Which Section is applicable?

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This discussion clarifies the eligibility for filing an IT Return under Section 44AB for AY 2024-25, after having previously filed under Section 44AD for AY 2023-24. It explains that if an assessee opts out of the presumptive assessment scheme under Section 44AD before completing six continuous years, they may be liable for a tax audit under Section 44AB(e) for the next five years, especially if their income exceeds the basic exemption limit.

MANJUNATHA M R

MANJUNATHA M R (Querist)

04 October 2024 Dear Sir/ Madam,
One of my client had filed IT Return u/s 44AD for A Y 2023-24 Now for A Y 2024-25 Shall he eligible to file U/s 44AB is there any problem. Please guide me in this regard.
Thanks in Advance.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 October 2024 Eligible assessee for presumptive assessment, if opts out of the sec. 44AD before completing continuous six years of such assessment is liable for tax audit u/s. 44AB(e) r.w.s. 44AD(4&5); for next five years.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 October 2024 Sec 44AD(4)

44AAD(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).

Analysis of the provisions of Sec 44AD(4) of the Act

The above provision postulates as the following:

The assessee should have declared profit as per section 44AD for any previous year; and
The assessee should have declared profit not in accordance with section 44AD in any of the five assessment years succeeding the previous year in which profit was declared as per section 44AD as per condition (a).

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 October 2024 44AD(5)Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 October 2024 Sec. 44AB(e) carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

11 October 2024 Good luck ....

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