Case Details: Manoj Rajaram Sharma vs. ITO [2026] 184 taxmann.com 675 (Mumbai-Trib.)
Judiciary and Counsel Details
- Pawan Singh, Judicial Member & Makarand Vasant Mahadeokar, Accountant Member
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Suryadev Yadav, Karan Hariya & Prashant Gupta, Ld. ARs for the Appellant.
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Bhagirath Ramawat, Ld. DR for the Respondent.
Facts of the Case
The assessee-individual was engaged in the activity of a Business Correspondent (BC) with a payments bank. He filed his return of income under section 44AD, declaring income at 35% of gross receipts. Based on information that certain income had escaped assessment, reassessment proceedings were initiated under section 147.
The Assessing Officer (AO) accepted gross receipts but held that income should have been computed at 50% thereof and made additions over the returned income. On appeal, the CIT(A) upheld the additions. Aggrieved by the order, the assessee filed an appeal to the Mumbai Tribunal.
ITAT Held
The Tribunal held that the assessee was engaged in business activity and was eligible for the benefit of section 44AD. The AO had not brought any material on record to demonstrate that the assessee was carrying on a specified profession as contemplated under section 44ADA. The activity of a Business Correspondent facilitating banking transactions cannot, by any stretch of interpretation, be equated with a profession such as legal, medical, engineering, architectural, accountancy, technical consultancy or other notified professions falling within the ambit of section 44AA and consequently section 44ADA.
The AO, while accepting the assessee’s gross receipts, substituted the statutory rate under section 44AD with a rate of 50%, which is traceable only to section 44ADA. Such substitution was contrary to the scheme of the Act and amounts to applying a provision which is otherwise inapplicable to the facts of the case. The assessee had declared income at approximately 35% of gross receipts, which is substantially higher than the statutory minimum prescribed under section 44AD.
Once the assessee has opted for the presumptive scheme and declared income exceeding the prescribed percentage, the AO cannot arbitrarily enhance the same unless the assessee is shown to be ineligible for section 44AD or there is material to demonstrate suppression of receipts or inflation of expenses. Therefore, the assessee’s income declared under section 44AD was to be accepted.
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