Tax audit for fy 2020-21

This query is : Resolved

DIVYESH JAIN (Querist)
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04 August 2021 Dear Sir,

One of my client deals in land development and for the financial year 2020-21 he has sold land amounting to Rs. 1,35,00,000/- but has incurred loss of Rs. 80,00,000/- due to construction costs of other land purchased.

I want to know is Tax audit required to be done in this case. He has not earned any profit that year.

Please help regarding this matter.

Regards,
Divyesh Jain

CMA Poornima Madhava

CMA Poornima Madhava (Expert)
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04 August 2021 No tax audit up to a turnover of ₹10 cr if cash transactions are limited to 5%.

Deepa B

Deepa B (Expert)
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04 August 2021 In the given case turnover is Rs.1.35 crore and it's mentioned that the assessee has incurred business loss. So there won't be any net profit declaration of 8% or 6% of turnover as the case may be, in accordance with the requirement of section 44AD. Hence tax audit is applicable in this case and books of accounts has to be maintained u/s 44AA(2).
Assumption:
1.Total income after considering all heads of income exceeds maximum income not chargeable to tax. 2. Assessee is an individual
If assessee has no income under other heads besides business income and the total income for the assessee does not exceed the non taxable limit then tax audit is not applicable in such case.

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DIVYESH JAIN

DIVYESH JAIN (Querist)
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05 August 2021 The Assessee files return U/s 44AB and the turnover limit I guess has been increased from 1 cr to 5 cr.

The cash receipts are limited to 5% of Turnover and Cash payments are limited to 5 % of Aggregate payments.

Is tax audit applicable in this case?

CMA Poornima Madhava

CMA Poornima Madhava (Expert)
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05 August 2021 This limit has further been increased to ₹10cr.
No tax audit applicable.

Deepa B

Deepa B (Expert)
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05 August 2021 If the assessee has not opted for 44AD in any of the last 5 years, then my answer will not hold good. If the assessee has filed his/her return in last five years without opting for 44AD, then he is not liable to tax audit u/s 44AB as his turnover is less than Rs.5 crores subject to the condition that cash receipts and cash payments haven't exceeded 5% of aggregate receipts and payments respectively during the year.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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05 August 2021 Ok, Thanks Deepa and Poornima for your replies and solving my query.