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Regarding Audit

RUDRA (Income & Corporate Tax Lawyer) (381 Points)

11 August 2020

There is a money transfer firm which is not registered in GST.
The turnover of the firm is near about 4 crore from bank.
There is refund of 280000 from section 194 N.
So my question is can we generally file the ITR as we file or we have to do audit.

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4 Replies

CA KARAN SINGH (Auditor at Big 4) (622 Points)
Replied 12 August 2020

Turnover exceeding 1 crore. Audit is compulsory

RUDRA (Income & Corporate Tax Lawyer) (381 Points)
Replied 12 August 2020

But it's profit margin is only 0.15 %. Even he can't pay the fees of audit. Generally he gets commission under section 194H. That's why he was filing ITR. Except this there is no purpose to file ITR. Even his total income is less than basic income.
In this case there is any matter of Forex. I had also discussed this matter with a CA. He is saying that this is the matter of Forex.
so is it?

CA KARAN SINGH (Auditor at Big 4) (622 Points)
Replied 12 August 2020

Ok, We will go one by one.

1. Applicability of Tax Audit does not depend upon profit margin of the business. If the assessee is required to get his Books of accounts audited under the Income Tax Act, then it is irrelevant to determine whether he has a sufficient profit margin or not.

2. If his commission income is more than one crore, then he compulsorily required to get his books of accounts audited.

3. There is a provision under which assessee can declare his income on a presumptive basis but only when his turnover is limited up to 2 crores and also he is not required to get his books of accounts audited. BUT THE IMPORTANT POINT IS, ASSESSEE EARNING INCOME IN THE NATURE OF COMMISSION CAN NOT DECLARE INCOME ON PRESUMPTIVE BASIS. SO THIS SECTION IS IRRELEVANT FOR YOU.

4. With the Finance Act 2020, Audit of Tax audit limit is relaxed from 1 crore to 5 crores if the assessee fulfills the following two conditions (a) Cash Receipts (includes all types of received in business) does not exceed 5% of Gross Receipt. (b) Cash Payment ((includes all types of payments in business) does not exceed 5% of Gross Payment. REMEMBER PROVISION STATED IN POINT NO. 4 IS APPLICABLE FROM F.Y. 2020-21.

Analytic Business Consulting (150 Points)
Replied 02 March 2021

If the client is earning only the commission from bank as 0.15%, he could be termed as a commission agent and how does the turnover comes as 4 crore as just a transaction ?

Here, If he is a commission agent then he is only earning the commission as mentioned in form 26AS under 194H section, This is his turnover. This amount could be his turnover.

And it would be appropriate if you explain what is his business is and what all it includes.

and as CA Karan Singh said Audit is mandatory irrespective of Profit margins and all his views are correct.

In this transaction your client may have income other than commission by way of service charges from customers ? if so, he could have a marginal income.

And if there is no any complex transactions and compliances then filing and audit may cost upto Rs.10,000/-.

Above points are out of my knowledge and views, i hope a expert would clarify the same so that the dilemmas are moved apart.

if anyone knows it well then please do have a time to convey the information.