Tax audit provisions

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Non-corporate assessees are required to obtain a tax audit report from a chartered accountant in certain cases. The limit of Rs 40 lakh in section 44-AB of the Income-tax Act, 1961, applies in the case of every person carrying on a business and whose total receipts or turnover from such business activity exceeds this figure.

The three expressions used by the statute, namely, ‘total sales’, ‘turnover’ or ‘gross receipts’ though not defined under the Act, in the ordinary sense, refer to the volume of the business to which it relates.

The business, which is carried on by the assessee has to be taken in totality. The ‘sales’, ‘turnover’, and ‘gross receipts’ are not words of art used in relation to any individual transaction independently but have been used as ‘sales’, ‘turnover’ or ‘gross receipts’. The expression ‘total’ qualifies all the other three expressions, namely, ‘sales’, ‘turnover’, and ‘gross receipts’. Total sales indicate the aggregate sale price of commodities carried out by the assessee as a trading business.

Obviously, it would not include such transfer of immovable or movable property by way of investment. Similarly, where the assessee is not merely selling movable commodities, but relating to other trading activities, for example, where the assessee is a land developer and he is engaged in the business of acquiring land, developing it, and selling houses or purchasing or is engaged in leasing business or in the stock market, the expression ‘turnover’ denotes receipts from such activities.

There may be a third or residuary category, which may not be termed a trading activity, though the assessee is carrying on a business activity like job work for others, without him being the manufacturer and selling such manufactured goods. Receipts by a person from business does indicate that it refers to revenue receipts only and do not include capital receipts and certainly not the receipts, which are not relatable to business and may fall under the expression income from sources other than profits or gains from business, profession or vocation.