Presentation on Tax Audit by Taxpert Professionals

1. TAX AUDIT
under section 44AB of Income Tax Act, 1961
CA. ANKIT SHAH
TAXPERT PROFESSIONALS
21 August 2015

2. Every person,-
 carrying on business and his Total Sales/Turnover/Gross receipts,
exceeds Rs. 1 Crore in any previous year ; or
 carrying on profession and his Gross Receipts Rs. 25 lakhs in any
previous year; or
 carrying on the business or profession and is covered under section
44AD/44AE/44BB/44BBB and claimed that his income from the
business is lower than deemed profits and gains computed under
relevant sections.
Applicability of TAX Audit

3. Objective
 To assist Income Tax Department to assess correct income of assessee.
Main Report
• As per Rule 6G, Tax Audit is to be furnished in Form 3CA/ Form 3CB
• Alongwith the particulars required in Form 3CD.
• Annexure I – Financial reporting
o Form 3CA & Form 3CD – In case where the Accounts of the business or
Profession of a person have already been audited under any other law.
(e.g Private/Public Companies under Company Act, 2013.)
o Form 3CB & Form 3CD – In case where the Accounts of the business or
Profession of a person have not been audited under any other law.
(e.g Proprietorship concern.)
Tax Audit

4.  Form 3CA - Report that Statutory Audit was conducted in pursuance of
Statute applicable to assessee.
 Form 3CB – Report that Tax Audit is conducted in accordance with
section 44AB. Express opinion whether financial statements give True or
Fair view:-
o State of affairs of assessee as represented by Balance Sheet
o Profit/Loss or Income. Expenditure as represented by Profit/Loss
Account
 Express opinion whether particulars mentioned in Annexure 3CD &
Annexure I are True & Correct.
Tax Audit Report

5.  The Due Date of filing Tax Audit Report u/s 44AB is 30th September of
the Assessment Year.
 However in case the Assessee is liable for Transfer Pricing Audit under
section 92 of Income Tax Act, 1961 the due date of filing Tax Audit is
extend to 30th November of the Assessment Year.
Note:
• International Transfer Pricing u/s 92E – No limit fixed
• Domestic Transfer Pricing u/s 92F – If Aggregate value of specified
transactions exceeds Rs. 5 Crore (Rs. 20 Crore from A.Y 2016-17 onwards)
As per Notification No. 34 dated 1st May, 2013,
 E-filing of Tax Audit report is mandatory from the A.Y 2013-14 onwards.
Due date & Mode of Filing Tax Audit

6.  The CBDT has notified Income-tax (7th amendment) Rules, 2014 which
substitutes the existing Form No. 3CD with a new form from A.Y 2014-15
onwards.
 The New Form 3CD prescribes:
• New reporting clauses and substitutes some existing clauses with new ones.
• Requires tax auditor to furnish more and detailed information.
• Explicit mention of the observations/qualifications, if any, by the auditors
while issuing the true and correct audit report.
Amendments in Form 3CA/3CB &
Form 3CD

7. Part A (Clause 1 to 6)
 Clause 1 : Name of the assessee
- As per the Certificate of Incorporation / Partnership deed, as the case
may be.
 Clause 2 : Address
- Address of Registered office. However, if the administrative / corporate
office is different from the registered office, the address of the same can also
be given.
 Clause 3 : Permanent Account Number
- As per the PAN card
Form 3CD

8.  Clause 4 : Whether the Assessee is liable to Pay Indirect Tax like
• Excise Duty
• Service Tax
• Sales Tax
• Custom Duty etc.
o If Yes, please furnish the Registration Number or any other Identification
number allotted for the same.
Additional Clause in Part A

9.  Clause 5 : Status
- Status refers to the different class of assessees included in the definition of
‘person’ under section 2(31) namely:
• individual,
• hindu undivided family,
• company,
• firm,
• an association of persons or a body of individuals,
• a local authority, or
• artificial juridical person
o Status should be as per the Return of Income tax. Residential status is not
required.
Clauses in Part A

10.  Clause 6 : Previous year ended
- It is 31st March (relevant financial year).
 Clause 7 : Assessment year
- If the financial year is 31st March 2015, the assessment year is 2015-2016.
 Clause 8 : Indicate the Relevant Clause of Section 44AB under which
the Audit has been conducted
- Select the Category
(a) Business
(b) Profession
(c) Deemed Audit
Clauses in Part A

