Tax Audit – All About You want to Know

Tax audit is mandatory in following cases:

1.The assessee is carrying on business and his/her Total Sales/Turnover exceeds Rs.1 crore

2.The assessee is carrying on Profession, and his Gross Receipts exceed Rs.25 Lakhs

3. Presumptive income :

The assessee is carrying on business or profession and is covered under the provisions of section 44AD, 44AE, 44AF, 44BB or 44BBB and claims that his income from the said business is lower than the deemed profits and gains computed under the relevant section.

Clarifications given by ICAI in computation of Income for tax audit :

1.If a person is carrying on business as well as profession and the Turnover of the business is Rs. 1.2 Crore and the Gross Receipts of the profession is Rs 22 Lakhs. In such a case, ICAI has clarified through a Guidance Note that the Assessee is liable to get the Tax Audit of both the business and profession because the Gross Receipts from the business exceed the limit of Rs. 1 Crore. However, if his total turn over was Rs. 95 Lakhs and Gross Receipts from business was Rs. 22 Lakhs, he would not be required to get his Tax Audit performed.

2.If a person is carrying on 2 Business or 2 Professions the total turnover of both the businesses shall be combined together and tax audit shall be liable to be conducted if the Total Turnover exceeds Rs. 1 Crore or Rs. 25 Lakhs as the case may be.

While computing the total sales or turnover for the purpose of tax audit ,income from following means shall not be considered.

1.Income in the form of Interest unless assessable as Business Income.

2.Income through Sale Proceeds of Fixed Assets.

3. Income from Sale Proceeds of Assets held as investments.

4.Rental Income.

Penalty provisions :

Every assessee whomever the above said provision is applicable should duly comply them.Otherwise non Compliance of the provisions of this act shall attract Penalty under section 271B of the Income Tax Act 1961. If any person required to get his audit done under section 44 AB fails to do so before the specified date shall be liable for

1. penalty of 1/2 % of the turnover or gross receipts. But this is subject to a maximum penalty of Rs. 1,50,000.

However, Section 273B states that no penalty shall be levied under section 271B if there is a reasonable cause for such failure.

Following are some cases which have been accepted by the Tribunals or Courts aas

Reasonable Cause are:

1.Resignation of the Tax Auditor and Consequent Delay

2.Death or physical inability of the partner in charge of the Accounts

3.Labour Problems such as strikes, lock-outs for a long period

4.Loss of Accounts because of Fire/Theft etc. beyond the control of the Assessee

5.Natural Calamities.

Note :

“Maximum number of Tax Audit Assignments under Section 44AB which can be taken by a CA has been increased from 45 to 60 by ICAI