Audit of accounts for stock traders

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Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2012 Dear Experts,
Please help urgently, letter for non filing of ITR received.
In AY 2011-12,total turnover in stock trading was as -
Intraday Trading-1.5 lac
Delivery trades-15 lacs
Profit/loss
Intraday Trading- loss of 31 thousands
Delivery trades- profit of 20 thousands

Total Income (from rent and bank interest) was Rs. 1.10 lacs.

No ledger,books were kept only record of buy/sell price & quantity and net loss/profit was maintained and no audit was done.

Under which section 44AB or 44AD income should be shown so that need for maintaining books and getting audit done does not arise ?

Thanks

Yajendra Adhikari

Yajendra Adhikari (Expert)
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21 September 2012 Who is Assessee?? Individual, HUF, Firm, Company???

Deepanshu Agg.

Deepanshu Agg. (Expert)
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21 September 2012 Assuming Assessee being other than corporates:-
Income should be shown under section 44AD ,which (if all conditions satisfied) does not require to mantain books of accounts

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Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2012 Thanks you both for reply Sir,
Assessee is an individual.
What are the conditions under 44AD which does not require to maintain books of accounts?
Does an individual need to get audit done under section 44AD if he incurred losses or profits below 8% of turnover (total income for the year below tax limit) ?

Amol S Joglekar

Amol S Joglekar (Expert)
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21 September 2012 8% is the KEY. If eligible assessee doing eligible business and having profit less than 8%, shall keep the books of accounts as per 44AA and get the same audited.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2012 Thanks for reply sir,
If an assessee did not maintain books of accounts and hence did not get the accounts audited, is there a way to avoid consequences of not getting the audit done ?
If presumptive income (Rs 1.3 lacs) is declared than it will be added to rental income(1.2 lacs) and total income will be 2.5 lacs and hence case of tax avoidance arises. AY is 2011-12

Amol S Joglekar

Amol S Joglekar (Expert)
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21 September 2012 sorry, could not get you... tax avoidance???? what is that.

Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2012 Amol sir
The query is regarding AY 2011-12.
No tax was paid and no return was filed as total income was only 1.2 lacs.
Now notice is received for non filing of return. Reason for notice may be turnover of delivery trades.
Now to file the return CA has advised to fill ITR 4 and show share trading as business. The income on share trading business is below 8% of turnover and audit was not done. So if presumptive income is shown than total income will be 2.5 lacs for AY 2011-12 but no tax was paid in that year.
If presumptive income is not shown than penalty for not getting the audit has to be paid.
so in your opinion what is the way out in this situation ?

Amol S Joglekar

Amol S Joglekar (Expert)
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21 September 2012 The notice is for non filing of return. So, file the return. It is very difficult to believe that the activity shall be construed as BUSINESS. This is one part. So no need to get 44AD into the picture.

Deepanshu Agg.

Deepanshu Agg. (Expert)
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21 September 2012 1) Audit is need to be done even if there is loss but total turnover exceeds Rs 60 lkhs during previous year
2) Audit is also required if profit shown less than 8% of turnover as per provisions of section 44AD

In your case if profit under presumptive taxation comes to Rs 2.50 lac that means total turnover is 3125000 ,i.e lower than 60 lakhs.

File ITR-4 ,as no tax audit is required ,even without filing return ,on plain paper just submit computation showing actual income i.e Rs 1.20 lacs explaining that total income is below taxable limit ,hence not filing retrn , assessing officer will definately be satisfied

Thereafter no penalty would be levied and no taxability arises.

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2012 Thanks a lot to you both sir,
Sir my CA is insisting on filing a return in response to the letter from IT Dept. for non filing.
Can you please tell me the conditions under which a person has to compulsorily file a return even if total income is below tax limit ?

Amol S Joglekar

Amol S Joglekar (Expert)
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22 September 2012 letter from ITO is the good instance to file the return having below taxable income. Some people file such return who want to maintain the file for years together say for bank purpose, VISA purpose etc.

Deepanshu Agg.

Deepanshu Agg. (Expert)
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22 September 2012 By issuing Notice u/s 142(1) and u/s 153A are some of the examples ( other instances can in case of Tax audit applicable, lower profit shown in Presumptive taxation,if assesment is done u/s 147, u/s 144)
in which AO can demand return of income to filed ,otherwise there is no necessity to file return if income is below taxable limit, but this fact should be explained reasonably to the satisfaction of AO.

As per the details furnished by you there is neither Tax audit applicable nor notice u/s 142(1) etc is issued ,so no need to file return.
However it is recommended if the same transactions to be continued in future then you MUST file return

Amol S Joglekar

Amol S Joglekar (Expert)
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22 September 2012 The querrist has said that LETTER for non filing of return is received. For want of section, this LETTER from department need not go unanswered.

Deepanshu Agg.

Deepanshu Agg. (Expert)
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22 September 2012 Dear Amol you are right but there is a point to be noted that time limit for return filing for AY 11-12 is not yet expired , therefore letter is non statutory letter just asking the reason to file the return
Therefore satisfactory reply of notice even without filing return is enough compliance.
If anyone still not satisfied ,kindly refer me the section under which notice has been furnished.
Hope I am clear

Amol S Joglekar

Amol S Joglekar (Expert)
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22 September 2012 Absolutely right Sir, The point is well taken.. that the letter should not go unanswered.. directly in dustbin.

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2012 Thanks to you both sir.
CAClub is a wonderfully useful site to consult about taxation and other related matters.
Thanks again for the discussion above.