Whether Tax Audit Required or not.

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This discussion clarifies when a tax audit is required for individuals declaring income under Section 44AD. It explains that if an individual has continuously opted for 44AD for six years and then opts out, the restrictions under 44AD(4) may not apply. However, specific circumstances like declaring a loss or not filing returns can affect audit requirements. The key is to check past filings to determine if the six-year continuous opt-in period was met, which ultimately dictates the need for an audit in the current year.

A Khaitan

A Khaitan (Querist)

18 August 2024 Asssessee(Individua) is declaring income u/s 44AD since last many years. During AY-23-24 assessee had Loss from Futures and Options and the return was filed claiming that loss under ITR-3 and Total Income was below 2.5 Lacs. During AY-24-25 he is having profit from FO Trading for an amount of 32 Lacs.
Is Tax Audit required during this year?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

18 August 2024 Unless turnover exceeds 10 Crs. or profit margin is below 6%.

A Khaitan

A Khaitan (Querist)

18 August 2024 Sir are provisions of 44AD(4) not applicable in this case

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

18 August 2024 Not applicable, if sec. 44AD was opted for continuous six years before opting out in FY 2022-23; otherwise it may be applicable.
For that reason tax audit may or may not be applicable u/s. 44AB(e) IT act.

A Khaitan

A Khaitan (Querist)

18 August 2024 But the above condition already breached in AY 23-24 when he had declared a loss. So as per 44AD(4) is he not liable to get the accounts audited and maintain books for next 5 years.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

18 August 2024 As you said sec. 44AD was continuously opted earlier, so the condition may not get breached if opted the sec. from FY 2016-17 to FY 2021-22. So, check the liability as per the previously filed ITRs.

A Khaitan

A Khaitan (Querist)

18 August 2024 For AY 2017-18-44AD opted
AY 2018-19-44AD opted
AY 2019-20-ITR-1 Filed as no Business Income
AY 2020-21 44AD Opted
AY 2021-22 ITR Not Filed
AY 2022-23 44AD Opted
AY 2023-24 Opted out of 44AD and loss declared in ITR-3.

A Khaitan

A Khaitan (Querist)

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

18 August 2024 For AY 2021-22 why ITR was not filed?
Was there any business income?

A Khaitan

A Khaitan (Querist)

18 August 2024 No business income was there only interest income with tds was there but assessee forgot to file the ITR.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

18 August 2024 So, as per the data, the assessee has not opted out from presumptive assessment u/s. 44AD till AY 2022-23 i.e remained opted in for past six years, so the condition for sec. 44AD(4) not applicable from AY 2023.24.
As such no audit applicable for AY 2024-25 u/s. 44AB(e) IT act.

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