Sec 44ADA is not applicable where income is not earned on account of professional consultancy

Shri Vishnu Dattatraya Ponkshe v. CPC Bengaluru (ITA No. 1570/Mum/2023)

Facts:

1. The taxpayer, Vishnu Dattatraya Ponkshe, reported their income under Section 44AD of the Income Tax Act, indicating an income rate of 8% on receipts totalling Rs. 8,30,800, generated from a consultancy business related to stamp duty and registration.
2. Within this amount, there was a receipt of Rs. 4,81,280 on which TDS (Tax Deducted at Source) was deducted under Section 94J of the Income Tax Act.
3. During the assessment process, the Assessing Officer (AO) added 50% of the income under Section 44ADA of the Act, resulting in an additional Rs. 2,40,640.
4. Dissatisfied with this assessment, the assessee appealed to the Commissioner of Income Tax (Appeal), who subsequently dismissed the appeal. Consequently, the taxpayer filed another appeal before the tribunal.
5. Section 44ADA of the Income Tax Act pertains to individuals engaged in legal, medical, engineering, architectural, professional accountancy, technical consultancy, interior decoration, or other professions as specified by the Board in the official gazette.

ITAT Mumbai held as below:

1. The taxpayer being assessed had only completed their 10th standard education and lacked the qualifications to work as a legal, medical, engineering, architectural, professional accountant, or technical consultant.
2. No addition is to be incurred under section 44ADA of the Income Tax Act 1961 for the income made via the business of the consultancy service.

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