Menu

The Income Tax Act, Section 44AB, mandates tax audits for two categories of taxpayers:

Businesses

A tax audit becomes compulsory if a business’s gross turnover or Receipts exceeds Rs. 1 crore in the preceding financial year or Rs 10 crores if cashTransactions do not exceed 5% of Total Transactions

Professionals

 Professionals whose gross receipts surpass Rs. 50 lakh in the preceding financial year are liable for a tax audit.

Tax payer opted Presumptive taxation under 44AD/AE/ADA,but profits declared lower than prescribed rate.

Forms Required for Tax Audit

  • FORM 3CA : For Business entities who are required to get their accounts Audited under any other law.
  • FORM 3CB : For Business entities who are not required to get their accounts Audited under any other law.
  • FORM 3CD : Applicable for all businesses who are subjected to tax audit.

How and when tax audit reports shall be furnished?

  • The tax auditor shall furnish a tax audit report online by using his login details in the capacity of ‘Chartered Accountant’. Taxpayers shall also add CA details in their login portal.
  • Once the tax auditor uploads the audit report, the same should either be accepted/rejected by the taxpayer in their login portal. If rejected for any reason, all the procedures need to be followed again till the audit report is accepted by the taxpayer.
  • You must file the tax audit report on or before the due date of filing the return of income. It is 31st October of the subsequent year in case the taxpayer has entered into an international transaction and 30th September of the subsequent year for other taxpayers. The subsequent year itself is the assessment year.

What are the objectives of the Income-tax Audit?

  • The major objectives for conducting tax audit are: Proper maintenance of books of the account without fraud activities and certification of the same by an auditor.
  • For reporting discrepancies noted by proper examination of the books of accounts.
  • For reporting various information such as tax depreciation, compliance with the provision of income tax law, and so on.
  • Computation of tax and deductions becomes easy with auditing.
  • The major role is to verify the information filed in the income tax return regarding income, tax, and deductions by the taxpayer.

Penalty of non-filing or delay in filing tax audit report

If any taxpayer is required to get the tax audit done but fails to do so, the least of the following may be levied as a penalty:

0.5% of the total sales, turnover or gross receipts
or
Rs.1,50,000

  • However, if there is a reasonable cause of such failure, no penalty shall be levied under section 271B.
  • So far, the reasonable causes that are accepted by Tribunals/Courts are:
  • Natural Calamities
  • Resignation of the Tax Auditor and Consequent Delay
  • Labour problems such as strikes, lock-outs for an extended period
  • Loss of Accounts because of situations beyond the control of the Assesses
  • Physical inability or death of the partner in charge of the accounts

For More Information Contact Us

Contact Us