04 September 2022
My query is that one of my client is opted sec 44AD last year having turnover of 1.20 crore but for this year he want to opt out of 44AD having turnover of 1.70 crore and profit is 8.5 lakh then under which clause audit is applicable 44AB(A) Or 44AB(E)
05 September 2022
After change in data of original post, the query is clear. Being 5% profit margin, sec. 44AD(4) gets triggered, hence reading it with sec. 44AD(5), sec. 44AB(e) gets activated.
06 September 2022
Thanks Dhirajlal Rambhia Ji for your response But one more question comes to mind that is If the cash receipt / payment is more / less, then 5% then there is any change in your reply because there many myths going around about that too I got confused
06 September 2022
For different situations there are different options/answers, so if you mix them (as in present case), you might get confused. The referred case is to be studied with reference to sec. 44AD and not sec. 44AB(a), because last year sec. 44AD was opted.
Read sub-sec. 44AD(4)... it states once you have opted it, you must continue it for consecutive 5 years, otherwise you have liability as per sec. 44AD(5) for next five years..
Here the receipts or expenditures within /above 5% doesn't come into picture.
10 September 2022
Thanks sir for your response I have lot of confusion on this matter but you made it clear. You gave me a straight forward reply without any if and but otherwise many people gives answers with if and but that confused a lot
10 September 2022
If your confusion has partly been solved, let me ask you to move a step further... i.e How and under which condition tax audit u/sec. 44AB(a) can take place?
11 September 2022
If tax payer has new business and his turnover exceeds 1 crore then tax audit under 44AB(a) is applicable if his cash receipt/payment are more than 5% Otherwise he will be covered under provsio to 44AB(a) then for him limit will be 10 crore
11 September 2022
Correct.... But in the given example, if any change in data and how the things would change. 1. Consider when TO is more than 2 Crs.. 2. Consider when profit is more then 6/8% 3. Consider also when total taxable income is less than 2.50 lakhs... That is why I had asked to clarify the incorrect data first...
15 September 2022
Sir one more question is that my client is opted sec 44AD last year having turnover of 1.20 crore but for this year he want to opt out of 44AD having turnover of 2.70 crore and profit is 8.5 lakh then under which clause audit is applicable 44AB(A) Or 44AB(E)
According to me report under sec 44AB(a) is to be issued Correct me if I am wrong.
15 September 2022
Here sec. 44AD is not applicable, so no question of opting it out. Now if cash transaction percentages are below 5 %, then the TO limit for audit [as per sec. 44AB(a)] is 10 Crs.; thus file the ITR under normal assessment without audit. Otherwise, TO limit for audit u/s. the sec. 44AB(a) of the act is 1 Cr., which gets attracted in the example. So, file it with audit report.
22 September 2022
Sir is there any clarification on this issue by the ICAI or CBDT regarding 44AD audit limit because many professionals have other view
And for how many years audit is compulsory for him under sec 44AB(E) if his turnover is below 2 crore continuosly
Or For how many years audit is compulsory for him under sec 44AB(E) if his turnover is sometime above 2 crore or sometimes below 2 crore if cash transaction is above 5%
And after how many years he can get back to normal scheme where no audit is required and turnover limit for him
23 September 2022
Sec. 44AD (4) of the act clarifies it as..... (4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).
23 September 2022
Well, there is no confusion that when the turnover is below 2 Crs. the clause is applicable, but if it exceeds 2 crs., the rule doesn't apply for that particular year.
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