Limitations of Audit under Section 44AB, Income Tax Act
Applicability of Section 44AB of the Income Tax Act:
The44AB section provides that people having business or profession should get his accounts audited by a chartered accountant within the “specified date” and file a report of the audit, if the total sales, turnover exceed or gross receipts Rs.60 lakh in the case of business and gross receipts exceed Rs.15 lakh in case of any profession in case of the Assessment year 2011-12 and 2012-13. In case of the Assessment year 2012-13 the said former amount is Rs. 1 crore and Rs. 25 lakh in case of the later amount.
The “Specified date” as referred in Section 44AB in connection with the accounts of the previous year relevant to an assessment year is the 30th day of September of the assessment year in case the assessee is a company or any other one.
Scope of Section 44AB:
The section 44AB of the Income Tax Act was introduced through the Finance Act, 1997. It came into effect from the assessment year 1998-99.
Is states that audit is needed in case of an assessee carrying on any business as given in Section 44AD and Section 44AE of the Income Tax Act if his income is less than that specified in the section.
Every assessee whose turnover does not cross Rs.60 lakh also requires getting his accounts audited.
While computing the pecuniary limits of sections 44AB, the turnover or the gross receipts, the income from the said business shall not be included.
The requirement of section 44AB is a generalized one dealing with the total position of the accounts of the assessee. It is applicable to the total accounts of the assessee of the previous year including those of all the individual ones owned by the assessee wherever they are situated.
In case if the total turnover is more than the prescribed limits, the assessee is required to get the audit report under section 44AB in the form prescribed in the Act.
Cases where Section 44AB is not applicable:
44AB does not apply in cases relating to the business of plying, hiring or leasing goods carriages as stated in section 44AE(1) of the Act and any business as stated in section 44AD(1)of the Act.
When a person carries on businesses as stated in section 44AD, 44AE and opts for taxation on presumptive basis, tax audit requirement is not applicable to him.
When someone carries on any other business which does not fall under the category of presumptive taxation, tax audit requirements is applicable to him.
This section is not applicable to people deriving income falling under the category as stated in section 44B or 44BB or 44BBA or 44BBB, on and from 1.4.1985 or since the day when the said section came into force, whichever comes later.
Section 44AB is applicable only to income from any business or profession. It is not applicable to other kinds of incomes.