How to maintain Accounts of Mobile Showrom as an Aocc*ntant of such Showroom. mean to say what are the basic requirements.
shankar
(CA, CS Final)
(243 Points)
Replied 29 November 2012
It is generally seen that there is confusion among taxpayers about maintenance of books of accounts under Income Tax Act like who is required compulsorily to maintain the books of accounts and for how many years one has to keep his books of accounts. Some views are expressed on this topic as follows:
Maintenance of books of accounts by Professionals: Section 44AA of Income Tax Act and rule 6F of Income Tax rules deal with the provisions regarding maintenance of books of accounts under Income tax Act. As per section 44AA(1) read with rule 6F the persons carrying on any of the profession as mentioned below are required to maintain books of accounts and other documents as may enable the assessing officer to compute his total income, if yearly gross receipts of the profession exceeded Rs 150000.
1) Legal
2)Medical
3)architectural
4)engineering
5)accountancy
6)technical consultancy
7)interior decoration
8)authorized representative
9)film artist
10)any other profession as is notified by the board
When no books of accounts are required to be maintained by professionals covered u/s 44AA(1): Proviso to Rule 6F (1) provides that if the gross receipts of a profession do not exceed Rs 150000 in any one of the three years immediately preceding the previous year or where the profession has been newly setup in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount, then such professional need not to maintain any books of accounts as mentioned in sub rule 2 of rule 6F.
It means that if the gross receipts of a profession exceed Rs 150000 in all the three years preceding the previous year only then the books of accounts will be required to be maintained, if the gross receipt exceed the prescribed limit in the two preceding years but not in the third preceding year then there will be no need to maintain books of accounts as contemplated in sub rule 2 of rule 6F.
Maintenance of Books of accounts by other Persons covered u/s 44AA (2): In relation to any other persons engaged in any other profession or carrying on any business other than section 44AA (1), the requirement of compulsory maintenance of books of accounts applies if- either the income from business or profession exceeds Rs 120000 or the turnover or gross receipts exceed Rs 10 Lakhs in any one of the three years immediately preceding the previous year.
When no books of accounts are required to maintained by other persons covered u/s 44AA (2): If the Income or the gross receipts or gross turnover of a person carrying on business or profession other than profession as mentioned u/s 44AA (1) do not exceed in any one of the three years preceding the previous year then no books of accounts will be required to be maintained u/s 44AA (2).
What books of accounts are required to be maintained by persons covered u/s 44AA(1): As per Rule 6F(2) the following books of accounts and documents are required to be maintained:
1) cash book,
2)Journal, if the accounts are maintained as per mercantile system of accounting,
3)ledger
4)carbon copies of bills, serially numbered and carbon copies or counterfoils of receipts issued in respect of sums exceeding Rs 25,
5)original bills for expenses exceeding Rs. 50 and payment vouchers for petty expenses. However in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred, then vouchers are not necessary in respect of expenses upto Rs 50.
For how many years books of accounts are required to be preserved: Every year the record of books of accounts grows up and the cupboards filled up more and more. Every assessee wants to know for how many years he should keep the records of his books of accounts.
Rule 6F(5) provides that the books of accounts and other documents are to be kept for at least 6 years from the end of relevant assessment year. That means from the assessment year 2009-10 one should keep books of accounts upto the assessment year 2003-04 i.e. books of accounts of financial year 2002-03.
The time limit for issuing notices for assessment or reassessments have been prescribed u/s 149, after the end of such prescribed time no notice can be issued and no assessment can be framed, therefore the assessee will not need books of accounts of the concerned year. Keeping in mind the time limit as provided u/s 149 for issuing notice the following suggestions are made regarding preservation of books of accounts:
1) If the assessee has made an appeal against any assessment order of any year then the books of accounts of such year should be preserved until the final decision of such appeal.
2) Where the assessment in relation to any Year has been reopened u/s 147 within time u/s 149, in such case all the books of account and documents shall continue to be kept till the assessment so reopened has been completed.
3)Books of accounts for only 7 financial years should be preserved. Therefore the taxpayers should keep books of accounts of only financial year 2002-03 and onwards.
Where the books of accounts should be kept: The current year’s books of accounts should be maintained and kept at the principal place of business or profession as per Rule 6F(3). There is no specific rule as to where the books of accounts of earlier years should be kept.