Audit Compulsory or not For Partnership Firm

[virag]

Hello All,

One of our clients, is a partnership firm having turnover of Rs.30 lacs in Saree Retail business.They are showing profit of Rs.15k against turnover.

Is it compulsory for them to do an audit to show this profit or switch over to presumptive taxation ?

Please guide us on it.

Thanks,
Virag Shah.

[Eswar Reddy S]

Minimum 8% (240,000/-) profit should be shown in ITR.

So in this case profit 15k is less than 8% of turnover.
Hence Audit is required

[virag]

Thanks for the answer.

They have been submitting returns for 15 years without audit and no single query raised by the Income tax department.

Is that any other provision for the same for non audit ?

Thanks
Virag

[CA Aakarsh Jain]

Audit is not required at all since turnover is less than 1 cr. It doesn’t matter that the profit is less than 8%.

[Eswar Reddy S]

Turnover is not alone the criteria for tax audit.

Even profit % also the criteria.

While filing ITR , it will ask for tax audit. Else the ITR will be defective u/s 139(9)

[CA Aakarsh Jain]

Yes Eswar, Turnover is not only the criteria but in virag case audit is not required as he haven’t filed his previous returns in sec 44AD.

[virag]

Thanks for the answers, Friends.

What should I have to do ?

As we have another case, they have started a partnership firm for computer parts and repairs having a turnover of 35 lacs with a net profit of 20k.( They are maintaining books of accounts)

So as per Aakarshbhai reply we don’t have to go for audit as turnover less than 1 cr.

Please advise.

[CA Aakarsh Jain]

Yes virag we don’t need to go for audit if our turnover is less than 1 Cr. But if have filed our return as per section 44 AD (Presumptive Basis) and now opting out before 5 years from 44AD then if you show profit less than 8% you need to do audit.

[Eswar Reddy S]

If Audit is not applicable then by default it’s come under presumptive Taxation rules and you must declare the 8%/6% profit do avoid tax sudit

[CA Aakarsh Jain]

It is nowhere written that if audit is not applicable then by default presumptive taxation rules applicable. Read the sections first eswar. Don’t give wrong advices.

[virag]

Noted.

For both cases they have not filed tax returns under presumptive taxation in earlier years, so we are not going for audit till turnover doesn’t exceeds 1 crore.

Please acknowledge the same.

Many thanks to all for your time.

Thanks,
Virag.

[CA. ANKIT PANDYA]

Agreeing with the View of CA Aakarsh Jain. No Audit required in the above cases. Just to add to the above Views:

1. If CASH receipt and payments are up to 5% of the total receipt and payments transaction respectively, then the Tax Audit will be applicable only if turnover / gross receipts from business exceeds Rs.10 Crores.

2. As per the changes in the Budget of 2016, businesses with turnover up to Rs.2 crores can opt for presumptive taxation scheme. Earlier this limit was Rs.1 crore.

3. So, If the income of assessee exceeds the maximum exemption limit (i.e.  2 Crores) and he has opted for the  Presumptive scheme in any of the last 5 previous years but does not opt for the same in current year, then only in that case Tax Audit becomes applicable.

[Eswar Reddy S]

Try filing ITR with less than 8% of profit on income tax portal, you will come to know the exact issue

[Abhilash Shetty]

If the turnover is less than 1crore and opted for tax audit in the ay 21-23 and never opted for 44AD in any AY

 

And TO  in AY 2022-23 also less that 1CR can we file the return without audit (not under 44AD)

[CA Aakarsh Jain]

Yes you can file without tax audit

[virag]

To summarise all discussions, it seems that there is no cut wording in income tax provisions if turnover doesn’t exceed tax audit limit then no need to go for compulsory presumptive taxation and (Also considering points of Ankitbhai ).

[SATHVEDHANARAYANAN]

1. FIRST to consider, whether the assessee opts for -to declare his income under presemptive basis (44AD), If opted,  then the minimum 8% income of the Turnover to be declared. The tax audit report is compulsory if the income shown is below 8%, only , reitrerating , only when the asesee opted to declare his income u.s.44AD.

2. Second Senario, If the assessee does not opts for u/s. 44AD( Presumptive Basis) and the T.O. is also below 1 crore, he need not gets his books audited u/s. 44AB but nevertheless since in the above case, the T.O. is above 10 Lakhs, he has to maintain the books of accounts u.s. 44AA only , no concern for the declaration of below 8%.

[Divya jain]

Income Tax Return Audit For Proprietorship Firms is mandatory for the propreitor and companies to file the income tax return above the limit of 5 lakhs income.

[Eswar Reddy S]

Partnership firm?

[ramesh]

Dear All,

A Partership firm with a turnover <1 Crore:

a) Filed return under presumptive profit scheme for the 4 consecutive years.

b) Now, in 5th year would like to opt out of presumptive profit scheme. Turnover is <1Cr. Maintaining books of accounts and showing profits <8%.

As explained by CA Aakarsh Jain, In 5th Year,  Complusary audit applicable.

From 6th Year, Is compulsory audit applicable..?

Please advise. 

[Sanjay Suryavanshi]

Partnership firm is required to undergo a tax audit if its sales, turnover, or gross receipts exceed Rs. 1 crore in a financial year. 

If a taxpayer is required to undergo a tax audit but fails to do so, the penalty can be the lower of the following:

0.5% of the total sales, turnover, or gross receipts

OR

Rs 1,50,000

[Author]

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