Mr. Rajesh, proprietor of M/s. Gupta Electronics, trades in smartphones. For FY 2024-25, his turnover and total receipts total - 5,12,00,000. He…

CA Final · Direct Tax Laws and International Taxation · MTP · January 2026
Mr. Rajesh, proprietor of M/s. Gupta Electronics, trades in smartphones. For FY 2024-25, his turnover and total receipts total - 5,12,00,000. He collected - 22,00,000 in cash from sundry debtors, with the balance of 4.90 crore received via online banking before 31.03.2025. He also made a total business payment of 5,50,00,000 against purchase of goods, rent; salary and other business expenses during the previous year 2024-25, out of which total cash payments amounted to 28,00,000 and remaining all kind of payments made through online banking channel. No other amount received or paid during the year on business account. He has no other business in his name. Is Mr. Rajesh mandatorily required to audit the books of M/s. Gupta Electronics for AY 2025-26 under Section 44AB of the Income-tax Act, 1961? Discuss the applicability. Assuming Mr. Rajesh is required to get his accounts audited and in the light of the Tax Audit applicability u/s 44AB of the Act, Also discuss whether the following issue need to be reported by the Chartered Accountant of Mr. Rajesh in the tax audit report as applicable for A.Y. 2025-26 u/s 44AB in relation to Tax audit of M/s. M/s. Gupta Electronics in view of section 269ST. You need to give the relevant provisions of law in support of your answer. M/s. Gupta Electronics issued an invoice of 3,50,000 to M/s. PQR Traders for sale of mobiles on 10.02.2025. M/s. PQR Traders made payment of 2,50,000 through account payee cheque. The balance of 1,00,000 has been paid on 10 different dates in cash, through payment of 10,000 on each day before 31.03.2025. Ignore the Clause numbers given in Form 3CD prescribed for Tax Audit Report u/s 44AB for such reporting.

Suggested Answer and Working Notes:

As per section 44AB, every person carrying on business or profession is required to get his accounts audited before the "specified date" by a Chartered Accountant, if the total sales, turnover or gross receipts in business exceeds 1crore in any previous year. However, tax audit is not required in case of such person carrying on business whose total sales, turnover or gross receipts in business ≤ 10crore in the relevant previous year (P.Y.), if - aggregate cash receipts including amount received for sales, turnover, gross receipts in the relevant previous year ≤ 5% of such receipts; andaggregate cash payments including amount incurred for expenditure in the relevant P.Y. ≤ 5% of such payments In this case, the percentage of cash receipts of 22lakhs to aggregate receipts of 5.12 crore is 4.30% and the percentage of cash payments of 28lakhs to aggregate payments of 5.50 crore is 5.09%. Since the cash payments made during the year exceed 5% of aggregate payments, M/s Gupta Electronics is required to get its accounts audited under section 44AB and furnish audit report before the specified date, irrespective of the fact that its turnover does not exceed 10crores and its cash receipts do not exceed 5% of total receipts. Further, particulars of each receipt in an amount exceeding the limit specified in section 269ST i.e.,2 lakhs, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, during the previous year, where such receipt is otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account is to be reported in Form 3CD. In this case, M/s PQR Traders made payment of 2.5 lakhs by account payee cheque and the balance of 1lakh in cash in aggregate during the P.Y. 2024-25 to M/s Gupta Electronics. Since the amount received in cash by M/s Gupta Electronics is less than 2lakhs and the transaction is not covered u/s 269ST, there is no need to report this transaction in the tax audit report of M/s Gupta Electronics by his Chartered Accountant.

Topics: Double Taxation Relief, Non-Resident Taxation

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