Audit Report filed during assessment proceedings cannot be ignored by AO
Facts and Issue of the case
The present appeal has been filed by the assessee against the order of ld. CIT( A), Dehradun dated 06 . 03.2019.
Following grounds have been raised by the assessee:
- That the AO erred on facts and in law in computing total turnover at Rs.2,56 ,64,511 and then computing net profit @8% amounting to Rs.20 ,53,160 on such turnover under section 44AD of I.T. Act as against short term capital gain declared on shares and F&O transactions by completely ignoring the tax audit report filed during the course of assessment proceedings.
- That the AO erred on facts and in law in computing the net profit at Rs.20,53 ,160 under section 44AD on account of F&O transaction instead of assessing the net profit at Rs.2,41 ,131 on account of F&O transactions as declared/reflected in the audited P&L A/ c read with tax audit report filed during the course of assessment proceedings.
- That the AO erred on facts and in law in computing the net profit at Rs.20,53 ,160 under section 44AD on account of shares instead of assessing the same at Rs.56 ,147 under the head ‘short term capital gain’ as declared by the Appellant.
- That the Ld. CIT( A) erred on facts and in law in passing an ex- parte appellate order as no notices off hearing were served on the communication address as mentioned in Form 35 thereby violating the principles of natural justice.
- That the Ld. CIT( A) erred on facts and in law in passing an ex- parte appellate order as notices of hearing appear to have been sent by email despite the fact that in Form 35, it was duly mentioned that notices of hearing should not be sent through email.
Observation and Conclusion of the Court
The only issue pertains to application of provisions u/s 44AD of the Income Tax Act, 1961. The assessee earned income from sale & purchase of derivatives which the AO held that the same should be treated as business income. The assessee has also incurred losses in the derivatives trading which have been duly filed before the AO. The AO held that the tax Audit Report has not been filed before the due date and ignored the Audit Report filed during the course of assessment proceedings. While different provisions govern the delay in filing of tax Audit Report, the action of the Assessing Officer not to consider the Audit Report while concluding the assessment and wrongly invoking the provisions of Section 44AD cannot be sustained.
Hence, the matter is remanded back to the file of the Assessing Officer to frame the assessment de novo considering the tax Audit Report. The assessee shall comply to the notices of the revenue authorities promptly without seeking any unnecessary adjournments. The appeal of the assessee was allowed.Rajesh-Mittal-Vs-ITO-ITAT-Dehradun