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Tax audit applicability

sameer (Article) (122 Points)

22 June 2017

Hi,

I am Just want to Know, I have reveiwing the income details of one of my client, and they have salary income of Rs.5,00,000/-(after all deductions) and loss of F&O amounting to Rs. 5200/- on the turnover of 75,000/-. whether in that case section 44AB is applicable, I also google up my query then all the articles puts me in the delima that tax audit is applicable just because of section "44AD".

Now my question whether tax audit is applicable on such meager loss and on such negligilble turnover and why we have refered section 44AD???

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6 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 22 June 2017

As per section 43(5) F&O transactions are treated as non-speculative (normal) business.

As per section 44AA for non specified business:

Persons carrying on a Business are required to maintain books of accounts if, in any of the 3 immediately preceding years, their:
- Total Sales/ Turnover is more than Rs. 10 lakhs, OR
- Income is more than Rs.1,20,000
For newly set up profession or business: If it is likely that above limits may be exceeded

As the total turnover is 75K, there is no requirement of maintaining books...............No question of tax audit....

sameer (Article) (122 Points)
Replied 22 June 2017

Respected Sir,

Yes, As per section 43(5) F&O transactions are treated as non-speculative (normal) business.

But all the relevant articles referring the provision of section 44AD,, ie if your profit is less than 6% of turnover and your income exceeds the amount which is not chargeable to tax, then tax audit is applicable, the articles referring 44AD why???

sameer (Article) (122 Points)
Replied 22 June 2017

Respected Sir,

Yes, As per section 43(5) F&O transactions are treated as non-speculative (normal) business. But all the relevant articles referring the provision of section 44AD,, ie if your profit is less than 6% of turnover and your income exceeds the amount which is not chargeable to tax, then tax audit is applicable, the articles referring 44AD why???

Read more at: /forum/details.asp?mod_id=396736&offset=0

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 23 June 2017

You have option to declare income under presumption, at 6% profits.

But in case your profits are lower than as prescribed under the section 44AD, and also if total income is more than basic exemption limit, you have to maintain books of accounts as per section 44AA and further to get such books of account audited as per section 44AB. But as per section 44AA you are not required to maintain books of accounts as said earlier.....

sameer (Article) (122 Points)
Replied 26 June 2017

Respected Sir,

You have said that you have "option" to declare income under presumption, at 6% profits. if we dont go/ opt 44 AD and shows loss then can we avoid tax audit provisions.