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CS Executive · Tax Laws and Practice · Procedural Compliance under Income Tax

Mr. Sameer Joshi, a wholesale dealer, has turnover of Rs 6 crore in the tax year. His total receipts are Rs 6.2 crore, of which Rs 40 lakh were received in cash, and he made total payments of Rs 5 crore, of which Rs 20 lakh were paid in cash. All other amounts were by account payee cheque or bank transfer. Applying section 63 of the Income-tax Act, 2025, is a tax audit required?

A tax audit is required. Cash receipts of Rs 40 lakh are about 6.45% of Rs 6.2 crore, exceeding 5%, so the ten crore limit is unavailable. The one crore limit applies and his turnover of Rs 6 crore exceeds it.

  1. ANo, because cash payments are within 5% and turnover is below ten crore rupees
  2. BNo, because turnover is below ten crore rupees regardless of cash receipts
  3. CYes, because cash receipts exceed 5% of total receipts, so the one crore rupee limit appliesCorrect
  4. DYes, because cash payments exceed 5% of total payments

Explanation

Receipts in cash are 40/620 = about 6.45%, which exceeds 5%. Payments in cash are 20/500 = 4%, within 5%. Both conditions must be met for the ten crore limit, so the one crore limit applies and turnover of Rs 6 crore exceeds it. The option on cash payments is wrong because 4% is within the limit.

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