Commission

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 August 2014 Dear Sir,
A commission agent whose gross commission receipt is Rs. 9.70 lacs in fy 2013-14. And this is the first year of his business.
If he claims his net profit in return below the 1.20 lacs. Then he is liable to maintain a/c for the fy 2013-14.

Please clarify.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 August 2014 no. he wont be required to maintain books of accounts.

Querist : Anonymous

Querist : Anonymous (Querist)

15 August 2014 Then it would be better to keep profit below 1.20 lacs in above case?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 August 2014 well that is a call you need to take as the advisor.

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 Sir, What did you mean ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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16 August 2014 I mean that what profit you wish to show shall depend on your professional decision making. You need to own up that call.

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2014 Purpose of my question is that if the assessee shows profit below 1.20 lacs then he will get immunity of section 44AA
or
even after that department can compel him to produce books of accounts?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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19 July 2024 If an individual's gross commission receipts are Rs. 9.70 lakhs in FY 2013-14, and it is the first year of their business, here's how the tax provisions apply regarding maintenance of accounts under Section 44AA of the Income Tax Act, 1961:

1. **Section 44AA Requirement**:
- Section 44AA mandates that certain categories of taxpayers must maintain books of accounts if their income exceeds the specified threshold. For commission agents, this threshold is set at Rs. 1.20 lakhs of net profit or Rs. 10 lakhs of gross receipts in any of the three preceding financial years (according to the latest amendment applicable).

2. **Immunity from Maintenance of Accounts**:
- If the commission agent's net profit is below Rs. 1.20 lakhs in FY 2013-14 and does not exceed Rs. 10 lakhs in gross receipts in any of the preceding three years, they may be exempted from the mandatory requirement of maintaining books of accounts under Section 44AA for that financial year.

3. **Department's Discretion**:
- Even if the net profit is below Rs. 1.20 lakhs, the tax department has the authority to compel the taxpayer to maintain books of accounts if they have reasons to believe that income has been underreported or if the taxpayer's activities warrant closer scrutiny.
- However, if the taxpayer's income is below the threshold and there are no specific red flags, the likelihood of the tax department compelling the maintenance of accounts is generally lower.

4. **Practical Application**:
- In practice, if the commission agent's net profit is below Rs. 1.20 lakhs for FY 2013-14 and they meet the criteria for exemption under Section 44AA, they may not be required to maintain books of accounts.
- It's essential for the taxpayer to keep records of income and expenses to substantiate their tax return in case of scrutiny by the tax authorities.

5. **Documentation and Compliance**:
- Even if books of accounts are not mandatory under Section 44AA, maintaining proper documentation of business transactions, income, and expenses is crucial for compliance and to support the income declared in the tax return.

In summary, while claiming net profit below Rs. 1.20 lakhs in FY 2013-14 may exempt the commission agent from mandatory bookkeeping under Section 44AA, the tax department retains the authority to request books of accounts if there are concerns regarding income reporting or compliance issues. Therefore, maintaining accurate records is prudent to avoid complications during tax assessments or audits.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 July 2024 do not waste your time with 10 year old queries. respond to current ones. its not a competition!!

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