017-18) and the return type (ITR-4).

- **Adjust the Profits and Gains Calculation:**
- **Remove Section 44AD:** Since Section 44AD is not applicable, you need to compute the profits and gains under the normal provisions.
- **Compute Profits:**
- In your case, the income needs to be computed based on actual receipts and expenses rather than the presumptive basis.
- Since your gross receipts are Rs. 94,550, you should calculate your income by considering all allowable expenses, if any, related to earning this income.

#### **2. **Compute Profits and Gains under Normal Provisions:**

- **Calculate Net Income:**
- Determine your net income by subtracting any business-related expenses from your gross receipts. As you mentioned, you have only commission income with no other sources, so calculate your net profit based on actual receipts and expenses.

- **Update the Return:**
- Enter the computed net income in the relevant section of the revised ITR form.
- Ensure that the Balance Sheet and Profit & Loss Account are accurately filled out, reflecting the correct figures.

#### **3. **Submit the Revised Return:**

- **File the Revised Return:**
- Complete the revised return by including the accurate computation of income and other required details.
- Submit the revised return electronically through the Income Tax e-filing portal.

- **E-Verify the Return:**
- Ensure that you complete the e-verification process or send the physical ITR-V form as required.

#### **4. **Respond to the Notice:**

- **Online Response:**
- Go to the “e-File” > “Income Tax Return” > “Response to Notice” section on the Income Tax e-filing portal.
- Provide an explanation regarding the correction, mentioning that Section 44AD was incorrectly applied and that the revised return has been filed with the correct computation of income.

### **Summary of Actions:**

1. **Revise the ITR:** Remove the presumptive income calculation under Section 44AD and compute your income based on actual receipts and allowable expenses.
2. **File Revised Return:** Submit the revised ITR with the updated calculations.
3. **Respond to Notice:** Provide a detailed explanation and attach relevant documents if needed.

By following these steps, you will correct the defect and comply with the notice requirements. If you encounter complexities, consulting a tax professional or chartered accountant for assistance is advisable.