Applicability of Section 44 AB

[BAL KRISHAN GARG]

Dear All Members , There is a doubt regarding applicability of  Section 44AB on a assessee and I will be highly oblidge if somebody can clarify the same . A was doing job work in a factory during 2008 -09 financial year and his gross receipts are slightly more than 40 Lacs. A was also running a proprietoryship business having TIN no. and his sales from that business was RS. 3.2 Lacs during the year 2008 - 09 . Here what is the best option as he has contacted me during march ,10 and I saw the above facts . Whether I should do Tax Audit U/S  44AB as his total gross receipts is more than 40 Lacs including Proprietoryship concern or I should apply 44AD and calculate 8 % of gross receipts and prepare profit and loss account for his proprietoryship business and file the return of income .As no tax audit report is to be filed in hard copy whether the provision of penalty provisions will apply if I go for tax audit report and file the return of income in march 2010 ? I have approched many my professional brother but no body can clarify the matter in clear terms . Thank to all

(BAL KRISHAN GARG )

[HIMANSHU JARIWALA]

as the total jobwork income is more than Rs.40 lacs sec.44 AB is definitely applicable and also T.O of proprietary business will also be counted for the purpose of sec. 44AB. hance total turnover comes to near 44 lacs and tax audit will definitely applicable.

[Surender Gupta]

You have mixed certain things. Gross turnover is more than 40 Lacs whether, it is a combined figure. Assuming that it is a combined figure and total turnover of the both the business are less than 40 lacs individually, I am of the view that if you follow the ICAI guidelines, you have to conduct the audit u/s 44AB. But, if you see the provisions of section 44AB, it nowhere stipulates that turnover of all the business shall be grossed up for the purpose of Section 44AB. This aspect has been discussed in the matter of THE INCOME TAX OFFICER Versus SACHINAM TRUST reported in [2010 -TMI - 35306 - HIGH COURT OF GUJARAT] in which High Court has waived the penalty after discussing the provisions of section 44AB at length. But, certain issues left to be decided in clear terms. Therefore, it is your own decision and view to take the best course of decision after reading the said decision of the high court.

[THIRUGNANAM KALIYAPERUMAL]

Section 44AD is not applicable to do job works in a factory for your case because of Section 44AD is applicable in case of an assessee engaged in the business of civil construction or supply of labour for civil construction. Hence, it is better to do the tax audit u/s.44AB

AI Summary

Debate on Need for Tax Audit: Section 44AB Applies to Combined Turnover Over 40 Lakhs, Section 44AD Not Applicable A query was raised regarding the applicability of Section 44AB of the Income Tax Act for an individual with gross receipts exceeding 40 lakhs from job work in a factory and additional sales from a proprietorship business. The discussion involved whether a tax audit under Section 44AB is necessary or if Section 44AD could be applied. One respondent confirmed that Section 44AB is applicable due to the combined turnover exceeding 40 lakhs. Another highlighted that ICAI guidelines suggest an audit is required, but the law does not explicitly mandate combining turnovers. A third response clarified that Section 44AD is not applicable for job work, recommending a tax audit under Section 44AB.