audit u/s 44ab and 44AD doubt

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2011 dear sir,
Mr.A have turnover of rs. 37 lacs with retail business, he maintaing accounts and have net profit of rs. 120000 (3.25% only)which is below the taxable limit but have less than 8% profit.
is audit to him is mandatory?
as per my understanding 44 ad(5)is not fullfilling in this case.
please suggest.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

23 July 2011 Provisions of section 44AD(5) of the Income tax Act,1961 does not apply since total income ,in the cited issue,does not exceed the maximum amount which is not chargeable to income tax. Hence accounts need not be audited under section 44AB of the said act.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)

23 July 2011 As section 44AD has been inserted in the name of making things more simple for the assessee at the time of filing their returns, it was necessary for the law maker to generate controversies at a later stage by drafting it as poorly as they could.

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Sub-section 1 of Section 44AD makes a provision of 8% or more profit on turnover. Assessee can understand this provision very well. But they added a few more lines in this ss which can be understood by them only.

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ss2,ss3,ss4 have clarity and after drafting these three they suddenly realised that they were writing the provisions of a New Section which will really simplify The Income Tax Act against their inner wish.

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So they tried their level best in drafting ss5.

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They rejected the provisions of ss 1 to ss 4. ( perceiving the fact that what they wrote will easily be understood) and created a new criteria by inserting Taxable Total Income in to the play.

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The Total Income according to SS 5 has not to be arrived by applying 8%. Because, what ever written in earlier provisions (ss1,ss2,ss3 and ss4) has already been negated in the initial phrase of ss5 itself.

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Meaning there by, Total Income has to be arrived by showing the income Under the head Business Income at BOOK LEVEL only.

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We can thus say in ss5 , which is imposing the requirement of tax audit upon the assessee, is a " SUPER POWER" in itself.

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Applicability and non- applicability of tax audit has to be tested from this section only.

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And the emerging view from the above discussion is , you are not required to get accounts audited since your total income is not taxable.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 July 2011 thx a lot.......