08 July 2011
As per section 44AD(5) there is cumulative condition to be satisfied, i.e. 1. If the assessee shows profit less than 8% of turnover and 2. If the Total Income is exceeding maximum amount not chargeable to tax, then the consequences of maintaining books and getting them audited are triggered. So, in case of firm - if loss is incurred and in case of Individual/HUF- if total income doesn't exceed 1,60,000/- then the 2nd condition is not fulfilled then also the consequences are triggerred?
08 July 2011
44AD is concerned with minimum Profit of 8% if that is not shown then you have to get the books of account audited and the turnover should not exceed the limit as fixed in 44AB
08 July 2011
In my view, as I have written above that there is some drafting error in ss 5 and the error seems to be the non ostensible clause which reads as under
"Notwithstanding anything contained in the foregoing provisions of this section " which to the best of my understanding is not required at all.
*
By introducing this clause all the foregoing provisions of section 44AD becomes ineffective including the provisions of ss (1) which provides for A SUM EQUAL TO 8% of turnover shall be deemed to be the profit. SS 5 overrides "anything" including " "something" like the 8% profit's clause.
*
The blunder does not stop here only. The illusory criteria of Total Income is also out of place here. Suppose due to Capital Gains or Salary Income if total income becomes taxable then the assessee carrying on small business is required to get the books of account audited, who is having turnover of say Rs.5.00 lacs only and does not show profit @ 8% or more. It seems quite illogical when according to Section 44AA, such person is not required to maintain books of account.
* DUe to the poor drafting of ss 5, it gives, indirectly , an option to the eligible assessee to show profits at a lower level, so as to reduce his total income below the taxable limit. This lets the assessee slip from the clutches of tax audit.
* Mr Jeet, is logically correct in ASSERTING that the second condition is not being fulfilled and on the plain reading of section his questioning about the audit also has a sound ground. No such audit is required as the word "and" between the conditions suggests that both are mandatory conditions for burdening tax audit upon the assessee. This "and" is also an omission on the part of the draftsman.
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