11.  Clause 11(c) : Nature of documents examined by the auditor
- The auditor is required to specify the nature of documents examined by
him in the course of tax audit.
 Clause 13 & 14 : Change in method of accounting/stock valuation
- A tabular format is specified for reporting of financial impact of changes in
method of accounting and method of stock valuation
 Clause 17 : Transfer of land/building for less than stamp duty value
- Details of land or building transferred by assessee for less than stamp duty
value (under section 43CA or under section 50C) shall be reported.
 Clause 19 : Deduction allowable under Sections 32AC/35AD/
35CCC/35D
- Deductions allowable under sections 32AC, 35AD, 35CCC and 35DDD.
Amendments in Part B (Form 3CD)

12.  Clause 21 : Disallowances
- Old Form 3CD required reporting of inadmissible payments only when they were
debited to Profit and loss account. However, the new Form 3CD requires reporting
of following disallowable payments, even if they are not debited to profit and loss
account
(i) Disallowance for TDS default under Section 40(a)
(ii) Disallowance for cash payments under section 40A(3)
(iii) Disallowance for provision for gratuity under section 40A(7)
(iv) Disallowance under Section 40A(9)
(v) Particulars of any liability of a contingent nature
(vi) Amount of deduction inadmissible under section 14A
(vii) Interest inadmissible under the proviso to section 36(1)(iii)
Amendments in Part B (Form 3CD)

13.  Clause 24 : Deemed income under Section 32AC
- Section 32AC of the Act provides for investment allowance of 15% for
investment in plant and machinery.
- Reporting of deemed income which results from sale or transfer of new
asset, (if asset was acquired and installed by the assessee for the purpose of
claiming deductions under Section 32AC within a period of five years from
the date of its installation.
 Clause 28 : Receipt of unlisted shares
- Reporting of all unlisted shares which were received by assessee either for
inadequate consideration or without consideration in view of section
56(2)(viia).
Amendments in Part B (Form 3CD)

14.  Clause 29 : Issue of shares above fair market value
- Reporting of all transactions of issue of shares where consideration received by
assessee exceeds its fair market value in view of section 56(2)(viib)
 Clause 32(c) : Speculation losses
- Reporting of losses from speculation business as referred to in Section 73.
 Clause 32(d) : Losses from business specified under section 35AD
- Assessee shall furnish details of losses incurred as referred to in Section 73A in
respect of specified businesses mentioned in Section 35AD.
 Clause 33 : Reporting of deductions claimed under Sections 10A and 10AA
- If any deduction has been claimed by assessee under Sections 10A and 10AA.
Amendments in Part B (Form 3CD)

15.  Clause 34 (a) : Compliance with TCS provisions
- Reporting on compliance with TCS provisions along with TDS provisions
 Clause 34(b) : Filing of TDS/TCS statements
- The tax auditor shall report on the compliance by the assessee with the
provision of furnishing of TDS or TCS statement within prescribed time.
 Clause 34(c) : Assessee-in-default
- If assessee is deemed as an assessee-in-default and he is liable to pay
interest under Section 201(1A) or 206C(7), the tax auditor shall furnish the
TAN of assessee, interest payable and interest actually paid.
Amendments in Part B (Form 3CD)

16.  Clause 36 : Dividend Distribution Tax
- Reporting of following reductions as referred to in clause (i) and clause (ii) of
Section 115-O(1A).
(i) Dividend received by domestic company from its subsidiary, and
(ii) The amount of dividend paid to any person for or on behalf of the New
Pension System Trust referred to in Section 10(44).
 Clause 37, 38 & 39 : Audits
(i) Cost audit
(ii) Audit under Central Excise Act
(iii) Special Audit under Service Tax
- Report if any audit as mentioned above is carried out and qualifications (if any)
made by the auditor.
- Attached the copy of Audit Report.
Amendments in Part B (Form 3CD)

17.  Clause 40 : Ratios
- Reporting of ratios of Current financial year as well as preceding
financial year.
 Clause 41 : Demand raised or refund issued
- Reporting of demand raised or refund issued under any tax laws (other
than Income Tax Act, 1961 and Wealth Tax Act, 1957)
- Details of relevant proceedings (if any)
Amendments in Part B (Form 3CD)

18. The Procedure for E-filing can be summarized in the following Four
steps:
 Registration as Tax Professional on Income Tax E filing website
(Incometaxindiaefiling.gov.in)
 Engaging Tax Professional by Assessee
 Uploading of Form 3CB by Tax Professional (CA) and
 Approval of Form 3CB by Assessee
Procedure for E-Filing

19. Non Compliance of the provisions of this act
 Attract Penalty under section 271B of the Income Tax Act
 If any person required to get his audit done under section 44AB fails to
do so before specified date shall be liable to penalty:
• ½ % of Turnover/Gross Receipts subject to
• Maximum of Rs. 1,50,000/-
Penalty for Non Compliance of
Section 44AB

20. THANK YOU
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Contact:
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