CAclub Ebooks :Maintenance of Accounts by Certain Persons Carrying on Profession or Business-Sec. 44AA

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Practical Guide to Tax Audit - Rajkumar S. Adukia

Maintenance of Accounts by Certain Persons
Carrying on Profession or Business-Sec. 44AA

Before we try to understand the implication of section 44AB, let us see section 44AA, which pertains to compulsory maintenance of books of accounts by certain assessees.

Sec 2(12A) of the Income Tax Act, 1961 defines, book of account-books or books of account includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device.

Section 44AA of the Income tax Act, 1961 pertains to compulsory maintenance of books of accounts by certain assessees.

The relevant part of the Act is reproduced below:

1. Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

2. Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall:

 if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakhs rupees in any one of the three years immediately preceding the previous year; or

 where the business or profession is newly set up in any previous year if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakhs rupees, during such previous year; or

 where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD or section 44AE or section 44AF, as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year, keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.

3. The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.

4. Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.

Rule 6F of the Income Tax Rules, 1962

Books of account and other documents to be kept and maintained under section 44AA (3) by persons carrying on certain professions:

1. Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorized representative or film artist shall keep and maintain the books of account and other documents specified in sub-rule (2):

Provided that nothing in this sub-rule shall apply in relation to any previous year in the case of any person if his total gross receipts in the profession do not exceed one lakh fifty thousand rupees in any one of the three years immediately preceding the previous year, or, where the profession has been newly set up in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount.

2. The books of account and other documents referred to in sub-rule (1) shall be the following, namely:

i. a cash book;

ii. a journal, if the accounts are maintained according to the mercantile system of accounting;

iii. a ledger;

iv. carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him:

Provided that nothing in this clause shall apply in relation to sums not exceeding twenty-five rupees;

v. original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person:

Provided that the requirements as to the preparation and signing of payment vouchers shall not apply in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.

Explanation: In this rule,

(a) authorized representative means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;

(b) cash book means a record of all cash receipts and payments, kept and maintained from day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a [month];

(c) Film artist means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as

i. An actor;

ii. A cameraman;

iii. A director, including an assistant director;

iv. A music director, including an assistant music director;

v. An art director, including an assistant art director;

vi. A dance director, including an assistant dance director;

vii. An editor;

viii. A singer;

ix. A lyricist;

x. A story writer;

xi. A screen-play writer;

xii. A dialogue writer; and

xiii. A dress designer.

3. A person carrying on medical profession shall, in addition to the books of account and other documents specified in sub-rule (2), keep and maintain the following, namely:

i. a daily case register in Form No. 3C;

ii. an inventory [under broad heads,] as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

4. The books of account and other documents specified in sub-rule (2) and sub-rule (3) [other than those relating to a previous year which has come to an end] shall be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on in more places than one, at the principal place of his profession:

Provided that where the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on.

5. The books of account and other documents specified in sub-rule (2) and sub-rule (3) shall be kept and maintained for period of [six] years from the end of the relevant assessment year:

Provided that where the assessment in relation to any assessment year has been reopened under section 147 of the Act within the period specified in section 149 of the Act, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment shall continue to be so kept and maintained till the assessment so reopened has been completed.

6. Notwithstanding anything contained in sub-rules (1) to (3), it shall not be necessary for any person carrying on any of the professions specified in sub-rule (1) to keep and maintain the books of account and other documents specified in sub-rule (2) or sub-rule (3) in relation to any previous year commencing before the first day of March, 1983.

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