08 September 2015
We received a notice under section 143(2),f.y:13-14 our total sales were 90 lacks ,netprofit shown were 15 lacks i.e 16%. net profit includes profit from buidiness + commission income(6lacks ) + interest on bank deposit( 3.5).
Can any expert advice whether our case be put on scrutning by IT ,even profit shown BY US are more than 8% (ie 16 % ).
The date of filling 5/12/2014 & notice date 30-08-15. pl advice on my query whether our case will be considered under 44AD , showing profit more than 8%.
09 September 2015
This scrutiny is by CASS where they my have some details collected from many agencies,banks etc, based on that Your pan might be selected by system under CASS module, also For agency com. Sec 44ab not applicable hence non compliance of sec 44aa may invite the security. On first hearing date you can request your AO to furnish the reason for sec 143 2 notice ....
09 September 2015
This scrutiny is by CASS where they my have some details collected from many agencies,banks etc, based on that Your pan might be selected by system under CASS module, also For agency com. Sec 44ab not applicable hence non compliance of sec 44aa may invite the security. On first hearing date you can request your AO to furnish the reason for sec 143 2 notice ....
A notice under Section 143(2) is typically issued when the Income Tax Department intends to conduct a detailed scrutiny of your tax return. Here’s what you need to know about handling such a notice:
### **1. **Section 143(2) Notice:**
- **Purpose**: This notice is issued for the purpose of conducting an assessment to verify the correctness of the income and deductions claimed in your return. - **Timing**: It can be issued within six months from the end of the financial year in which the return is filed. For the financial year 2013-14, the last date to issue this notice would be September 30, 2015.
### **2. **Impact of Profit Percentage:**
- **Section 44AD**: This section is for small businesses and mandates that if a business has a turnover of up to ₹2 crore, and if the net profit is less than 8% of the turnover, the taxpayer is required to maintain books of accounts and get them audited. If the net profit shown is more than 8% (as in your case, 16%), you are compliant with the provisions of Section 44AD.
- **Scrutiny Despite Higher Profit**: Even if your profit percentage is above 8%, a case can still be selected for scrutiny if there are other factors, such as discrepancies, unusual claims, or specific triggers that warrant a closer examination.
### **3. **Key Aspects to Address:**
- **Profit from Business and Other Sources**: Ensure that the profit from business (including commission income) and interest on bank deposits are properly accounted for and supported by appropriate documentation.
- **TDS Compliance**: Verify that the TDS deductions on commission income are correctly reflected in Form 26AS, and ensure that you have the corresponding TDS certificates from the payees.
### **4. **Response to Notice:**
- **Documentation**: Prepare to provide all necessary documents related to your business operations, commission income, and bank interest. This includes books of accounts, invoices, bank statements, and TDS certificates.
- **Explanation**: Be prepared to explain the nature of your commission income and any other income sources. If the commission is a liaisoning fee, provide details about the nature of services and agreements.
- **Professional Help**: Consider consulting a tax professional or accountant to help with the response and ensure all documents and explanations are in order.
### **5. **No Automatic Rejection under Section 44AD:**
- **Assessment**: If your case is under scrutiny, the assessment will be based on the overall correctness of your return and not solely on the profit percentage. Section 44AD does not automatically exempt a case from scrutiny; it ensures you are compliant with its minimum profit requirement.
### **6. **Action Steps:**
1. **Review and Gather Documents**: Collect all relevant documents including financial statements, TDS certificates, and evidence of commission income. 2. **Prepare a Detailed Response**: Draft a response to the notice addressing the specific concerns raised, if any. 3. **Consult a Professional**: Engage a tax consultant to guide you through the process and ensure compliance with the tax laws.
To, The Assessing Officer, Income Tax Department, **[Address of the Assessing Officer]**, **[City, PIN Code]**
**Subject: Response to Notice under Section 143(2) for AY 2013-14**
**Respected Sir/Madam,**
I am writing in response to the notice issued under Section 143(2) of the Income Tax Act for the Assessment Year 2013-14. The notice dated **[date of notice]** requires a detailed explanation regarding the tax return filed for the financial year 2013-14.
**1. Financial Summary**
- **Total Sales**: ₹90 lakhs - **Net Profit**: ₹15 lakhs (16% of turnover) - **Income Breakdown**: - Business Profit: ₹9.5 lakhs - Commission Income: ₹6 lakhs - Interest on Bank Deposits: ₹3.5 lakhs
**2. Profit Computation**
Our net profit of 16% exceeds the 8% threshold prescribed under Section 44AD. All business transactions are accurately reflected in our accounts.
**3. TDS Compliance**
The commission income received was subject to TDS, and the TDS has been correctly deducted by the payer. The relevant TDS certificates are attached for your reference.
**4. Documentation**
Enclosed are the following documents to support our return: - Profit and Loss Account and Balance Sheet - Bank Statements - TDS Certificates - Details of Commission Income
**5. Conclusion**
We kindly request you to consider the provided documentation and explanation. Please let us know if any additional information is required.
**6. Contact Information**
For any further queries or discussions, please contact us at **[Your Contact Information]**.