Meaning of Sec.44AF(4)

Assessee, an individual, has 2 businesses with turnover as under for AY 2008-09:

a)      Medical shop – turnover Rs. 37.5 lakhs

b)      Lodging business – turnover Rs 10.8 lakhs

For medical shop, tax audit was opted u/s 44AF(5) and report was obtained in time and was filed during assessment u/s 143(3). For lodging business, no tax audit was done since turnover was below Rs 40 lakhs for that business. ITO opines that business of lodging should also have been audited u/s 44AB since total turnover for both businesses put together exceeded Rs 40 lakhs. Assessee cited provisions of Sec 44AF(4), whereby, if tax audit is opted under sub section (5), the turnover of that business should be excluded for the purpose of Sec. 44AB (to find overall turnover limit). ITO is not accepting this. Whether assessee’s contention is correct?. Any case law may please be cited.

 

Replies (3)

for individual with many business, audit report is made on adding all business, and reported in 3cd, any exclusion leads to evation. as the individual is one identity for all business for incometax purpose. with single PAN

As per my opinion you are not reuired to get the accounts audited. Please refer to the Para 31.4 of CBDT Circular No. 684 dated 10.06.1994, which makes it clear with a practicle example of 44AB.

31.4 The  assessees who file the return, estimating income at 8 per cent of gross receipts, or a higher income, will neither be required to maintain books of account under the provisions of section 44AA, nor required to get accounts audited under the provisions of section 44AB, in respect of their income from the business of civil construction. However, even such an  assessee has to comply with the requirements of both sections 44AA and 44AB in respect of his businesses which are not covered by this scheme. For instance, a person may have gross receipts of Rs. 30 lakhs from civil construction business and of Rs. 25 lakhs from trading in scrap and Rs. 10 lakhs from garment manufacture. Although his total gross receipts are Rs. 65 lakhs, he will not be required to have his accounts audited, since his gross receipts after excluding those from the business of civil construction are still less than Rs. 40 lakhs, the limit provided in section 44AB

Paras Transport Co. vs ITO decided on 18.08.2004 Agra. ITA No. 198/2001 

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