As per erstwhile section 44AF of the Inccome tax act if a person is not having a turnover over Rs. 40 Lacs in a year and declares a profit @5% or higher of the turnover then he is not required to maintain any books of accounts and other documents. Now Suppose a person made a turnover of Rs. 30 Lacs in retail trade during the financial year 2008-09 and assumed a net profit of 5% under 44AF, which comes to Rs. 1.5 Lacs, now as per the provisions of section 139(1) since his net profit computed as allowed by section 44AF is below the net income which is not chargeable to tax he is not under the obligation to file income tax return. (There is no provision in 44AF or anywhere in the act which mandates the return filling compulsory even if the net income is below the exemption limit). Now my question is that:- 1. If the person has not maintained any books of accounts or other documents except bank statements of 2008-09 which shows cash deposits and withdrawals (Business receipts/expenditure), also total deposists including cash deposits not exceeding the aforesaid turnover of Rs 30 Lacs, if income tax department comes to know about these cash transactions through AIR from bank, can it assume this whole deposit amount as income and not turnover, if yes then under what section. 2. Whether the very fact that person has not filed ITR of the concerned year which he was not obliged to file, excludes him from availing benefit of section 44AF.
Guest
Guest
(Expert)
17 March 2012
1. Maintain the records of gross receipts so as if required can be produced before department as proof.
2. Since the income is below the maximum amount not chargeable to tax return is not required to be filed. Also he cannot be deprived to take benefit of section 44 AF.
Querist :
Anonymous
Querist :
Anonymous
(Querist)
17 March 2012
Dear Mr. Ketan, Thanks for the revert, Also thanks for agreeing with point No. 2, but as far as point No. 1 is concerned please note that section 44AF exempts a person from maintaining any books of accounts and other documents under section 44AA if does not claim his net profits below 5%. Now as a practical measure if he is not maintaining any records like purchase, sales cash memos or inventory records etc and depositing all his sales realization in a bank account regularly and making regular withdrawals to make business expenditure and having only this bank statement then also I think AO can not hold him guilty for non maintenance of books of accounts, Also there are mutilple cash deposits during the year and non of them exceeds rs 50K and person is declaring all the cash deposits as his business turnover. Please refer case law of CIT vs Surinder Pal Anand in this situation and provide your views please.
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