Tax audit applicability

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2012 One of My Client is having sub dealership of Two wheeler Vehicle,You can also treat that sub dealer as commision agent because he is getting only certain fixed commision amount. & he is not authorise to issue invoice to the Customer instead he is giving receipt of cash received if there is any sale.Sub Dealer is purchasing vehicles from main Dealer On credit or cash & he is getting commision from main dealer if sale is made the point is that the total turnover of purchases & Sale on Bank Statment is Excedded Rs. 1 Cr whether tax audit provisions are applicable or Not?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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21 August 2012 Circular : No. 452 [F. No. 201/3/85-IT(A-II)], dated 17-3-1986.

The turnover does not include the sales effected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB.

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2012 But on the Basis of Turnover in CC Statment of SBI Bank is of the opinon that u are in the ambit of tax audit u have to do the tax audit

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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26 July 2025 Here’s the key point:

**For tax audit under Section 44AB, the “turnover” means the gross receipts or gross sales of the business**, **NOT** the total bank transactions or purchases & sales on bank statements.

In your client’s case, since he is a **sub-dealer/commission agent**, **only the commission income received from the main dealer is considered as turnover for tax audit** — **not the total value of vehicles purchased or sold.**

**Circular No. 452 (dated 17-3-1986)** clearly says:

> *"The turnover does not include the sales effected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB."*

So, if the commission income is below the prescribed limit (₹1 crore or ₹50 lakhs depending on the business), **tax audit is not applicable, regardless of the bank statement showing large purchases or sales.**

If the bank is insisting otherwise, you can explain this circular and section 44AB provisions to clarify the correct interpretation.

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