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Sec 44 ad is it mandatory

N.N.RAJAN (PROFESSIONAL) (243 Points)

26 July 2014

Dear Colleageus,

An assesse is having turnover below Rs.1 crore. He is maintaining books of account. His actual Net Profit is likely to be below 8% and he even expects a loss due to valid factors.

Now My question is can he file return without giving audit report u/s 44AD. That is whether sec .44 AD is mandatory or optional .

Sec. 44AB says if an assesse whose turnover is beyond 1crore he has to get his account audited. Now if one says that Sec 44 AD is mandatory then turnover limit sepcified in Sec 44 AB becomes redundant is it not?

In otherwords only when I opt for Sec 44AD then I can admit 8% profit or attach aduit report if it is lesser than that. If I can prove my real profit is less thatn 8% then I need not give audit report. Is that correct?

Please answer.

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11 Replies

CA RUSHABH GANDHI (CA) (212 Points)
Replied 26 July 2014

HELLO MY FRIEND

IF YOU R SHOWING YR NETPROFIT BELOW 8% THEN COMPLUSORLY U HAVE DO TAX AUDIT AND FILE THE RETURN.

AND IF YOUR TURNOVER IS MORE THAN 1 CRORE THAN U HAVE TO DO TAX AUDIT MANDATORY.

CS Advocate Abhishek Goyal (M Com FCS LLB M-AIMA ) (13531 Points)
Replied 31 July 2014

Presumptive income scheme u/s 44AD is not mandatory it is an option given to assessees whose gross turnover from business not being agency business is below Rs. 1 crore. But to file return u/s 44AD you need to show net income at minimum of 8% of your gross turnover otherwise you will need to get your accounts audited even u/s 44AD. In your case your turnover is below Rs. 1 crore so you are not covered by section 44AB to get your accounts audited compulsorily and since net income is below 8% you cannot file return u/s 44AD unless you get your accounts audited.

akhil sharma (article) (21 Points)
Replied 16 June 2015

If earlier i file return under 44AB. should i file subsequent return for A.Y 2015-16 under 44AD.

CS Advocate Abhishek Goyal (M Com FCS LLB M-AIMA ) (13531 Points)
Replied 16 June 2015

It depends on your turnover for every year. It doesn't matter if you have previously filed your return u/s 44AB.

ARUL PRADEEP (ARTICLE ASSISSTANT) (175 Points)
Replied 16 June 2015

Once if You reached Tax audit Limit......

for Subsequent years you have to compulsorily file Tax audit Report for Your company....

Sonakshi Mangla (Employee) (310 Points)
Replied 16 June 2015

I beg to differ Arul, haven't read about any such rule, where once you are covered under tax audit limit, you need to file the tax audit report for subsequent years. Can you provide me any link or something where the same is written.?

ARUL PRADEEP (ARTICLE ASSISSTANT) (175 Points)
Replied 16 June 2015

No , I assure that there is no rule like that @ Sonakshi Mangla

But once you filed ur Return u/s 44AB, subsequent year if your accounts are not tax audited,

IT department definitely send you a notice to bring the Accounts for scrutiny often....

As i'm working in an Auditor firm, i have seen many cases like these....

So it is better to get ur Account tax audited for ur accounts for subsequent years once you reached 44AB level.....

Nikhil Kaushik (Fellow CA) (85085 Points)
Replied 17 June 2015

Arul not at all. the section 44AB is self explantory.

it states that where the turnover crosses the limit for any previous year, the assessee needs to get his accounts of such previous year audited by an accountant

Further, the the query that was raised in this thread 10 months ago, the audit is not required is the income doesn't exceed the maximum exemption limit amount even if it is less than 8% of the turnover.