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FAQs on Sec 44AD

Is section 44AD applicable to the assessee in search/survey cases, where the total of disclosed as well as undisclosed Turnover does not exceed Rs. 1 Crore?
The answer is YES, because if both the assessee and business are eligible, 44AD automatically comes into equation without hesitation unless the case is covered by 44AD (5). In this regard, reliance can be placed on the decision of ITAT Pune in case of Balaji Construction 72 ITD 559 and to some extent on ITAT Ahmedabad in case of Abhi Developers.
Whether the provisions of section 68 and 69 to 69D are applicable to the assessee covered by section 44AD?
Section 44AD does not over ride section 68 and 69 to 69D, so the assessee has to explain the cash credits, investments, etc. as required under those sections. One may even argue that addition u/s 68 could not be made when no books are maintained as held in case of Ms. Mayawati. However, this decision is like the inconsequential in the sense that if a particular entry in say Bank pass Book cannot be equated with books, even then to set the controversy at rest, the AO or CIT(A) can very well add the same u/s 69A of the Act.
However, is the assessee supposed to explain each and every entry of credit/investment?
It is not so. It has been held by Hon’ble Punjab and Haryana High Court in case of CIT Vs. Surinder Pal Anand 192 Taxmann 264, that assessee need not explain each and every entry of deposit / investment unless such entry had no nexus with gross receipts. Hence, the assessee is under obligation to explain only the deposits or investments higher than Gross Receipts or Turnover.
Whether the eligible assessee can claim Deductions u/s 80C to 80GGC and 80U from the income computed u/s 44AD?
The answer is YES, because section 44AD(2) says that only Deductions u/s 30 to 38 shall be deemed to have been allowed and given full effect to. Thus, all Deductions u/s Chapter VI-A falling u/s 80C to 80GGC and 80 U are available to the assessee. (As regards other Deductions under Chapter VI-A is concerned; it is pertinent to note that all the remaining Deductions are “Deduction in respect to certain Incomes” and in such cases as per Explanation (a) to 44AD, such assessees are not eligible assessees for Section 44AD of the Act. So the question does not arise.)