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2022 (6) TMI 415 - AT - Income TaxApplicability of provision u/s 44ADA - quantifying the turnover of the assessee - whether or not the sales tax or/and VST/CST is includable while quantifying the turnover to determine the applicability of Section 44AD? - HELD THAT:- As in this case, the accounts are not audited and there is nothing on record to show that the method of accounting followed by the assessee is not inclusive method. Since Section 145A of the Act is clear in its import that for the purpose of determining the income chargeable under the head “profits and gains of business/profession”, the valuation of purchase and sales of goods shall be adjusted to include the tax component also and it was so understood by the ICAI the turnover shall include the tax component unless the assessee maintains a separate tax account in respect of sales tax or/and VST/CST wherein credit is made on collection and debit is made on payment. Admittedly in this case, the assessee did not get their accounts audited for this particular assessment year though it was not so for the earlier assessment years. In these circumstances, we are of the considered opinion that for the purpose of quantifying the turnover of the assessee, the sales tax or/and VST/CST cannot be excluded. On this account, we cannot find fault with the observations of the Ld. CIT(A). Now coming to the net profit relevant for taxation is concerned, CIT(A) estimated the same at 25% of the gross turnover but the figures furnished by the assessee by way of written submissions, show that the net profit was 12.82%, 12.54% and 5.52% for the AYs.2014-15, 2015-16 and 2016-17 respectively - we find that estimate of the same at 25% is very high and taking a pragmatic view, we estimate the same at 12.5% of the gross receipts/turnover. AO is directed to re-compute the income under the head “profits and gains of business/profession” of the assessee at 12.5% of the gross receipts/turnover. Appeal of assessee allowed in part.
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