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Tax Audit U/S44AB

Dintakurthi Tirumala (CA FINAL) (15994 Points)

27 August 2010

Hai friends plz clarify my doubt. Our Assesse was doing same type of business with two different firm names under propritor designation for both the firms. The first firm tournover exceeded Rs.40 lacs and should be liabile to tax audit and the second firm tournover is Rs.27 lacs (does not exceeded Rs.40 lacs). Now doubt the first firm should be audited U/S44AB. what about second. I mean is the second firm also mandatory for tax audit U/S44AB.

MY opinion is the second firm not liable to tax audit U/S44AB. But a senior auditor's opinion is both firms should be audited U/S44AB.Please give your opinions and clearifications

Thank you to ALL

OM SAI SRI SAI JAI JAI SAI

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17 Replies

CA Shiv (Business Controller) (2987 Points)
Replied 27 August 2010

My friend, your opinion is right...

second firm wont be liable for tax on mandatory basis.

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CA Sumit Arora (CA) (1411 Points)
Replied 27 August 2010

I agree with Shivang Sir...

Mukesh Agrawal (Ca professional) (69 Points)
Replied 28 August 2010

I am not agree with u all . As per Section 44AB it is celarly mentioned that if the Turnover of the person is more than 40 Lacs than it is liable for tax audit.

as per act individual is the person no matter he is making turnover in two or more firms. it will all be clubbed in one status in which he is making sale.

however if one of the status would be changed than your contention was must be correct.

So , in my opinion both the firm will come under the tax audit purview.

with professional regards

CA Mukesh Agrawal

mukeshairon @ gmail.com

mukeshairon @ live.com

09935417049

1 Like

(Guest)

CA Mukesh Agrawal sir is correct.............

See the belowmentioned link..... for more confirmation.......

/forum/pls-guide-regd-tax-audit-43495.asp

Regards

K.Ilayaraja

vikash rathi (Chartered Accountant) (787 Points)
Replied 28 August 2010

ya sure definately provision of sec 44AB will attract to both the firm as it is individual an u cant bifurcate individual on his business basis....or on name of his firm .......if here same question was asked for the partenship firm where 2 partnership having same partner then it would be not applicable for 2nd firm ...........but in individual case he have to consider sec44AB as u will file only one return for one individual not two.........think doubt is clear .....

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vikash rathi (Chartered Accountant) (787 Points)
Replied 28 August 2010

agree with ca mukseh sir ............n furthere comments r also welcome for the same issue

Rahul Gupta [CA,CS] (Asst Manager) (39 Points)
Replied 28 August 2010

Please find :

Sec. 2(7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes-

Sec.2(31) "person" includes-

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses;

Section 44AB:

A person carrying on business, if the total sales, turnover or gross receipt in business for the accounting year or years relevant to the assessment year exceed or exceeds Rs. 40 lakh.

In case of individual tax is lavied on his total income not the entity wise

In case of firm and company legal entity of firm and entity is different.

In this way we can say assessee > person> individual. That’s why we have to check the applicability if Section 44AB on the basis of total revenue

Plese revert ir more clarification is required

Regards,

Rahul Gupta

9958073300

rahulgutpacacs @ yahoo.co.in

Nitin Kumar Agrawal (Student) (31 Points)
Replied 28 August 2010

Tax audit U/s 44AB is done on the total revenue earned by a person irrespective of how many entity he has. So we can't split the revenue by entity wise as we file only one return for one Individual.

So both the firm will mandatory for Tax Audit u/s 44AB

Regards,

Nitin Kumar Agrawal

CA JAYESH RELKAR (CA) (335 Points)
Replied 28 August 2010

all businesses (firm) collectively take into consideration while seeking for tax audit applicability.

hence both the firms will come under the purview of tax audit.

SUNNY (CA Final & CS Professional) (327 Points)
Replied 28 August 2010

yes......... Friends explanation given by MR. MUKESH is Awesome and correct too..

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yogesh (PCC Student) (21 Points)
Replied 28 August 2010

As Per 44AB ,The Assess having turnour Exceeds 40 Lakhs ,he is laible for tax Audit,if the Assess have more than one business ,if turnour of all business exceeds Rs 40 Lakhs then Tax Audit is Compulsory for all business

CA Saurabh Kataria (Partner) (68 Points)
Replied 28 August 2010

both the firms are liable for tax audit

Pankaj Gulati (Tax Advisor) (81 Points)
Replied 28 August 2010

I agree with CA Mukesh Agarwal. Here an Individual is making combined Gross receipts of 67 lac. All the businesses which are under proprietorship (in individual category) are combined to arrive the TO figure for 44AB qualification.

In ITR 4 also, u cannot bifurcate figures of 2 or more businesses. U have to feed the consolidated figure of all businesses. For eg if a person is running two prop concerns and his TO is 30lac & 20 lac respectively, U'll be entering Rs. 50 lac as TO and if u'll submit ur ITR with this TO and say that ur return is not subject to tax audit u/s 44AB, u'll be attracting penalty provisions.

CA. Nayan Kahar (Chartered Accountant) (29 Points)
Replied 29 August 2010

For this we will have to first analyse the sec 44AB

As per Sec 44AB

A person carrying on business, if the total sales, turnover or gross receipt in business for the accounting year or years relevant to the assessment year exceed or exceeds Rs. 40 lakh.is requeired to get his accounts audited from Chartered Accountant.

Person Includes

Sec. 2(7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes-

Sec.2(31) "person" includes-

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses;

means tax audit is to be done of person and not of perticular business.

therefor it is clear that for all the business of a person one tax audit report will be issued by CA if turnover of the all the business taken togather of a person exceeds Rs.40 lacs during relavant financial year.