Taxation

All you need to know about Tax Audit Report

Tax Audit Report

As per income tax rules, certain taxpayers should get their accounts audited under Section 44B of the Income Tax Act. The primary objective of a tax audit is to ensure that the books of accounts and other records is properly maintained and that the income of the taxpayer and claim for deductions have been made correctly. The Income Tax Act provides that the auditor needs to furnish the audit report in a specified audit form along with some particulars.

Tax Audit- Meaning

Tax audit involves cross examination of the books of accounts of the taxpayer. This is done by a Chartered Accountant under the Income Tax Act 1961[1]. Section 44 AB lays down the condition under which Tax Audit becomes imperative for taxpayers. As said earlier, tax audit is done to verify the accuracy of the financial records.

Tax Audit Report- Meaning

The person who performs a tax audit should furnish the findings in a report through specific audit forms specified by the income tax department. Section 44AB provides for two forms, namely- Form 3CA and 3CB. Apart from this, the auditor also needs to furnish Form 3CD. 

Form 3CA and its applicability

In case of a taxpayer carrying on a business or profession and who is required under any other law i.e., law other than the income tax law, to get his accounts audited needs to file audit report in Form 3CA.

Components of Form 3CA

Some of its major components are as follows:

  • Assessee details such as name, address and PAN;
  • Date of the audit report;
  • Annexure details;
  • A declaration by the auditor that all details submitted and the annexure are accurate;
  •  Auditor’s name, address, membership number, FRN number etc.
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Form 3CB and its applicability

In case of a taxpayer carrying on a business or profession but is not mandated to get his account audited under any other law, shall file such audit report in form 3CB.

Components of Form 3CB

Some of its major components are as follows:

  • Assessee details such as name, address and PAN;
  • Date of the audit report;
  • Annexure details;
  • A declaration providing that all information required for the purpose of audit has been obtained;
  • Declaration by the auditor that all details submitted and the annexure are accurate;
  • Auditor’s name, address, membership number, FRN number etc.;
  • Reporting of the detailed observations, comments, discrepancies, if any;
  • The form also includes the auditor’s declaration that books of accounts are being maintained at the branch and head offices.

 Form 3CD and its applicability

Form 3CD is a statement of particulars which needs to be furnished as per Rule 6G and Section 44AB along with Form 3CA/CB as may be applicable. Form 3CD is a 41-points detailed statement of particulars. It contains disclosures related to loans, deductions etc.

Tax Audit Report- Due date

Taxpayers need to obtain audit report in Form 3CA on or prior to September 30 of the particular assessment year. When an auditor sends this audit report to the taxpayer, the taxpayer should check and approve before it is submitted with the tax department.

How to furnish tax audit report to the income tax department?

The audit report may be filed electronically by the CA to the tax department. Such report can be uploaded directly to the official website of the income tax department. However, in order to furnish the report, an assessee needs to authorise and appoint the CA from his e-filing account. The date on which the report is approved by the taxpayer such date will be considered as the date of filing of the tax audit report.

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Can a tax audit report be revised?

Once filed, a tax audit report can be revised on the following grounds:

  • Revision of accounts of a company after adopting it in the AGM;
  • Change of law;
  • Change in interpretation.

The CBDT has said that a person can revise the report by getting a revised report of audit from a CA and should furnish it before the end of the relevant AY, in case there is a payment by such person after furnishing the original report which mandates a recalculation of disallowance under Section 40/Section 43B.

Penalty for non-filing of tax audit report

An assessing officer has the authority to penalise a taxpayer under Section 271B if the taxpayer hasn’t got his accounts audited or hasn’t filed the tax audit report. The minimum penalty here can be 0.5% of the total sales, turnover or gross receipts and it may go up to 1.5 lakh rupees. However, the taxpayer will be provided with due opportunity of being heard before a penalty is imposed, and if the taxpayer provides reasonable cause for such failure, then no penalty will be imposed.

Among the reasonable cause, some of them are as follows:

  • Delays caused due to resignation of the tax auditor;
  • Delay due to the death or physical inability of the partner responsible for accounts;
  • Delay caused due to reasons not under assessee’s control.

Conclusion

Hence Tax Audit report should be furnished within the due time in order to avoid paying hefty penalties. Recently the tax authorities had extended the due date for furnishing tax audit report.

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