Mr.A is a businessman white turnover is 80 lakhs in PY 17-18. He properly maintains his book of accounts as required u/s 44 AA and his P& L A/c shows 5.5%.
Whether Mr.A is also liable to tax audit?
It is clear that one who is covered under sec 44 AD and shows his profit at less than 8% or having turnover greater than 2 cr., then liable to tax audit u/s 44AB but the real query is: Where it has been written in IT ACT that one with turnover less than Rs 1 crore have to get their accounts audited if profit shown is less than 8%?
12 Replies
Ashish Khillan
(Gaining knowledge)
(1039 Points)
Replied 24 June 2018
if profit is less than 8% or turnover exceed 2 crore.... Audit is compulsory, if any one of condition fulfilled
Yashi Bansal
(Student CA FINAL)
(97 Points)
Replied 24 June 2018
Even if Mr. A is a regular taxpayer but not a taxpayer under Presumptive taxation scheme?
221382 CA.RAVI SHANKAR SISTLA
(17 Points)
Replied 25 June 2018
Look, the two sections are to be read in conjunction with each other.
While 44AB specifies that audit is mandatory wherever turnover exceeds Rs. 1 crore, 44AD specifies that even those who have turnovers between Rs 1 to 2 crores can also opt for presumptive income if they are willing to declare a presumptive income @ 8% or 6% as the case may be. Meaning if your turnover is say Rs. 1.50 crores, section 44AB would still not apply to you if you have declared an income of 8%/6%.
Conversely, if your net income is far less than 8%, you need to get your books audited u/s 44AD read with 44AB.
In case your turnover exceeds Rs. 2 crores, audit is mandatory even though your net income is much more than 8%.
While 44AB specifies that audit is mandatory wherever turnover exceeds Rs. 1 crore, 44AD specifies that even those who have turnovers between Rs 1 to 2 crores can also opt for presumptive income if they are willing to declare a presumptive income @ 8% or 6% as the case may be. Meaning if your turnover is say Rs. 1.50 crores, section 44AB would still not apply to you if you have declared an income of 8%/6%.
Conversely, if your net income is far less than 8%, you need to get your books audited u/s 44AD read with 44AB.
In case your turnover exceeds Rs. 2 crores, audit is mandatory even though your net income is much more than 8%.
RAJA P M
("Do the Right Thing...!!!")
(128091 Points)
Replied 25 June 2018
Yes... I agreed to above said replies... 🙏🙏🙏
@ Yashi Bansal.,
Yes...
If a Taxpayer show his profit less than 8 percentage except u/s 44ab then his accounts will fall under Tax Audit...
In case the Taxpayer is individual and th profit is BEL then not required Tax Audit...
As per my view Difference between 44AA and 44AD...
44ad : Depreciation not allowed and If partnership firm then Interest and remuneration is not allowed...
44aa : Depreciation will be allowed and if partnership firm then Remuneration and Interest is allowed...
But, Both sec related condition same as shown profit 8 percentage or above 8percentage...
@ Yashi Bansal.,
Yes...
If a Taxpayer show his profit less than 8 percentage except u/s 44ab then his accounts will fall under Tax Audit...
In case the Taxpayer is individual and th profit is BEL then not required Tax Audit...
As per my view Difference between 44AA and 44AD...
44ad : Depreciation not allowed and If partnership firm then Interest and remuneration is not allowed...
44aa : Depreciation will be allowed and if partnership firm then Remuneration and Interest is allowed...
But, Both sec related condition same as shown profit 8 percentage or above 8percentage...
Yashi Bansal
(Student CA FINAL)
(97 Points)
Replied 25 June 2018
@ CA RAVI SHANKAR SISTLA and @ RAJA PM, I completely agree to both of your replies but my query is regarding one whose turnover is below threshold if Rs 1 crore say 80 lakhs and also a regular tax payer without paying taxes under Presumptive scheme and his books of account shows profit @ 5.5%. Will he still b liable for tax audit?
Ajit Hegde
(CA - Final)
(1367 Points)
Replied 25 June 2018
No. If he does not opt for presumptive taxation u/s 44AD, he need not get his books audited even if the income is below 8%.
Many may not agree with this view. But if you carefully observe, the words used in FAQ issued by Income tax department, it uses the word 'willingness' with respect to 44AD.
Hence in my view, 44AD is an option, not compulsory. If you do not opt for it, the provisions of the same is not applicable.
Many may not agree with this view. But if you carefully observe, the words used in FAQ issued by Income tax department, it uses the word 'willingness' with respect to 44AD.
Hence in my view, 44AD is an option, not compulsory. If you do not opt for it, the provisions of the same is not applicable.
221382 CA.RAVI SHANKAR SISTLA
(17 Points)
Replied 25 June 2018
Where the turnover is less than 80 lakhs and the net profit is less than 8%, tax audit is COMPULSORY notwithstanding the fact that the assessee maintains complete set of books of account.
SATISH KUMAR NEMANI
(PROPRIETOR)
(46 Points)
Replied 25 June 2018
I also completely agree with Mr Ravi Shankar Sistla.
CA Saitsh Nemani
SATISH KUMAR NEMANI
(PROPRIETOR)
(46 Points)
Replied 25 June 2018
I also completely agree with Mr Ravi Shankar Sistla.
CA Saitsh Nemani
Yashi Bansal
(Student CA FINAL)
(97 Points)
Replied 25 June 2018
@ Satish kumar nemani and @ ca ravi shankar-
Where it has been quoted in IT Act?
Where it has been quoted in IT Act?
SATISH KUMAR NEMANI
(PROPRIETOR)
(46 Points)
Replied 25 June 2018
Mr Ajit Hegde
Kindly read the section 44AD(1) of the Income Tax Act, 1961. I have not read FAQ but the provisions of the Act shall prevail and binding on the assessee.
(Guest)
| Originally posted by : Ajit Hegde | ||
 |
No. If he does not opt for presumptive taxation u/s 44AD, he need not get his books audited even if the income is below 8%. Many may not agree with this view. But if you carefully observe, the words used in FAQ issued by Income tax department, it uses the word 'willingness' with respect to 44AD. Hence in my view, 44AD is an option, not compulsory. If you do not opt for it, the provisions of the same is not applicable. |  |
Have you filed any return of any assessee having business income(not commission agent) and showing NP less than 8%/6% of turnover last year? Is the return cleared without any defect?
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