Assesseeto get his accounts audited under Income Tax Act compulsorily:

Tax Audit

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TAX AUDIT U/s 44AB

  • Assesseeto get his accounts audited under Income Tax Act compulsorily:

  1. A Person carrying on business:  

    is required to get his books of account compulsorily audited u/s 44AB If the total sales, turnover or gross receipt in business for the previous year relevant to assessment year exceeds Rs. 1 Crore but business whose gross turnover/receipt does not exceeds Rs. 2 Crore are eligible to take benefit of Presumptive Scheme under section 44AD.

  2. A person carrying on profession

    is required to get his books of account compulsorily audited u/s 44AB, if his gross receipts in profession for the previous year relevant to the assessment year exceeds Rs 50 lakh

  3. Person covered u/s 44AE , 44BB or 44BBB 

    is required to get his books of account compulsorily audited u/s 44AB if such person claims that the profits and gains from the business are lower than the profits and gains computed under these sections (irrespective of the turnover)

  4. Person covered under Section 44AD 

    is required to get his books of account compulsorily audited u/s 44AB if such person claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD(1) and if his income exceeds the maximum amount which is not changeable to tax (i.e basic exemption limit).

However if the total turnover exceeds Rs 2 crore in any previous year, in case of the assessee declaring income u/s 44AD,the assessee is required to get his accounts Audited U/s 44AB (wef A.Y 2017-18).

  1. A person covered under Section 44ADA. Is required to get his books of account compulsorily audited u/s 44AB if such person claims that the profits and gains from the Profession are lower than the profits and gains computed in accordance with the provisions of section 44ADA(1) and if his income exceeds the maximum amount which is not changeable to tax (i.e basic exemption limit).
  • Forms and due dates for Audit:

Forms No. 3CA, Form No. 3CD in case of person who carries on business or profession and who is required by or under any law to get his accounts audited.

Form No. 3CB and 3CD, in case of a person who carries on business or profession but not being a person referred to above.

Due date for getting the books audit and filing of return in both the above cases is the due date of furnishing return u/s 139(1) i.e 30th September of the relevant assessment year.

  • Audit under any other law :

In case where the accounts are required to be audited by or under any other law. (as in the case of companies and cooperative societies). It is sufficient if accounts are audited under such other law before September 30 of the assessment year. And the assessee obtains before the said date. Audit report as required under such law and also a report of audit from a chartered accountant in the audit forms under Income Tax Act i.e. Forms No. 3CA, Form No. 3CD

· No penalty u/s 271B if audit report furnished within due date but return filed after due date:

If the assessee gets his account audited u/s 44AB and furnish the said report as required. Then penalty u/s 271B shall not be levied though. The return of income is filed after the due date specified u/s 139(1).

·  Quantum of Penalty for failure to get accounts audited within due date:

If any person fails to get his accounts audited. As required under the provisions of section 44AB before the due date u/s 139(1). The AO may impose penalty which may be a sum equal to one-half percent of the total sales. Turnover or gross receipts subject to a maximum of Rs. 1.5 Lakh.

· Section 44AB applicable to only business Income:

Section 44AB provisions are applicable only in the case of business/profession income. It is not applicable in respect of other incomes-Thai Constructions vs. State of Maharashtra.

Turnover in case of broker: Transactions by a share broker of sale or purchase of shares on behalf of parties cannot amount to ‘sale turnover or receipt’ of share broker himself within the meaning of section 44AB-CIT v Hasmukh M. Shah

· Work-in progress does not constitute ‘turnover’ within the meaning of section 44AB:

Value of work in progress in case of the assessee engaged in construction of shop/flats would not constitute ‘turnover’ within the meaning of section 44AB-CIT v B.K Jhala & Associates.

–Varsha singh (CA Final)

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