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Tax Audit Report (TAR) Certain exceptions and increased limits according to number of partners and considering nature of activity are desirable

Tax Audit Report (TAR) Certain exceptions and increased limits according to number of partners and considering nature of activity are desirable - Income Tax - Direct Tax Code - DTC - By: - CA DEV KUMAR KOTHARI - Dated:- 13-4-2016 - Maintenance of accounts and Tax Audit Report (TAR): Provisions relating to maintenance of accounts and obtaining of TAR are old provisions and we find that very low limits fixed long ago have remain in force for long time. Even revisions in limits was meagre and did n .....

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elling goods in small quantities with at higher margin and another trader supplying large quantity of goods to industries at very low margins. Many businesses have reporting system through stock exchanges, and reporting is on real time basis. The volumes in such business is huge and that too on click of mouse. Therefore, applying same Limits to such business is not proper, In fact such business should be exempt from TAR. Therefore, there must be consideration of relevant aspects and different li .....

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ng books of account and obtaining TAR. Furthermore limit should be linked to inflation and should be revised to nearest lakh of rupees every year based on rate of inflation. Purpose of provision for maintaining accounts: Purpose of provision directing maintenance of books of account is that tax department is able to get such information and records as are considered necessary for ascertaining income of assessee carrying a business or profession( except cases in which income is disclosed on presu .....

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d and verified by an Accountant. This is also to enable AO to compute total income of assessee as per law. TAR make work of AO easy. Business turnover or gross receipts: Basis for applicability of TAR is turnover or gross receipts in business carried by assessee. There is no difference between different kinds of businesses, though nature of turnover differ very widely. In case of professions also, the basis for applicability of TAR is gross receipts from profession, and there is no difference be .....

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ss other than banking. In case of firms carrying profession, governed by Special Act. there is now no limit on maximum number of partners. In this regard we can refer to: http://www.icai.org/new_post.html?post_id=10927 The Council of the Institute has clarified that the earlier restriction of maximum of 20 partners permitted for firms under section 11 of the Companies act, 1956 is no more applicable to the firms as Section 464 of the Companies Act, 2013 has been notified w.e.f 01.04.2014 wherein .....

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der the Limited Liability Partnership Act. There must be some consideration of number of partners a firm have for requirement of TAR. A firm having two partners and another having 100 partners should not be considered equally for the purpose of TAR and also taxation. With changes in time, provisions relating to imposition of Income-tax and related procedures must also be changed. High Volume low margin business: Some business have very high volumes but very low margins. The volume of gross recei .....

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sirable that such business should be exempted from TAR. For example, in case of transactions carried through stock exchanges and their members, particularly when transactions are carried out electronically, each transaction is reported on the stock exchange. If a person carry transactions through more than one member of exchange, transactions done through each member is recorded by stock exchange and is reported on daily basis. Reports are complied with annually also and Income-tax Department al .....

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n accordance with the provisions of this Act. (2) Every person carrying on business or profession not being a profession referred to in sub-section (1)] shall,- (i) if his income from business or profession exceeds [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds [ten lakh] rupees in any one of the three years immediately preceding the previous year; or (ii) where the business or profession is newly .....

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laimed 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, during such [previous year; or],] [(iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee 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 durin .....

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o be contained therein and the form and the manner in which and the place at which they shall be kept and maintained. (4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.] 1[Audit of accounts of certain persons carrying on business or profession. 44AB. Every person,- (a) carrying on business shall, if his tot .....

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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 17[previous year; or],] 18[(d) 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 cha .....

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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 11[***], 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 12[furnishes by] that date the report of the audit as required under su .....

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