- Who is required to get his books Audited Under Section 44AB?
Section 44AB of the Income Tax Act requires certain persons to get their accounts audited by a chartered accountant before the specified date and furnish the report of such audit in the prescribed form duly signed and verified by such accountant. The persons who are required to get their accounts audited are as follows:
(a) carrying on business if the total sales, turnover or gross receipts in business exceed one crore rupees in any previous year (provided that if the cash receipts and payments are less than 5% of the total receipts and payments respectively, the limit is five crore rupees);
(b) carrying on profession if gross receipts in profession exceed fifty lakh rupees in any previous year;
(c) carrying on the business if profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, 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 in any previous year;
(d) carrying on the profession if profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year;
(e) carrying on the business if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.
The section provides certain exceptions, such as for persons who declare profits and gains in accordance with the provisions of sub-section (1) of section 44AD and whose total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in the previous year. The section also allows compliance with other laws if such persons are required by or under any other law to get their accounts audited. The specified date for furnishing the report of such audit is one month prior to the due date for furnishing the return of income under sub-section (1) of section 139.
2. Consequence of Non-Compliance of Tax Audit Requirement?
If a taxpayer who is required to get his books audited under Section 44AB fails to comply with the tax audit requirement, then the following consequences may arise:
1. Penalty for Non-Compliance: The taxpayer may be liable to pay a penalty of 0.5% of the total sales, turnover, or gross receipts, or Rs. 1,50,000, whichever is lower, for not getting his books audited as required under Section 44AB. This penalty can be levied by the assessing officer before the completion of the assessment.
2. Disallowance of Deductions: If the taxpayer fails to get his books audited as required under Section 44AB, then certain deductions claimed by him may be disallowed by the assessing officer. For example, the deduction claimed under Section 80-IA for profits and gains from industrial undertakings or enterprises may be disallowed.
3. Prosecution: If the taxpayer fully fails to comply with the tax audit requirement, then he may also be liable for prosecution under Section 276D of the Income Tax Act. The punishment for such an offense may include imprisonment for a term ranging from three months to two years and a fine.
It is, therefore, advisable for taxpayers who are required to get their books audited under Section 44AB to comply with the audit requirement and file their tax audit report within the due date to avoid any penalties or disallowances.