18 August 2016
My client executed gross contract of Rs 3.27 crores for the AY 204-15 and he has not maintained books of accounts. On the basis of TDS certificates (16A) income is declared as net income at Rs 26.18 lacs (at 8% of GCR). Only statement of Income is filed and balance sheet is not filed. case is selected for scrutiny and notice u/s 142(1) is issued. In the absence of books tax audit u/s 44AB is not done. However, income is offered at 8% of GCR in line with section 44AD. Please let me know is there any scope for enhancing the declared income by the department. Can we defend the declared income as income is declared at 8% of GCR in similar line with 44AD. Assesse is willing to pay penalty for non maintenance of books 44AA. Please clarify with case laws if any.
18 August 2016
Since gross income exceed one crore liable for tax audit, you have to maintain regular books of accounts, applicable TDS to be deducted , all payments should be supported by voucher , cash payment should not exceed 20000/- per day as per rule 6DD, all the parameters will be checked in scrutiny if any deviations they will raise demand even though declare 8% income.
18 August 2016
Dear Bharat,
I feel you've misinterpreted section 44AD. it is applicable for eligible assessee having eligible business with turnover not exceeding one crore.
I don't understand how you have considered section 44AD as a basis of calculating profit if the turnover has exceeded 1cr. Section 44AD was not applicable in your case.
Penalty for non maintenance of books of accounts, penalty for failure to furnish audit report may be levied in your case.
The assessee is required to maintain such record so as to enable the assessing officer to assess his income. Non providing of information also calls for penalty for failure to furnish information.
As regards your question of whether the department can accept your submission, I feel the department can go for best judgement assessment u/s 144 and calculate profit based on the industry standards of the business.
19 August 2016
Maintenance of books of accounts is MUST. Proceed on to prepare the same and the profit will automatically be computed from the said books.....
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