Eligibility of tax audit

This query is : Resolved

Ashish Rathi (Querist)
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16 November 2013 Sir/Madam,

One of my client(Agency Firm) has Gross Turnover of Rs. 59.60 lacs.

Whether tax audit is eligible or not?

If not, what are effect of such case & Process under IT Act,1961?

CA Ashish Lodha

CA Ashish Lodha (Expert)
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16 November 2013 The 44AB section stipulates that every person carrying on business or profession is required to get his accounts audited by a chartered accountant before the "specified date" and furnish by that date the report of such audit, if the total sales, turnover or gross receipts exceed Rs.60 lakhs(100 lakhs from financial year 2012-13) in the case of business and gross receipts exceed Rs.15 lakhs (25 lakhs from financial year 2012-13) in the case of profession - vide clauses (a) and (b) of section 44AB. Clause (c) of section 44AB, inserted by the Finance Act 1997 w.e.f. assessment year 1998-99, provides that in the case of an assessee carrying on a business of the nature specified in sections 44AD, 44AE , tax audit will be required, if he claims his income to be lower than the presumptive income deemed under the said sections. Therefore, an assessee will be required to get his accounts audited even if his turnover does not exceed Rs.60 lakhs. Under the provisions of sections 44AD , an assessee can opt to be assessed on presumptive basis, so long as the gross receipts/total turnover from any of the business(es) do not exceed Rs.60 lakhs (100 lakhs from financial year 2012-13) Once the total turnover/gross receipts from any such business(es) exceed Rs.60 lakhs (100 lakhs from financial year 2012-13) a tax audit will be required under clause (a) of section 44AB. The provisions of sections 44AA and 44AB shall not apply insofar as they relate to the business of plying, hiring or leasing goods carriages as referred to in section 44AE(1) and business as referred to in section 44AD(1). In computing the monetary limits under sections 44AA and 44AB, the turnover/gross receipts, or, as the case may be, the income from the said business shall be excluded. If a person is carrying on business(es), coming within the scope of sections 44AD, 44AE , but he exercises his option given under these sections to get his accounts audited under section 44AB, tax audit requirements would apply, in respect of such business(es) even if the turnover of such business(es) does not exceed Rs.60 lakhs(100 lakhs from financial year 2012-13). In the case of a person carrying on businesses covered by section 44AD,44AE and opting for presumptive taxation, tax audit requirement would not apply in respect of such businesses. If such person is carrying on other business(es) not covered by presumptive taxation, tax audit requirements would apply in respect thereof, if the turnover of such business(es), other than the business(es) covered by presumptive taxation thereof, exceed Rs.60 lakhs (100 lakhs from financial year 2012-13). The first proviso to section 44AB stipulates that the provisions of that section will not be applicable to a person who derives income of the nature referred to in sections 44B, 44BB, 44BBA or 44BBB. Where the assessee is carrying on any one or more of the businesses specified in section 44B or section 44BB or section 44BBA or section 44BBB referred to in the first proviso to section 44AB, the sales/turnover/gross receipts from such businesses shall not be included in the total sales/turnover/gross receipts for determining the applicability of section 44AB. A question may arise in the case of an assessee who is eligible to claim deductions under sections 80HH, 80HHA, 80HHC, 80HHD, 80HHE,80HHF, 80-I or 80-IA etc., as to whether it will be necessary for him to get separate audit reports/certificates under these sections in addition to an audit report under section 44AB. The requirement of section 44AB is a general requirement covering the overall position of the accounts of the assessee. This applies to the consolidated accounts of the assessee for the relevant previous year covering the results of all the units owned by the assessee whether situated at one place or at different places. Therefore, when the turnover of all the units put together exceed the prescribed limits, the assessee will have to get the audit report under section 44AB in the prescribed form and separate audit reports in the forms prescribed for different purposes like sections 80HH, 80HHA etc. will have to be further obtained by the assessee to meet the specific requirements of the relevant sections

CA.Shubhneet Kaur

CA.Shubhneet Kaur (Expert)
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16 November 2013 Every person is required to get his account audited u/s 44AB if gross turnover/ gross receipts exceeds 1 crore.
So your client is not liable to tax audit but has to file Income tax Return under Income Tax Act,1961

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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16 November 2013 depends on what sort of agency firm your client is. If the same is covered under profession, then tax audit shall apply (as the limit fo professional firms is Rs 25 lakhs)