Tax Audit

Tax Audit is mandatory under section 44AB of the Income Tax Act, 1961. Every person carrying on business whose total sales or turnover exceeds Rs. 1 Crore and by a person carrying on profession and his gross receipts from profession exceed Rs. 25 Lakhs in the previous year, is liable to get his Tax Audit done by a Chartered Accountant mandatorily

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September month is a Tax audit month. Tax audit is popularly known as 44AB audit, this audit has to be completed on or before due date i.e. 30th Sept. This section creates an obligation on a person carrying on business to get his accounts audited by a chartered accountant in full time practice and to furnish by the specified date, the report in prescribed form of such audit, if the total sales, turnover or gross receipts in business in the relevant previous year exceed or exceeds Rs. 1 Crores. 44AB comprises of 2 forms Form 3CA/CB and Form 3CD. Every 44AB assesssee need to file either Form 3CA or 3CB. But Form 3CD is must Accounts maintained by companies are required to be audited under the Companies Act, 1956 (Now read The companies Act, 2013) Accounts maintained by co-operative societies are also required to be audited under the Co-operative Societies Act, 1912. There is, however, no obligation on other categories of taxpayers to get their accounts audited. A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of Assessing Officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the Assessing Officers thus saved could be utilized for attending to more important investigational aspects

CHECKLIST FOR TAX AUDIT

  •   FORM 3CA
  •   FORM 3CB
  •   FORM 2CD

Frequently Asked Questions

what are the forms 3CA and 3CD?

The report of the tax audit conducted by the chartered accountant is to be furnished in the prescribed form. The form prescribed for audit report in respect of audit conducted under section 44AB? is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD. In case of persons covered under previous FAQ, i.e., who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA and the prescribed particulars are to be reported in Form No. 3CD

what is the penalty for not getting the accounts audited?

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts: (a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years. (b) Rs. 1,50,000. However, according to section 273B?, no penalty shall be imposed if reasonable cause for such failure is proved.

what is tax audit?

The dictionary meaning of the term “audit” is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law. Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law.

what is the objective of tax audit?

One of the objectives of tax audit is to ascertain/derive/report the requirements of Form Nos. 3CA/3CB and 3CD. Apart from reporting requirements of Form Nos. 3CA/3CB and 3CD, a proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and considerably save the time of Assessing Officers in carrying out routine verifications.

What is the due date by which tax payer gets the accounts audited?

A person covered by section 44AB should get his accounts audited and should obtain the audit report on or before the due date of filing of the return of income, i.e., on or before 30th September (*) of the relevant assessment year, e.g., Tax audit report for the financial year 2013-14 corresponding to the assessment year 2014-15 should be obtained on or before 30th September, 2014. (*) In case of a taxpayer who is required to furnish a report in Form No. 3CEB under section 92? in respect of any international transaction or specified domestic transaction, the due date of filing the return of income is 30th November of the relevant assessment year. However, due date for filing of Income tax

What are the documents to be attached to Tax Audit Report

B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

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