1. The CBDT has vide notification No. 33/2014 dt. 27/07/2014 notified revised forms for tax audit report and details to be furnished. This is just two months prior to completion of tax audits by 30th September, 2014. Hopefully, the ICAI’s views would have been invited before making changes in the forms, as has been the case earlier when the forms had been formulated or revised.
2. Simultaneously, the old forms are withdrawn with immediate effect, without any prior intimation or any sort whatsoever. Even the utility for filing the forms electronically was disabled from the date of notification of the revised forms.
3. While the right of CBDT to revise the forms cannot be disputed the timing and manner in which the same is done completely oblivious of the consultative approach that is promised to be adopted under the new regime and there was total lack of transparency in the whole process whatsoever. There is nothing in the forms that required the CBDT to really wait for 4 months from end of the previous year to notify the forms. It also seems that till date, i.e. even after 11 days the new utility is not uploaded and from the past experience one can be virtually sure that the schema will not be available immediately even when the utility is uploaded. Also, one fails to understand what will be the size of data that will be permitted to be uploaded given the limits set for uploading the data.
4. The details that have been asked for in the revised forms are also not going to significantly boost the revenues for the year under consideration, as most of the assessees would have planned their affairs according to the prevalent legal position in any case.
5. In particular the following issues also need to be taken into consideration and date of implementation of the revised forms should be deferred by one year to AY 2015-16, viz.―
(a) In many large cases the terms of engagement are finalised even before the year end.
(b) In case of assessees with large network of branches, the branch auditors would have already completed audit long time back and the consolidation process would be underway in different stages.
(c) The details on TDS and many other matters like section 56(2)(viia)(viib) etc. asked for, are either of humungous volume or require legal interpretations. ICAI guidance in the matter will be very much necessary before any view could be taken in these matters – (i) for conduct of audit and (ii) for reporting purposes.
6. Also, clause wise some of the issues on which clarity will be required are as under―
a. Form 3CB does not provide any option for change if the auditor has to give an adverse of disclaimer report. It should be brought in line with the SA 700 and other standards in this regards. Representation is needed for change of the form.
b. What is the significance of the word “liable” in clause (4) of Form 3CD? Is the auditor also to take a view in the matter? If there are disagreements with the assessee, how should the auditor report on same? What type of representation will be required to be obtained?
c. Clause 11(b) will pose great challenge if an assessee has no. of branches and at all places books are maintained and only consolidation takes place periodically at HO. What will be auditors duty in this regards? What are the checks to be applied? How should reporting be done by the auditor? Whether mere a place from where only data entry is made will be considered to be place where accounts are maintained or the place where server is located will be considered to be place where accounts are maintained? In case server is not located in assessee’s premises what address should be mentioned?
d. In clause ‘17’ how would auditor report u/s. 43CA having regards to the method of accounting that is followed. Guidance will also be needed for reporting on sale of distressed assets sale by banks and financial institution where section 43CA will be attracted.
e. For items falling in clause ‘19’ detailed guidance for checks to be performed and documentation to be maintained will be required to be given to members.
f. Clauses ‘28’ and ‘29’ – guidance needs to be provided on nature of auditors’ duty for obtaining audit evidence specifically in light of the rules under the Income-tax Rules, representations required to be obtained and manner of reporting, especially when there are disagreements with the assessee?
g. Detailed guidance need on reporting under clause 34 as virtually it tantamount to carrying out assessment of TDS compliance by an assessee.
h. In respect of clause ‘41’ members shall require guidance about the documents and evidence to be obtained. It will also be necessary to obtain representations in appropriate cases. What care should be taken in case reliance is to be placed on representation due to non-availability of documents with the assessee? Can reliance be placed on certificates of experts who are not “auditor’s experts”?
7. Ideally Institute should dissuade from seeking any extension in the matter and should insist on deferment of the revised form by one year. As mentioned earlier no significant revenue loss shall occur to the treasury by deferment of an year, as it is the CBDT waited for four months after the year end to finalise changes without even considering the impact it has on reporting requirements. The Institute should take a firm stand in this matter.