Posted on : - Mar 27, 2018 |
Question |
What is tax audit? |
Answer |
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. The audit conducted by the chartered
accountant of the accounts of the taxpayer in pursuance of the requirement of
section 44AB is called tax audit.
The chartered accountant conducting the tax audit is required to
give his findings, observation, etc., in the form of audit report. The report
of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB
and 3CD. |
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Posted on : - Mar 27, 2018 |
Question |
What is the objective of tax audit? |
Answer |
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 truly 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, like checking correctness of totals and verifying
whether purchases and sales are properly vouched for or not. The time of the
Assessing Officers saved could be utilised for attending to more important and
investigational aspects of a case. |
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Posted on : - Mar 27, 2018 |
Question |
As per section 44AB, who is compulsorily required to get his accounts audited, i.e. who is covered by tax audit? |
Answer |
As per section 44AB,
following persons are compulsorily required to get their accounts audited:
• A person carrying on
business, if his total sales, turnover or gross receipts (as the case may be)
in business for the year exceed or exceeds Rs. 1 crore. This provision is not
applicable to the person, who opts for presumptive taxation scheme under
section 44AD
and his total sales or turnover does not excceeds Rs. 2 crores.
• A person carrying on
profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
• A person who is
eligible to opt for the presumptive taxation scheme of section 44AD but claims the profits or gains
for such business to be lower than the profits and gains computed as per the
presumptive taxation scheme of section 44AD and his income exceeds the amount
which is not chargeable to tax.
• If an eligible
assessee opts out of the presumptive taxation scheme, after specified period,
he cannot choose to revert back to the presumptive taxation scheme for a period
of five assessment years thereafter.
• A person who is
eligible to opt for the presumptive taxation scheme of section 44ADA
but he claims the profits or gains for such profession to be lower
than the profit and gains computed as per the presumptive taxation scheme and
his income exceeds the amount which is not chargeable to tax.
• A person who is
eligible to opt for the presumptive taxation scheme of sections 44AE but he claims the profits or gains
for such business to be lower than the profits and gains computed as per the
presumptive taxation scheme of sections 44AE.
• A person who is
eligible to opt for the taxation scheme prescribed under section 44BB or section 44BBB but he claims the profits or gains for such
business to be lower than the profits and gains computed as per the taxation
scheme of these sections.
Section 44BB is
applicable to non-resident taxpayers engaged in the business of providing
services or facilities in connection with, or supplying plant and machinery on
hire basis to be used in exploration of mineral oils. section 44BBB is applicable to
foreign companies engaged in the business of civil construction or erection of
plant or machinery or testing or commissioning thereof, in connection with a
turnkey power project. |
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Posted on : - Mar 27, 2018 |
Question |
If a person is required by or under any other law to get his accounts audited, then is it compulsory for him to once again get his accounts audited to comply with the requirement of Section 44AB? |
Answer |
Persons like company or co-operative society are
required to get their accounts audited under their respective law. Section 44AB provides that,
if a person is required by or under any other law to get his accounts audited,
then he need not again get his accounts audited to comply with the requirement
of section 44AB. Is such a case, it shall be sufficient if such person gets the
accounts of such business or profession audited under such law and obtains the
report of the audit as required under such other law and also a report by the
chartered accountant in the form prescribed under section 44AB, i.e., Form No.
3CA and Form 3CD (refer to next FAQ for relevance of these forms). |
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Posted on : - Mar 27, 2018 |
Question |
What are Form Nos. 3CA/CB and 3CD? |
Answer |
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/3CB and the prescribed particulars are to be
reported in Form No. 3CD. |
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Posted on : - Mar 27, 2018 |
Question |
What are Form Nos. 3CA/CB and 3CD? |
Answer |
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/3CB and the prescribed particulars are to be
reported in Form No. 3CD. |
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Posted on : - Mar 27, 2018 |
Question |
What is the due date by which a taxpayer should get his accounts audited? |
Answer |
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 2017-18 corresponding to the assessment year 2018-19 should
be obtained on or before 30th September, 2018.
(*) 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.
The
tax audit report is to be electronically filed by the chartered accountant to
the Income-tax Department. After filing of report by the chartered accountant,
the taxpayer has to approve the report from his e-fling account with Income-tax
Department. |
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Posted on : - Mar 27, 2018 |
Question |
What is the penalty for not getting the accounts audited as required by section 44AB? |
Answer |
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. |
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