Deepak sharma (Learner) (1431 Points)
03 July 2014Hi,
If a trader bought a goods of Rs.15Lacs & same sold in 15Lacs on no profit no loss...
As per I.Tax Law he should show his income atleast 120000.00 (8% on gross receipts) but genuinly there is no income on above said transaction.
So I want to know what will be the accounting for this, or we liable for Income tax audit.
Please provide best advise.
Thanks
Deepak Sharma
Satish Makam
(Asst. Manager - Accounts)
(294 Points)
Replied 03 July 2014
Mr. Deepak
it is not compulsory to show 8% profit. if profits are less than 8% then audit is required. that is the provision.
generally no one wish to sell the goods at the price at which they bought.
There may be whatever the reason for selling at the same price or at lower price.
income tax depts expect some tax from you when you do business.
if you show no profit or even loss in your return of income, the department may suspect you that you are intentionally showing lessor profit or nil prfit or loss.
so, when you show lessor profit or loss, income tax dept requires you to get audit for correctness of profit or loss you have declared.
and when it comes to accounting.. there is no special accounting is required in your case. just book sales at the price at which you sell the goods i.e 15 lakhs. and book puchases at 15 lakhs. show profit nil. and get books audited.
i hope you are now clear with my explanation.
Satish Makam
(Asst. Manager - Accounts)
(294 Points)
Replied 03 July 2014
just to avoid tax audit, people do increse income by posting some ficticious entries in accounts so as to maintain atleast 8 % profit.
by this they can save tax audit fee. and lessor chances of scrutiny.
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