Whether tax audit is required when opting for section 44AD and simultaneously reporting separate commission income in P&L?

[Dipika Shetye]

I am an individual carrying on business and proposing to declare income under section 44AD.

My turnover/gross receipts during the year are approximately Rs. 1.37 crore. Cash receipts as well as cash payments exceed 5% of total receipts/payments. However, I am declaring presumptive income higher than the prescribed 6%/8% under section 44AD.

In addition, I have commission income of around Rs. 4 lakh, which I am showing separately in the Profit & Loss Account and not under the presumptive scheme.

While validating the return, the ITR utility is giving an error stating that since turnover is more than Rs. 1 crore and cash receipts/payments exceed 5%, tax audit under section 44AB is applicable.

Pls Guide me as per Income Tax Act. Whether tax audit is required

AI Summary

Tax audit remains mandatory where business turnover crosses the applicable threshold and cash transactions prevent enhanced threshold relief.
Tax audit under section 44AB operates independently of presumptive income declared under section 44AD. Declaring profit above the prescribed 6% or 8% rate does not remove the turnover-based audit requirement. Where turnover exceeds the normal threshold and cash receipts and cash payments each exceed 5%, the enhanced low-cash threshold is unavailable. On turnover of approximately Rs. 1.37 crore, tax audit is required. Separate commission income does not change this audit consequence, although its treatment under the presumptive-taxation framework requires separate examination.