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Is tax audit compulsory

Renuka (Accountant) (107 Points)

06 June 2015

An Assessee engaged in Labour Supply Contract Service, and have done Tax Audit for A.Y.14-15 for very 1st time and got the assessment order with no issues,

For A.Y.15-16 he is having a less income than prescribed limit for Tax Audit, is it necessary for him to goo for Tax audit,

One thing that I have observed he has made maximum payment to sub contractors and have not deducted TDS, can any expert elaborate on this, what are the consequences he is going face.

Regards

Renu

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11 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 06 June 2015

Assuming assesee to be individual, If during AY 15-16, gross receipts also does not exceed 1 crore, then no need of tax audit, in which case no need to deduction of TDS.

But if s/he is declaring income on presumptive basis (44AD), then if actual income going to be declared is less than the prescribed limit (8%), s/he is required to get books audited u/s 44AB and also liable for deduction/payment of TDS.

2 Like

Renuka (Accountant) (107 Points)
Replied 06 June 2015

Yes Assessee is an Individual, and having an inomce Rs.9000000.00 and Net profit -300000.00

But the important thing is he has collected service tax on above amount and not paid a single penny, which will be treated as profit.

in this condition how do you treat those payment which he made to sub-contractors. without deducting TDS.

what do u suggest........

Regards

Renu

CMA Poornima Madhava (CMA) (13097 Points)
Replied 06 June 2015

Not only income even gross receipts should not exceed 1 crore. If so, no tax audit and no tds deduction required

dig vijay (ok) (151 Points)
Replied 06 June 2015

No tax audit required

Ashok J (CA Final) (880 Points)
Replied 06 June 2015

Since for FY 13-14, he is under Tax audit - he is liable to deduct TDS on payments in FY 14-15. If not deducted 30% of payments will be treated as taxable income..

For FY 14-15, if gross receipts (including Service tax) exceeds 1 crore, mandatory tax audit....if its less than 1 crore and he wants to declare taxable income of less than 8 lacs, then also tax audit is mandatory

Nikhil Kaushik (Fellow CA) (85404 Points)
Replied 06 June 2015

Originally posted by : Poornima Madhava
	Assuming assesee to be individual, If during AY 15-16, gross receipts also does not exceed 1 crore, then no need of tax audit, in which case no need to deduction of TDS. But if s/he is declaring income on presumptive basis (44AD), then if actual income going to be declared is less than the prescribed limit (8%), s/he is required to get books audited u/s 44AB and also liable for deduction/payment of TDS.

Dear Poornima,

Please note that if a person is liable for an audit under section 44AB(d) ie because of application of 44AD(5), then TDS regulations dont apply to him.

TDS is specifically applicable only in cases where the turnover exceeds the limit provided under clause (a) or (b) of the section 44AB

2 Like

prashanth (Article assistant) (60 Points)
Replied 06 June 2015

I agree with Ashok J

Gnanashekar.R (Chartered Accoutant) (64 Points)
Replied 07 June 2015

If tax audit is not applicable then there is no disallowance in income tax but still he is liable under chapter XVII of it act. that is he has to pay along with interest

Ashok J (CA Final) (880 Points)
Replied 08 June 2015

@ Mr. Gnanashekar

Taxable income is computed irrespective of whether you are under tax audit or not...based on my prev reply...disalloance as well as liability to deduct TDS is attracted....Pls specify where is it mentioned when thre is no tax audit no disallowance is attracted..