One of my client deals in land development and for the financial year 2020-21 he has sold land amounting to Rs. 1,35,00,000/- but has incurred loss of Rs. 80,00,000/- due to construction costs of other land purchased.
I want to know is Tax audit required to be done in this case. He has not earned any profit that year.
04 August 2021
In the given case turnover is Rs.1.35 crore and it's mentioned that the assessee has incurred business loss. So there won't be any net profit declaration of 8% or 6% of turnover as the case may be, in accordance with the requirement of section 44AD. Hence tax audit is applicable in this case and books of accounts has to be maintained u/s 44AA(2). Assumption: 1.Total income after considering all heads of income exceeds maximum income not chargeable to tax. 2. Assessee is an individual If assessee has no income under other heads besides business income and the total income for the assessee does not exceed the non taxable limit then tax audit is not applicable in such case.
05 August 2021
If the assessee has not opted for 44AD in any of the last 5 years, then my answer will not hold good. If the assessee has filed his/her return in last five years without opting for 44AD, then he is not liable to tax audit u/s 44AB as his turnover is less than Rs.5 crores subject to the condition that cash receipts and cash payments haven't exceeded 5% of aggregate receipts and payments respectively during the year.
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