Section 44ab regarding the audit and tax liablity

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VIJAY PAREEK (Querist)
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04 August 2017 Dear Sir/Madam
My Client is Transporter , opted Section 44AE as have 5 Trucks, and Filled Return accordingly for the AY: 2015-16
His total Freight Receipt in Bank Rs 92.56 Lakhs, whereas His total freight which he billed Value Rs 1.28 Crore. and same is reflated in the 26AS,
Got Notice u/s 142(1) From IT Dept on Contractual Receipt Mismatch and Audit U/s 44AB.
Regarding the Same I would get explanation whether am i right or wrong for reply to notice......
1)(a) Assesses being a transporter (Service Provider), follows Cash Basis of Accounting Method. According to that he received freight of Rs 92.56 Lakhs, which is less than 1Cr, Hence the Question of Audit Does not arise. Where as 26 AS follows Accrual Basis (Pay or Credit whichever is Earlier), can not bound freight Rs 1.28 Cr on assessee.
(b) In case of Service Section 44AB says if "GROSS RECEIPTS" exceeds Rs 1 Cr --My Question whether Gross receipt means limited to Total Freight Receipts During the Year or Freight Received+Accured in that Year , I think if we follows cash method It should means only RECEIVED during the Year.

Please Suggest me on the same

RAJA P M

RAJA P M (Expert)
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04 August 2017 Dear Sir.,
In my view above said query is cleared and it's also include the answers....

1. How you define it's Cash basis. Bcoz, More transporter running his vehicles die to some companies doing monthly receipts basis. The companies ll be give payments after one or more than one months. then the companies is also calculate monthly one as payable.
So, in this way it's not cash system. It's only mercantile/Accrual basis.

RAJA P M

RAJA P M (Expert)
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04 August 2017 2. Yes. 44AB said "Gross Receipt".
Ex. The Transporter give service to a Company full month Rs. 1000000. The company l be accounted the month end Rs. 1lakh as freight. Average Its to Rs. 1.2Cr. But, The company ll be paid only Rs. 92 lakhs. Then what is his turn over...
If He can't give bills Rs. 1.2Cr. But, He served above 1cr. The company accounted Rs. 1.2cr and deduct TDS as per 1.2cr....
So, fall under 44AB..........

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