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Audit report for loss returns

Lila (Job) (489 Points)

17 August 2021

Don't think audit is required for first time filers of business loss even if their total income is above exemption limit.

However, ITR is showing validation error that audit report has not been filed for loss cases. Is anyone else also facing this. What is the solution?

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7 Replies

Lila (Job) (489 Points)
Replied 17 August 2021

A reading of section 44AB and section 44AD does not necessitate audit in all cases where loss is declared. Audit needs to be done only if turnover exceed specified limit or for those who had earlier chosen 44AD (under certain circumstances). Don't think audit is required for first time filers of business loss even if their total income is above exemption limit.

However, ITR is showing validation error that audit report has not been filed for loss cases. Is anyone else also facing this. What is the solution?

Lila (Job) (489 Points)
Replied 20 August 2021

Can anyone please revert on above query..

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 20 August 2021

Sec 44AD. (1) Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" :

Note: Eligible Assessee Eligible Business Deemed Profit.... & Notwithstanding anything to the contrary ....

If all of these conditions fulfilled ... section 44AD(4) doesn't apply; otherwise for deemed profit less than 6/8% it automatically gets attracted.

In short, either declare deemed profit or get accounts audited..

Lila (Job) (489 Points)
Replied 20 August 2021

Thanks for the response. However, kindly refer to sec 44AD(4) as well, which necessitates the audit only if the assessee has already declared profit u/s 44AD earlier. Nothing has been mentioned, if he has not done so earlier (eg first time filers of loss).