Applicability of tax audit

This query is : Resolved

Rajkumar Gollapudi (Querist)
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16 March 2017 Hai,

I heard that one of my ex-client had filed income tax return normally without tax audit. However his turnover is Rs.98 lakhs and showed profit in his profit & loss account as Rs.2,40,000/- which is within the basic exemption in the A.Y.2015-16. Here he filed his return by showing his profit as just 2.45% by dissatisfying the Sec.44 AD (profit less than 8%). So he has to audit his books accounts as per Sec. 44AB but he can't. I confused by seeing that his return was processed by the assessing officer and he received intimation letter for processing the return. Is the A.O correct in processing the return so?

Please assist me in this regard.

CA Gopal Somani

CA Gopal Somani (Expert)
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16 March 2017 If an assessee claims that his profits and gains from eligible business are less than 8% of the gross receipts and whose total income exceeds the maximum amount not chargeable to tax, the asseessee shall maintain the books of account as prescribed U/S 44AA and get them audited under section 44AB of the Act.
Here the catch lies in the words "and whose total income exceeds the maximum amount which is not chargeable to income-tax" Since the words start with ‘and’ therefore both the conditions need to be fulfilled for an assessee to be required to get his accounts audited u/s 44AB if his total income exceeds the maximum amount which is not chargeable to income-tax.

In Your case since the Income is less than the Basic exemption limit so audit is NOT required. AO is correct in processing the return.