The provisions relating to Audit of accounts are as follows as far as Income-tax Act, 1961 is concerned:-
- Audit under Section 44AB of the Income-tax Act, 1961 which is more popularly known as Tax Audit.
This is governed by Section 44AB Of the Income-tax Act, 1961 and the provisions of this Section are as follows:-
Audit of accounts of certain persons carrying on business or profession.
44AB. Every person,—
carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds sixty lakh rupees in any previous year [***J; or
carrying on profession shall, if his gross receipts in profession exceed fifteen lakh rupees in any [previous year; or
carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or Secti6n 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any 1[previous year,] [***]
The following clause (d) shall be inserted after clause (c) of section 44AB by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2011:
- carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
get his accounts of such previous year [***] audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:
Provided that this section shall not apply to the person, who derives income of the nature referred to in [***] section 44B or section 44BBA, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later:
Provided further that in a case where such person is required by or under any other law to get his accounts audited [***], it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section.
Explanation.—For the purposes of this section,—
“accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
“specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the 30th day of September of the assessment year.
Thus, the audit is required to be done only in case of those HUFAssessees whose total sales, turnover or gross receipts in the business exceeds Rs. 60 lacs in any previous year.
- It has been further provided that if the income of HUF Assessee is claimed to be lower than that a specified under the deeming provisions of Section 44AE or 44BB, then also the accounts are required to be audited as per the provisions of Section 44AB of the Income-tax Act,1961.
Out of the above, Audit u/s 44AF is very popular which deals with an assessee vho is engaged in retail trade in any goods or merchandise and who declares a sum equal to less than 5% of total turnover as Income from Business or profession. In such cases, the audited accounts are required to be submitted In case the audited accounts are not submitted, the Assessing officer has in such cases, the power to compute the Income from Business or profession @ 5% of the total turnover. The said Section 44AF is now proposed to be withdrawn w.e.f. 1/4/2011 since the assesses engaged in Retail business are now proposed to be governed by Section 44AD.
There are other provisions as well under the Income-tax Act, 1961 regarding certificates to be attached with the return of Income which are not discussed here.
In view of the amendments made in Section 44AF w.e.f. 1/4/2011, the provisions relating to tax audit in respect of the HUF assesses engaged in Retail business shall be governed by the provisions of audit u/s 44AB with respect to Section 44AD of the Income-tax Act,1961. Section 44AD has been totally recast w.e.f. 1/4/2011