Taxpublishers.in - Monday Corner Answer to the Quiz for the week (28 Oct 2024)

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Quiz for the week (28 Oct 2024): Ramesh Lal engaged in trade of Garments has turnover of Rs. 2.85 crores for the FY 2024-25. He did 100% of sale through online only. His purchases however, were in local market (shandy) which consisted of Rs.30 lakhs. Out of the said purchases, payment through online banking was Rs.22 lakhs. He has incurred other cash expenses during the year aggregating to Rs. 28 lakhs. His income as per books of account was Rs.18 lakhs. Suggest whether he can file his ITR through Tax Return Preparer (TRP). Best Answer : This query requires reference to section 44AB. As per clause (a) of section 44AB every person carrying on business shall if his total sales, turnover or gross receipt exceeds Rs.1 crore must get his accounts of such previous year audited by an accountant (meaning of the term “accountant” as per Explanation below section 288(2)). The proviso to clause (a) says that if the aggregate of all amounts received and aggregate of all payments made including amounts incurred for expenditures in cash does not exceed 5% of the total receipts and total payments respectively, the turnover limit for audit under section 44AB is Rs.10 crore instead of Rs.1 crore. In this case, 100% of the sales are through online, hence the first condition regarding receipt of amounts, stands satisfied. The purchases and expenditures incurred otherwise than through banking channel was Rs.8 lakhs and Rs.28 lakhs aggregating to Rs.36 lakhs which is more than 5%. Thus, the condition regarding expenditure is not satisfied. Hence, the proviso to section 44AB(a) cannot be applied. Proviso to Explanation to section 44AD says that where the aggregate amount received during the previous year in cash does not exceed 5% of the total turnover or gross receipt, the assessee may opt for presumptive income determination. This benefit is available for the aggregate turnover of Rs.3 crores from the assessment year 2024-25 onwards. In this case, the assessee has received 100% of the turnover through online sale of goods. Therefore, he can avail the benefits of section 44AD and admit the income @6% of the turnover. His income as per books of account is Rs.18 lakhs which is more than 6% of the total turnover (which is Rs.17.10 lakhs). Therefore, Ramesh Lal can file the return under section 44AD as more than 95% of the gross receipt is otherwise than by cash. Whether the return could be filed through Tax Return Preparer (TRP) is the subsequent issue. A resident assessee being an individual or HUF can file his return of income through Tax Return Preparer so long as the books of account are not liable for audit. In this case, the net income as per books of account is Rs.18 lakhs and his income as per section 44AD would be Rs.17.10 lakhs. As the assessee admits income more than the presumptive limit, the books of account need not be audited. When the books of account are not required to be audited, the ITR of the assessee could be filed through TRP. In case, the income as per books of account is Rs.10 lakhs (less than 6% of the turnover) then the provisions of section 44AD would not be applicable. When the income admitted is less than the presumptive limit, it has to be audited under section 44AB(a) and in such case the ITR cannot be filed through the TRP.

Quiz for the week (28 Oct 2024):

Ramesh Lal engaged in trade of Garments has turnover of Rs. 2.85 crores for the FY 2024-25. He did 100% of sale through online only. His purchases however, were in local market (shandy) which consisted of Rs.30 lakhs. Out of the said purchases, payment through online banking was Rs.22 lakhs. He has incurred other cash expenses during the year aggregating to Rs. 28 lakhs. His income as per books of account was Rs.18 lakhs. Suggest whether he can file his ITR through Tax Return Preparer (TRP).

Best Answer :

This query requires reference to section 44AB. As per clause (a) of section 44AB every person carrying on business shall if his total sales, turnover or gross receipt exceeds Rs.1 crore must get his accounts of such previous year audited by an accountant (meaning of the term “accountant” as per Explanation below section 288(2)).

The proviso to clause (a) says that if the aggregate of all amounts received and aggregate of all payments made including amounts incurred for expenditures in cash does not exceed 5% of the total receipts and total payments respectively, the turnover limit for audit under section 44AB is Rs.10 crore instead of Rs.1 crore.

In this case, 100% of the sales are through online, hence the first condition regarding receipt of amounts, stands satisfied. The purchases and expenditures incurred otherwise than through banking channel was Rs.8 lakhs and Rs.28 lakhs aggregating to Rs.36 lakhs which is more than 5%. Thus, the condition regarding expenditure is not satisfied. Hence, the proviso to section 44AB(a) cannot be applied.

Proviso to Explanation to section 44AD says that where the aggregate amount received during the previous year in cash does not exceed 5% of the total turnover or gross receipt, the assessee may opt for presumptive income determination. This benefit is available for the aggregate turnover of Rs.3 crores from the assessment year 2024-25 onwards.

In this case, the assessee has received 100% of the turnover through online sale of goods. Therefore, he can avail the benefits of section 44AD and admit the income @6% of the turnover. His income as per books of account is Rs.18 lakhs which is more than 6% of the total turnover (which is Rs.17.10 lakhs). Therefore, Ramesh Lal can file the return under section 44AD as more than 95% of the gross receipt is otherwise than by cash.

Whether the return could be filed through Tax Return Preparer (TRP) is the subsequent issue. A resident assessee being an individual or HUF can file his return of income through Tax Return Preparer so long as the books of account are not liable for audit.

In this case, the net income as per books of account is Rs.18 lakhs and his income as per section 44AD would be Rs.17.10 lakhs. As the assessee admits income more than the presumptive limit, the books of account need not be audited. When the books of account are not required to be audited, the ITR of the assessee could be filed through TRP.

In case, the income as per books of account is Rs.10 lakhs (less than 6% of the turnover) then the provisions of section 44AD would not be applicable. When the income admitted is less than the presumptive limit, it has to be audited under section 44AB(a) and in such case the ITR cannot be filed through the TRP.