Applicablity of Tax Audit

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SHAIKH AIJAZ ABU MIYAN (Querist)

31 July 2008
The firm is engaged in construction business.

The WIP of the firm Exceeds 40lacs.

The firm doesnt have any purchase, sales and gross receipts.

Whether firm is liable for tax Audit.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)

31 July 2008 No, Tax Audit Report u/s 44AB is to be obtained in case the Sale or Turnover or Gross Receipts are 40 lacs or more

CA N RAJA

CA N RAJA (Expert)

02 August 2008 The question of Tax Audit is discussed under Sec 44AB of the Income Tax Act, 1961.

As per the above section, tax audit arises only in the following cases.

Total Sales, turnover or gross receipts from the business exceeds Rs.40 Lakhs in case of BUSINESS.

OR

Gross receipts exceeds Rs.10 Lakhs in case of PROFESSION.

OR

Carries on business referred in Sec 44AD or AE or AF or BB or BBB and claims income from such business is lower than what is prescribed under the section.

In your case, the person carries on the business mentioned under Sec 44AD. In such case also, if the gross receipts from the business does not exceed Rs.40 Lakhs, then 8% of the gross receipts paid or payable to the assessee or such higher sum declared by the assessee shall be deemed to be the income of the assessee.

Inference:

Your Constrution Contractor fits under the definition of Sec 44AD but not under the taxability, since the sole consideration is on the receipt. (i.e., 8% of gross receipts or higher amout as declared will be deemed to be income when GROSS RECEIPTS does not exceed Rs.40 Lakhs. Since there is no receipt above condition cannot be met, and income provision prescribed under Sec 44AD cannot be applied. Since 44AD cannot be applied, Sec 44AB also cannot be applied(since there is no sales, turnover or receipts).

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