Query regarding audit u/s 44ab.

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Jigar Chudasama (Querist)

06 July 2012 Hello Experts,
My query is,
There is a p'ship firm who is in the business of Construction of Residential Complexes.
This firm is following Percentage Completion Method.
Also this firm has not booked any Sales yet, so there is no Turnover.
Further it has received Advance Receipts From Customers which is around Rs 5 crores.
The project is still under construction.
So whether this firm is liable to gets it books of accounts audited u/s 44AB of Income Tax Act??
please reply asap its urgent.

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)

07 July 2012 Every person,—
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds sixty lakh rupees in previous year
then require to be audited u/s 44AB

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Jigar Chudasama

Jigar Chudasama (Querist)

09 July 2012 Dear Sourabh Sir,
then whether just advance receipt from customers where there is no total sales or turnover ,will attract sec 44AB?
is advance receipt from customers comes under Gross receipts?

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)

09 July 2012 It will be noted that the provision relating to tax audit applies to
every person carrying on business, if his total sales, turnover or gross
receipts in business exceed Rs.60 Lacs(or 1crore)
However, the term "sales", "turnover" or "gross receipts" are
not defined in the Act, and therefore the meaning of the aforesaid terms
has to be considered for the applicability of the section.
since in your case it is no sales but there is receipts
therefor meaning of Gross receipts has to be considered
and it will include all receipts whether in cash or in kind arising from carrying on of the
business which will normally be assessable as business income under the
Act.
so as per the provisions it is applicable
you can also refer to other experts for further details.

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Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

19 July 2025 Question: Does the advance receipts count as turnover/gross receipts for 44AB?
Turnover or Gross Receipts means the aggregate value of sales and other income received or accrued during the previous year.
Under the Percentage Completion Method, sales are recognized based on the percentage of work completed.
However, advance receipts from customers are also considered as part of gross receipts under Income Tax.
Why?

Because advances are consideration received for sale of goods or services.
Even if sales are not booked, advances are part of receipts from business.
Therefore:
Since advance receipts are ₹5 crores, the gross receipts exceed ₹1 crore.
Hence, the firm is required to get its accounts audited under Section 44AB for that financial year.
📌 Important Notes:

The audit is mandatory irrespective of profit or loss or booked sales.
The firm should appoint a Chartered Accountant for audit.
The audit report must be filed before due date as per Income Tax rules.

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