Section 44AB of Income Tax Act: Applicability, Penalty and Due Dates

In India, there are various laws that are issued in order to govern various types of audits such as a stock audit, statutory audit, cost audit etc. The main purpose behind the conduction of these audits is to make sure that the books of accounts of an organisation or a person are free from any sort of errors that are mentioned in a particular law of a particular field. In the same way, in the field of income, we have a tax audit which is conducted under Section 44AB of Income Tax Act.

The books of accounts that are maintained by various taxpayers are verified using a tax audit under section 44AB of Income tax act. This tax audit needs to be carried out by a certified Chartered Accountant. In this blog, we will discuss the various concepts of tax audit like tax audit limit, its applicability, its penalty and the due dates related to it under Section 44AB of income tax act.

Tax Audit Applicability under Section 44AB of Income Tax Act

All the provisions related to a tax audit have been mentioned under Section 44AB of Income Tax Act. As per these provisions, a tax audit is required to be done by the people listed below in order to maintain proper regulation of income tax laws:

• Business: If we talk about businesses, then any taxpayer whose gross receipts or total sales turnover in the business is more than Rs. 1 Crore in any of the past years. Under Section 44AB of Income Tax Act, “Business” is nothing but an economic activity that is done in order to earn profits. Business has been defined as any of the economic activity like trade or commerce or manufacturing activity or any adventure or concern towards trade commerce and manufacture.
• Profession: If we talk about any sort of tax audit that needs to be done for a profession or a professional, then that tax audit under Section 44AB of Income Tax Act will be needed if the gross receipts in the profession turn out to be more than Rs. 50 lakh in a financial year. Those who can be considered a professional or a profession are listed below according to rule 6F of the Income Tax Rules,1962:
  • An Architect
  • An Accountant
  • An Authorised Representative
  • An Engineer
  • Any Film Artist like Actor, Director, Editor, Cameraman, and many more
  • An interior Decorator
  • A Legal Professional either a lawyer or an Advocate
  • A Medical Professional either a doctor or nurse or Paramedical Staff or Physiotherapist
  • A Technical Consultant

Due Date of filing a Tax Audit Report under Section 44AB of Income Tax Act

Under Section 44AB of Income Tax Act, the due date for filing and completing a tax audit report is 30th September of the year in which the tax audit is going to be done. This means that in order to obtain a tax audit under Section 44AB of Income Tax Act, a taxpayer needs to file the income tax return either on 30th September or before 30 th September along with his tax audit report. If the assessee is also chargeable for transfer pricing audit, then the due date will be 30th November of the assessment year for filing a tax audit under Section 44AB of Income Tax Act.

Penalty for not complying to Tax Audit

If someone has to necessarily get a tax audit done but fails to do so due to some circumstances, then he may have to face the following penalties which will be levied on him under Section 44AB of Income Tax Act:

• 5% of the total sales or turnover or gross receipts
• Rs. 1,50,000

But if the cause for the failure in the conduction of tax audit is justified and reasonable, then no penalty will be levied on the taxpayer under section 271B.

The causes that may be accepted by the courts are listed below:

• Any sort of Natural calamity
• Delay in the Tax Audit due to the resignation of the Tax Auditor
• Any sort of labour problems like strikes or lock-outs for an extended time period
• Loss of Accounts because of some uncontrollable situations
• Any sort of Physical inability or death of the partner who is in-charge of the accounts