Section 44AB — Audit of Accounts of Certain Persons Carrying on Business or Profession

Section 44AB of the Income-tax Act, 1961 mandates the audit of accounts for certain categories of taxpayers to ensure the accuracy and reliability of financial statements. This section applies to individuals and entities engaged in business or profession whose total sales, turnover, or gross receipts exceed specified thresholds. For businesses, the threshold is Rs. 1 crore, while for professionals, it is Rs. 50 lakh. The audit must be conducted by a chartered accountant, and the audit report must be furnished in the prescribed form by the due date of filing the income tax return. This provision is significant as it ensures transparency and compliance with tax laws, reducing the scope for tax evasion. The statutory test involves verifying the correctness of the books of accounts and ensuring compliance with accounting standards. The burden of proof lies with the taxpayer to demonstrate adherence to these requirements. In practice, this section plays a crucial role in maintaining the integrity of financial reporting and tax compliance.

Common Litigation Flashpoints

1. Dispute over applicability of audit thresholds
2. Challenges in meeting audit deadlines
3. Discrepancies in reported turnover or receipts
4. Non-compliance with prescribed audit formats

Judgments on Section 44AB — Audit of Accounts of Certain Persons Carrying on Business or Profession

• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• PR. COMMISSIONER OF INCOME TAX CENTRAL-2 NEW DELHI vs MEETA GUTGUTIA PROP. M/S FERNS 'N' PETALS — HC,
  Completed assessments can be interfered with by the AO under Section 153A only on the basis of some incriminating material unearthed during the course of search.
• Price Waterhouse Coopers Pvt. Ltd. vs Commissioner of Income Tax, Kolkata-I — SC, 2012
  A bona fide and inadvertent error does not amount to furnishing inaccurate particulars or concealment of income.