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Tax audit requirement in 1st year ?

Anonymous (Business) (240 Points)

20 July 2018

If assesee is filing f&o business loss ITR 3 (turnover less than 1 cr and other heads income exceeds max amount chargeable to tax )
Whether tax audit required ? This is the 1st year of business so he has never filed ITR4 (presumtive) so no question of mimimum 5 year conditon has been breach arises.

Please guide.

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8 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 20 July 2018

Yes, mandatory ...

1 Like

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Anonymous (Business) (240 Points)
Replied 20 July 2018

Thanku sir ....when we say total income should not exceed maximum amount chargeable to tax what that mean

1) do we need to add 6 % of turnover (deemed profit )with other heads of income and then check it exceeds tax limit or not ?
2) further here we see GTI or GTI less deductions (taxable income)
I mean total income suppose 3 lakh but 80 c 1 lakh now taxable income 2 lakh which is now under exemption limit (individual 2.50 limit exemption).

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 21 July 2018

1. No..... Before any presumptions.

2. GTI before any deductions (though some experts differ on the view, and interprete it as GTI after all such deductions)

Anonymous (Business) (240 Points)
Replied 21 July 2018

sir I m not opting for presumptive scheme and never opted earlier for f&o business.
Act says if I opt for presumptive scheme and still declare profit lower than 6% then only tax audit required. I m at loss.
44 AB requirement of 1 cr turnover also not exceed My turnover is hardly 25 lacs

So why tax audit require please clear sir.
I m showing loss as what is per broker statement.
Now even if other heads income exceeds max amt not chargeable to tax I think this condition is for those who opt for presumptive scheme.
Whether f&o by default presumtive scheme ?
I m going by Net profit method
Already at loss and still tax audit even when not breaching presumtive condition.

please guide once more.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 21 July 2018

"Now even if other heads income exceeds max amt not chargeable to tax I think this condition is for those who opt for presumptive scheme."

Yes, this is the impression we get after amendment in the section vide Finance Bill, 2016.

Earlier to the amendment the audit was mandatory for such conditions, but after the amendment the condition lapsed in drafting. ICAI has asked certain clarification from department on various issues, this being one of them.

Without any clarification from CBDT, it has become matter of dispute.

So, it is upto you to choose; I do not confirm.

As far as F&O transactions are concern, it is a non-speculative business.. 'Eligible' for deemed profit as per section 44AD(1).

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Anonymous (Business) (240 Points)
Replied 21 July 2018

sir I feel if in prior years I have not take benefit of presumtive scheme why the load of tax audit in case of loss.
In nutshell I m not changing my policies for my own advantage .There is one blog also on this on intetneť where he clearly says if we opt for presumtive earlier but not showing mininum 6 % profit next year then only tax audit require subject to basic tax limit cross .
(declaring an income lower than the presumptive income and such income (after setting off f&o losses or other business loss if any ) exceeds the maximum amount not chargeable for tax )

Best Regards.

Thanks

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 21 July 2018

Read: Sr. 55. Section 44AD – Clarifications required regarding provisions of section 44AD Page .. 87 from....

icai.org/prebudget memorandum 2018 dtc

Extracted as follows::

The treatment in respect of a situation, where the eligible assessee has an eligible business with turnover LESS than 1 crore (say Rs. 50 Lakhs) and has declared profit LESS than 8% (or 6%, as the case may be), for the first time in the previous year 2016- 17 or in the previous years 2016-17 and thereafter, has not been covered by the amended provisions.

The erstwhile section 44AD(5) required such assessee to maintain their books of account and other documents as per the provisions of section 44AD and also get the accounts audited and furnish a report of such audit under section 44AB of the Income-tax Act, 1961. Such eligible assessee are in a state of confusion as to whether or not they are required to get their books of account audited and furnish the same as per the provisions of section 44AB of the Act.

Suggestion::

It is suggested that appropriate clarification be issued as to, whether or not, the eligible assessee carrying on an eligible business, who:

a) has NOT in any previous year declared profits in accordance with the provisions of section 44AD AND

b) has total income exceeding the maximum amount which is not chargeable to income-tax AND

c) has a turnover less than the limits prescribed under section 44AB AND

d) claims the profits from the eligible business to be less than 8% (or 6% as the case may be) of total turnover or gross receipts shall be required to get the books of accounts audited and furnish a report of such audit as required under section 44AB of the Income-tax Act, 1961.

Anonymous (Business) (240 Points)
Replied 22 July 2018

Sir ,Thanks for your valuable suggestions.

My personal view is.
In f & o nothing can be hide. Transactions are recorded digitally. We need to pay tax on actual profit as per books maintained by broking company. Here we cant declare 6 % if actual profit is more. Presumptive taxation is I think designed for small traders who cannot maintain accounts
Those who do not maintain accounts and declare less than 6% of turnover as profit . I feel tax audit should be for those.

Best Regards,