Regarding ITR business income

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This discussion explores the implications of declaring business income under Section 44AD of the Income Tax Act, particularly when the declared turnover is significant but there's no actual business profit. While the Income Tax Department generally cannot question profit margins under 44AD above a certain limit, they can raise queries about the source of sales if the aggregate income exceeds the taxable limit. It's advised to declare only genuine figures to avoid future complications.

CA Parul Saxena

CA Parul Saxena (Querist)

24 September 2022 A person has shown 16 lakh turnover and Rs.4 lakh as business income u/s 44ad. In real he has no income from business. what are the implications he can face?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

24 September 2022 None..

CA Parul Saxena

CA Parul Saxena (Querist)

29 September 2022 why what is the reason? i just want to know for knowledge

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

29 September 2022 ITD cannot ask for the proof of profit margin (provided it is declared over and above specified limit), when income declared u/s. 44AD of the act...

CA Parul Saxena

CA Parul Saxena (Querist)

30 September 2022 Ok...but cash can not be received over and above 2 lakhs and in bank there is nothing...in future ITD can raise a question how sale amount from debtors is recovered? Although profit is shown below taxable limit and hence no tax whether justification of recovery of sale amount can be asked?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

30 September 2022 In the said case aggregate income is above taxable limit. ITO has right to ask for justification of sales figure. & as such the recovery should be through banking mode, unless its cash sales or below the specified limit.

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CA Parul Saxena

CA Parul Saxena (Querist)

07 October 2022 Yes sir exactly this is my point that in future query can be raised...so i advised my client not to show such a huge sale if nothing is there..am i right in my way?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

07 October 2022 Correct. Whatever is real, that needs to be declared, and nothing fabricated...

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