Taxpublishers.in - Monday Corner Answer to the Quiz for the week (16 Dec 2024)

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Quiz for the week (16 Dec 2024): Dr. Ramchand is running a hospital at Chennai since April,2023. His gross receipt from the profession for the year ended 31st March, 2024 was Rs.60 lakhs. He has maintained books of account in which his income from profession was Rs.20 lakhs (computed). He has paid advance tax of Rs.2 lakhs and has TDS credit of Rs. 1,20,000 out of professional receipts (i.e. sec.194J). Assume that he would not be able to file his ITR till 31st December, 2024 for the assessment year 2024-25. Suggest a suitable course of action to be chosen by Dr. Ramchand for filing the ITR of assessment year 2024-25. Best Answer : For the query, reference is invited to section 44 ADA. It says that in the case of individual or partnership firm (other than LLP) engaged in profession referred to in section 44AA(1) can avail this optional provision. If the gross receipt does not exceed Rs.50 lakhs, income has to be admitted @50% or more of the gross receipt. Such income is taxable under the head “Profits and gains from business or profession”. In case, the assessee does not offer income @50% or more of the gross receipt, the books of account have to be audited under section 44AB(d). From assessment year 2024-25 onwards, where the aggregate of the amounts received during the year in cash, does not exceed 5% of the gross receipt of such year the presumptive provision is applicable up to the aggregate receipt of Rs.75 lakhs. In the said case, since the gross receipt exceeded Rs.50 lakhs, if the receipt by cash was more than 5%, the assessee has to get the books of account audited under section 44AB. The tax payer must file the tax audit report first and file the ITR. Section 44ADA is not applicable. In case, the receipt by cash is less than 5% of the aggregate receipt, then books of account need not be audited but 50% or more of the gross receipt has to be admitted as income by applying section 44ADA of the Act. It is stated in the query that the ITR could not be filed before 31st December,2024. The proper course of action would be to get the accounts audited under section 44AB and file the same. The ITR could be filed by means of Updated return under section 139(8A) of the Act. The assessee has paid advance tax of Rs.2 lakhs and has TDS credit of Rs.1,20,000. For the income of 20 lakhs, the tax liability under default regime contained in section 115BAC would be Rs. 3,12,000 including cess but before fee under section 234F and interest under section 234C for any deferment of advance tax. Since Updated Return cannot result in refund, the total tax liability on the total income must be more than advance tax and TDS credit. Any failure to get the books of account audited under section 44AB would be liable for penalty under section 271B of the Act. It would be @0.5% of Rs.60 lakhs being Rs.30,000. In case the cash receipt is less than 5% of aggregate receipt then the assessee need not get the books of account audited. He can admit 50% or more as income from profession. Since it is stated that ITR could not be filed before 31st December, 2024 the assessee has to file Updated Return as per section 139(8A). Assuming that the assessee admits Rs.30.10 lakhs as income then the tax liability under default regime contained in section 115BAC would be Rs.6.03 lakhs before considering cess, interest under sections 234A, 234B and additional income tax @25% on the net tax liability. He would not be liable for penalty under section 271B as the books of account need not be audited under section 44AB.

Quiz for the week (16 Dec 2024):

Dr. Ramchand is running a hospital at Chennai since April,2023. His gross receipt from the profession for the year ended 31st March, 2024 was Rs.60 lakhs. He has maintained books of account in which his income from profession was Rs.20 lakhs (computed). He has paid advance tax of Rs.2 lakhs and has TDS credit of Rs. 1,20,000 out of professional receipts (i.e. sec.194J). Assume that he would not be able to file his ITR till 31st December, 2024 for the assessment year 2024-25. Suggest a suitable course of action to be chosen by Dr. Ramchand for filing the ITR of assessment year 2024-25.

Best Answer :

For the query, reference is invited to section 44 ADA. It says that in the case of individual or partnership firm (other than LLP) engaged in profession referred to in section 44AA(1) can avail this optional provision. If the gross receipt does not exceed Rs.50 lakhs, income has to be admitted @50% or more of the gross receipt. Such income is taxable under the head “Profits and gains from business or profession”. In case, the assessee does not offer income @50% or more of the gross receipt, the books of account have to be audited under section 44AB(d).

From assessment year 2024-25 onwards, where the aggregate of the amounts received during the year in cash, does not exceed 5% of the gross receipt of such year the presumptive provision is applicable up to the aggregate receipt of Rs.75 lakhs.

In the said case, since the gross receipt exceeded Rs.50 lakhs, if the receipt by cash was more than 5%, the assessee has to get the books of account audited under section 44AB. The tax payer must file the tax audit report first and file the ITR. Section 44ADA is not applicable.

In case, the receipt by cash is less than 5% of the aggregate receipt, then books of account need not be audited but 50% or more of the gross receipt has to be admitted as income by applying section 44ADA of the Act.

It is stated in the query that the ITR could not be filed before 31st December,2024. The proper course of action would be to get the accounts audited under section 44AB and file the same. The ITR could be filed by means of Updated return under section 139(8A) of the Act. The assessee has paid advance tax of Rs.2 lakhs and has TDS credit of Rs.1,20,000. For the income of 20 lakhs, the tax liability under default regime contained in section 115BAC would be Rs. 3,12,000 including cess but before fee under section 234F and interest under section 234C for any deferment of advance tax. Since Updated Return cannot result in refund, the total tax liability on the total income must be more than advance tax and TDS credit. Any failure to get the books of account audited under section 44AB would be liable for penalty under section 271B of the Act. It would be @0.5% of Rs.60 lakhs being Rs.30,000.

In case the cash receipt is less than 5% of aggregate receipt then the assessee need not get the books of account audited. He can admit 50% or more as income from profession. Since it is stated that ITR could not be filed before 31st December, 2024 the assessee has to file Updated Return as per section 139(8A). Assuming that the assessee admits Rs.30.10 lakhs as income then the tax liability under default regime contained in section 115BAC would be Rs.6.03 lakhs before considering cess, interest under sections 234A, 234B and additional income tax @25% on the net tax liability. He would not be liable for penalty under section 271B as the books of account need not be audited under section 44AB.