Tax audit applicability 44AB

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A second-hand car dealer's turnover has increased to £4 crore, exceeding the £2 crore threshold for Section 44AD. Despite cash receipts and payments being less than 5%, the client may no longer qualify for 44AD. However, due to the low percentage of cash transactions, a tax audit under Section 44AB(a) is not required, even with the increased turnover. The client can file their return under normal assessment using ITR 3.

Priyanka

Priyanka (Querist)

19 September 2022 Dear Experts
One of my client is dealer of second hand car. Till last year, his turnover was below 2 crore and so income was declared u/s 44AD. But now this year, his turnover is around 4 crore and cash receipts and payment are less than 5%.
My question is whether he is liable to tax audit as he was declaring turnover u/s 44AD earlier. His profit is also below 8% in current year
However, I feel, if turnover is exceeding 2 crore, it cannot be termed as Opt out. can we maintain books of accounts and file return without audit u/s 44AB and can declare profit less than 8% ? please guide

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

19 September 2022 Yes, your assumption is correct..
No question of opting out, as sec. 44AD in itself not applicable because of turnover.
As cash transactions are below 5%, Tax audit u/s. 44AB(a) is not liable..
File ITR 3 under normal assessment.

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