Tuesday, 16 March 2010

Can A.O Ask For Accounts From Salaried Employees During Scrutiny ?

First of all, it should be seen who is required to maintain accounts under Income Tax Act ?

Section 44AA along with Rule 6F states
Legal,Medical,Architectural,Engineering,Accountancy,Technical Consultancy,Interior Decoration,Authrised Representative before Tribunal ,Film Artist,Company Secretary and Information Technology professionals having gross receipts of Rs 1,50,000 per annum in any one of the three years immediately preceding the previous year.
Anyone carrying business or profession , other than 1 above , if total income from business or profession exceeds Rs 1,20,000 or total sales /gross receipt is above Rs 10 Lacs in any one of the three years immediately preceding the previous year.
Those persons who avail of Estimated Income Scheme under Section 44AD to 44AE are also required to maintain books of accounts if the profit is shown less than the stipulated under the relevant provision.
A salaried individual , therefore , does not fall in any of the category , is not required to maintain any books of accounts.

Can A.O ask such salaried individual for accounts ?

There is a provision under which A.O can ask for balance sheet from a person who is not required to maintain books of accounts . But this power can not be utilised by the A.O independently . He has to first take the approval of his Joint/Addl. Commissioner who is the Range head . Section 142(1)(ii)&(iii) is as under

142. (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired] a notice requiring him, on a date to be therein specified,

(ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or

(iii] to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require :

Provided that

(a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts ;

(b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

Thus , provision u/s 142(1) empowers A.O to ask for balance sheet and accounts or documents from an assessee whose case is scrutinized , but it is with the approval of JT.CIT .

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