Tax Audit under section 44ABof Income Tax ACt,1961


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This presentation gives the complete knowledge of Tax Audit in just 15 slides. Hope it will be helpful to all!! Thank You !!


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Meaning of TAX AUDIT::

Meaning of TAX AUDIT: Tax audit means an official examination and verification of financial accounts and records. It is required to be performed only by a Chartered A ccountant u/s 44AB of the Income Tax Act,1961.


TAX AUDIT- HISTORY 1984-Tax Audit provisions introduced Memorandum explaining the provisions of the Finance Bill,1984: “the compulsory audit is intended to ensure proper maintenance of books of accounts& other records, in order to reflect the true income of the tax payer & to facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities. This would also save the time of the Assessing Officers considerably in carrying out the verification”

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1984- Tax Audit provisions introduced 1997- Tax Audit provisions applicable to 44AD 1999- All forms and rule 6G revised. Form 3CC and 3CE done away with 2003- Tax Audit provisions applicable to 44BB and 44BBB 2004- All forms revised 2006- Form 3CD revised 2008- Requirement to furnish report with return done away with 2011- Cases of fake membership numbers 2013- E-filing of tax audit reports made mandatory

Who is required to get Tax Audit done ?:

Who is required to get Tax Audit done ? An assessee is liable to get his tax audit done mandatorily, if in the previous year, The person is carrying on the business & his total sales/Turnover exceeds Rs.1crore(limit increased w.e.f 1 st April 2012) or The person is carrying on profession and his gross receipts exceeds rs.25lkhs (limit increased w.e.f 1 st April 2012), The person is carrying on business or profession and is covered under the provisions of sec 44AD, 44AE,44AF,44BB or 44BBB and claims that his income from the said business is lower than the deemed profits and gains computed under the relevant section.

Due Date:

Due Date The due date of filing the Tax Audit Report under sec 44AB is 30 th sep of the assessment year. However, for A.Y 2014-15 the due date for filing Tax Audit Report has been extended from 30 th September,2014 to 30 th November, 2014.

Tax audit e-filing:

Tax audit e-filing As per notification no.34 dated 1 st may 2013, e-filing of tax audit report is now mandatory from the assessment year 2013.-14 onwards. As per rule 6G, tax audit report is to be furnished in Form 3CA & Form 3CB and the particulars required to be furnished along with these tax reports should be in Form 3CD.

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Form 3CA & Form 3CD – These forms are used in case where the accounts of the business or profession of a person have already been audited under any other law. Form 3CB & Form 3CD- these forms are used in case where the accounts of the business or profession have not been audited earlier.

Computation of Total Turnover for the purpose of Tax Audit:

Computation of Total Turnover for the purpose of Tax Audit Where a person is carrying on 2 Business/2 Professions – the total turnover of both the businesses shall be clubbed together and tax audit shall be liable to be conducted if the Total Turnover exceeds Rs. 1 Crore / Rs. 25 Lakhs as the case may be. Where a person is carrying on business as well as profession and the Turnover of the business is Rs. 1.2 Crore and the Gross Receipts of the profession is Rs 22 Lakhs . In such a case, ICAI has clarified through a Guidance Note that the Assessee is liable to get the Tax Audit done of both the business as well as profession because the Gross Receipts from the business exceed the limit of Rs. 1 Crore . However, if his Total Turnover was Rs. 95 Lakhs and Gross Receipts from business was Rs. 22 Lakhs , he would not be required to get his Tax Audit done .

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In case where a person has a total turnover of Rs. 98 Lakhs and has sold a Car for Rs. 8 Lakhs . In such a case, the total amount on adding up becomes Rs. 1.06 Lakhs i.e. above Rs. 1 Crore . Confusion arose whether the person is liable to get an audit done in this case and ICAI has clarified that the turnover will not include any amount on the sale of the fixed asset as it was held by the person for business use and not for the purpose of sale.

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ICAI has further clarified that the amount received from the following items shall not be included while computing the- Total Sales/Total Turnover/ Gross Receipts:- Sale Proceeds of Fixed Assets Sale Proceeds of Assets held as Investments Rental Income Income by way of Interest unless assessable as Business Income Any expense which is reimbursable to the Agent by the Client

Penalty for Non Compliance of Section 44AB:

Penalty for Non Compliance of Section 44AB Non Compliance of the provisions of this act shall 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 the specified date shall be liable for penalty of ½% of the turnover/gross receipts subject to a maximum penalty of Rs. 1,50,000 However, Section 273B states that no penalty shall be levied under section 271B if there is a reasonable cause for such failure.

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Some instances which have been accepted by the Tribunals/Courts as “Reasonable Cause” are:- Resignation of the Tax Auditor and Consequent Delay Death or physical inability of the partner in charge of the Accounts Labour Problems such as strikes, lock-outs for a long period Loss of Accounts because of Fire/Theft etc. beyond the control of the Assessee Natural Calamities

Revision of Tax Audit Report:

Revision of Tax Audit Report Tax Audit Report e-filed cannot be revised under normal circumstances. However, in case the Accounts are revised in the following circumstances, the Audit Report e-filed can also be revised :- Revision of Accounts of a Company after its adoption in the Annual General Meeting Change in Law with Retrospective effect Change in Interpretation of Law (E.g.: CBDT Circular, Notifications, Judgments etc.) In case the Tax Audit report e-filed is revised, the Auditor shall state that it’s a Revised Report and shall also state the reasons for the same.

Limitation on CA’s for the number of Tax Audits / Ceiling limit:

Limitation on CA’s for the number of Tax Audits / Ceiling limit The Maximum no. of Tax Audit Assignments under Section 44AB which can be taken by a CA has been increased from 45 to 60 by the ICAI Council in its 331st meeting held from 10th to 12th Feb 2014 . Thus if a firm has 4 partners, the maximum no. of Tax Audits that can be taken by a firm in an assessment year would be 60*4=240 . If the Firm undertakes all the 240 Tax Audit Assignments, the partners would not be in a position to undertake any tax audit assignment in their personal capacity. Now that tax audit efiling is mandatory, the chartered accountant conducting the tax audit would also be required to prepare the tax audit report in electronic format.

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