Tax Audit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 October 2010 One of my client is in the business of bill discounting from last 5 years. in the assessment year 2009-10 he has earned Rs. 18 Lacs as a commission from this business.

Now issue is my client got the show cause notice from the Income tax department in which they have asked for the cause for what reason penalty will not be levied on assessee in absence of Tax audit compliance.(Tax audit has not done).

My question to all is whether tax audit is applicable to the assessee even though his income is less than 40 Lacs in the previous year under section 44AB of the IT ACT.

Mayur Agrawal

Mayur Agrawal (Expert)
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28 October 2010 Bill discounting covered under profession it can not be say it is a business. For profession Tax audit u/s 44AB is compulsory after turnover of Rs. 10 lakhs.

According to section 44 AB

Every person,—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds 74a[forty lakh rupees] in any previous year 75[***]; or

(b) carrying on profession shall, if his gross receipts in profession exceed 75a[ten lakh rupees] in any 76[previous year; or

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under 77[section 44AD or section 44AE or section 44AF] 78[or section 44BB or section 44BBB], as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any 79[previous year,]] 80[***]

The following clause (d) shall be inserted after clause (c) of section 44AB by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2011 :

(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year 81[***] audited by an accountant before the specified date and 82[furnish by] that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

83[Provided that this section shall not apply to the person, who derives income of the nature referred to in 84[***] section 44B or 85[section 44BBA], on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :

Provided further that] in a case where such person is required by or under any other law to get his accounts audited 86[***], it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and 87[furnishes by] that date the report of the audit as required under such other law and a further report 88[by an accountant] in the form prescribed under this section.

Explanation.—For the purposes of this section,—

(i) “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;

89[(ii) “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the 90[30th day of September] of the assessment year.]]