Filing of Audit Report under sections 44AD(6), 44AE(7) and 44AF(5) of the Income-tax Act, 1961, for the assessment year 1998-99
1. Sections 44AD, 44AE and 44AF of the Income-tax Act, 1961, provide for estimating the income under the head ‘Profits and gains of business or profession’ in the cases of assessees engaged in the business of (i) civil construction, (ii) plying, hiring or leasing goods carriages, and (iii) retail businesses; provided the turnover or the number of vehicle, as the case may be, is below a specified figure.
2. Up to the assessment year 1997-98, under the provisions of the Income-tax Act, the above assessees could return income lower than the estimated income subject to compulsory scrutiny under section 143(3) of the Income-tax Act, 1961.
3. For the assessment year 1998-99 and subsequent years, sub-section (6) of section 44AD, sub-section (7) of section 44AE and sub-section (5) of section 44AF provide that in case of a returned income lower than the income estimated under the provisions of corresponding section, the assessees must keep and maintain such books of account or other documents as required under sub-section (2) of section 44AA and get their accounts audited and furnish a report of such audit as required under section 44AB. The requirement of section 44AB is that the audit report must be audited by an accountant before the specified date and the same must also be furnished by that date in a prescribed form.
4. Sub-section (6) of section 44AD, sub-section (7) of section 44AE and sub-section (5) of section 44AF were inserted with retrospective effect from
1-4-1998 by the Finance Act, 1999. Accordingly, the assessees were not in position to file audit report for the assessment year 1998-99 before the specified date; as on that date these sub-sections did not exist in the statute. Hence, the default of the assessees in complying with the requirement of filing audit report before the specified date for the assessment year 1998-99 was due to circumstances beyond the control of such assessees. To remove the genuine hardship in all such cases, the Board hereby directs that for the assessment year 1998-99, the audit report, where called for under the provisions of sections 44AD(6), 44AE(7) and 44AF(5), if not filed by the specified date as stipulated under section 44AB, could be filed anytime before the completion of assessment and in all such cases, the provisions of sections 44AD(6), 44AE(7) and 44AF(5) will be deemed to have been complied with.
Circular : No. 3/2001, dated 9-2-2001.