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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Direct Tax Laws & International Taxation

Case: Deccan Logistics Ltd (turnover Rs 150 crore) is audited by its statutory auditor, who is also appointed tax auditor. The company's cash receipts and payments are all through banking channels, and digital transactions exceed 95% of receipts and payments. It has no other issues. Which statement correctly describes the tax audit requirement for a business assessee under the Income-tax Act?

Tax audit is mandatory because turnover of Rs 150 crore exceeds even the enhanced Rs 10 crore limit available to businesses with minimal cash transactions. Digital dealings only raise the threshold from Rs 1 crore to Rs 10 crore, not beyond.

  1. ATax audit is required as turnover exceeds Rs 10 crore, since the higher limit applies only when cash receipts and payments do not exceed 5%, and the higher limit is Rs 10 croreCorrect
  2. BTax audit is not required because the turnover limit is Rs 200 crore for digital businesses
  3. CTax audit is required only if total income exceeds the basic exemption limit
  4. DTax audit is not required for companies filing returns electronically

Explanation

The tax audit threshold for a business is Rs 1 crore turnover, raised to Rs 10 crore where cash receipts and payments each do not exceed 5%. Turnover of Rs 150 crore exceeds even the higher limit, so the audit is required. No Rs 200 crore limit exists for this purpose.

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