As per section 44ADA, professionals (falling under definition) are allowed to declare 50% of gross receipts as income.
Situation - if a person lets say earns Rs. 20 Lacs and declare Rs.10 Lacs as income and pays tax on Rs. 10 Lacs.
Question-
1) The person may have actually incurred just 2 Lacs as expense and so bank balance is showing 18 Lacs (lets ignore personal expenses and Income tax payment at moment), hence there is a mismatch between declared income of 10 Lacs and actual assets (bank balance ) of Rs. 18 Lacs. Can IT department question this mismatch? yes/no and why ? If yes any way to handle this?
2) Can IT department challenge that profit margin of 50%. I mean can department say looking the nature of profession that profit margin is 60% or 70% or any other figure ?
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