• Sep
  • 07
  • 2013

Tax Audit issues Raised by ICAI & Reply by IT Department

FREQUENTLY ASKED QUESTIONS (FAQs) ON e-FILING OF TAX
AUDIT REPORT

(Developed by Direct Taxes Committee of ICAI in consultation with the Officials of Directorate
of Income-Tax (Systems)

Note: This document deals with those FAQ’s which are not covered in the e-filing portal. The members may visit the www.incometaxindiaefiling.gov.in for other FAQ’s.

[Go to home page of www. incometaxindiaefiling.gov. in, click on ‘Help’ menu at right topmost corner of the page, then click on the link as may be considered necessary]

1. What is the complete procedure to upload tax audit reports by Tax Professionals?

The procedure of e- filing is explained at the following path of e-filing website:

https://incometaxindiaefiling.gov.in/e-Filing/Portal/StaticPDF/Registration Services.pdf?0.223 1070064008236

However, the procedure in brief is mentioned below:

CA Reg 1

Step- I

Registration on e-filing portal

Action by Chartered Accountant

a)    Access www.incometaxindiaefiling.gov.in

b)   Click on ‘Register Yourself’ tab and select the user type under Tax Professional as ‘Chartered Accountant’

c) Enter Basic details:

Step- II

Add Chartered Accountant

Action by Assessee

a)      Assessee is required to login into his/her account by entering user id and password at www.incometaxindiaefiling.gov.in

b)      Go to ‘My Account’ tab and select ‘Add CA’

c)      Enter MRN of the CA. After entering correct 6 digits MRN of CA, the name of CA will automatically get prefilled.

d)     Select the Form no. for which CA is supposed to be added.

e)      Select Assessment Year

f)       Enter the image of the captcha code

g) Click ‘Submit’

After successful submission of above, a message will be displayed notifying the addition of CA in assessee’s profile.

Step- III

Submit Tax Audit report

Action by Chartered Accountant

CA Reg 2

After successful uploading of tax audit report, the said form will go to assessee for approval.

Step- IV

Approval or Rejection of uploaded tax audit report

Action by Assessee

a)                  Login the account and navigate to ‘Work list’ tab (Assessee will be able to view list of forms submitted by Chartered Accountant along with attachment)

b)                  Click on ‘View Form’

c)                  Assessee can verify the form and approve/reject the form (other than ITR).

d)                 The acceptance of the form (other than ITR) by the assessee is to be made under his/her Digital Signature.

e)          If assessee is rejecting the form, reason for such rejection has to be provided.

An email will be sent to the registered e-mail id after successful submission of the form along with the acknowledgement number.

2. Whether Schedules and Notes to Accounts are also required to be uploaded with Balance Sheet and P&L?

Form No. 3CA requires the tax auditor to annex a copy of the Statutory Audit Report along with the copy of audited Profit and Loss Account/ Income & Expenditure Account, audited Balance Sheet and documents declared by the said Act to be a part of / or annexed to the Balance Sheet and Profit and loss Account/ Income & Expenditure Account. Accordingly, the same are required to be uploaded.

With regard to Form No.3CB, the tax auditor is required to annex the audited Balance Sheet, Profit and loss account /Income & Expenditure Account along with notes to accounts and schedules, if any, forming part of Balance Sheet, Profit and loss account /Income & Expenditure Account.

3. Whether it is mandatory to upload a scanned copy of signed Balance Sheet, P&L and other documents?

Balance Sheet, Profit and Loss Account in Word, Excel Format, etc signed as “sd/-” can be converted in to ‘.pdf’ file and uploaded on the portal. However, the auditor should maintain the physically signed Audited Report in his records and ensure from that there is no difference between physical report and PDF file uploaded.

4.           Whether Name / Date of Birth (DOB) of the Chartered Accountant given in PAN database (as per ITD e-filing website) is to be matched with the ICAI database for successful registration in the e-filing portal?E-filing portal verifies the Name of Member and Date of Birth entered in Registration Form from ICAI Database and also PAN Database. In case there is difference / mismatch of details between the two Databases the portal will not allow registration. In case any member is facing such difficulty, please refer to procedure given in the following link http://220.227.161 .86/30652dtc20622.pdf

5. Whether audit conducted under section 44AD, 44BB, 44BBB & 44AE is required to be filed electronically?

Sections 44AD, 44BB, 44BBB & 44AE provide that in specified cases the assessee is required to get his accounts audited and furnish the report of such audit as required under section 44AB. Therefore, e-filing is applicable to such audits also.

6. Where the Firm Registration No. (FRN) should be mentioned in the e-forms?The present E-filing portal does not provide field to mention FRN, however, the department is in the process of enabling this facility. Till the utility is configured to allow entering of FRN, members need not mention their FRN.

7.       Where should the comments/observations in respect of a particular clause of Form No.3CD is to be mentioned in the e-form?Comments / observations, if any relating to the clauses may be given in Form 3CA/3CB subject to space provided therein. Alternatively, they can be uploaded as PDF file in the field ‘Upload other report’ of the portal.

8.           In case tax audit is conducted by joint auditors, what is the procedure to upload tax audit report electronically?The e-filing portal allows the report to be uploaded by a single auditor. Therefore, the joint auditors may mutually agree and decide the auditor who shall upload the report. However, all the joint auditors should sign the hard copies.As per the ICAI’s “Guidance Note on Tax Audit u/s 44AB of the Income-tax Act, 1961”, it is possible for the assessee to appoint two or more chartered accountants as joint auditors for carrying out the tax audit, in which case, the audit report will have to signed by all the chartered accountants. As per Standards on Auditing 299 (Responsibility of Joint Auditors) issued by ICAI, normally, the joint auditors are able to arrive at an agreed report. In such case, the physical copy should be signed by all the auditors. Thereafter, any one of them may upload the report.However, where the joint auditors are in disagreement with regard to any matters to be covered by the report, each one of them should express his own opinion through a separate report. A joint auditor is not bound by the views of the majority of the joint auditors regarding matters to be covered in the report and is required to express his opinion in a separate report in case of a disagreement. Such separate reports are also to be uploaded on the portal.

9. What is the procedure to furnish revised audit report electronically?In case of revision, the audit report should be given in the manner suggested by the Institute in SA-560 (Revised) “Subsequent Events”. It may be pointed out that report under section 44AB should not normally be revised. However, sometimes a member may be required to revise his tax audit report on grounds such as:

(i)                    revision of accounts of a company after its adoption in annual general meeting.

(ii)                  change of law e.g., retrospective amendment.

(iii)                change in interpretation, e.g. CBDT’s circular, judgments, etc.

(iv)                Any other reason like system/software error requiring change in report already
uploaded.

In case, where a member is called upon to report on the revised accounts, then he must mention in the revised report that the said report is a revised report and a reference should be made to the earlier report also. In the revised report, reasons for revising the report should also be mentioned.

The e-filing portal allows uploading such Revised Audit Report by the CA for the same PAN and Assessment Year.

10.  Is there any upper limit on the no. of audit reports which can be uploaded by a Chartered Accountant on e-filing portal?

As per ICAI Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, a member of the Institute in practice shall not accept, in a financial year, more than the 45 tax audit assignments under Section 44AB of the Income-tax Act, 1961. However, audits conducted under sections 44AD and 44AE shall not be included in this limit.

Since, the Income-tax Act,1961 does not provide any limit on number of tax audits assignments which can be undertaken by a Chartered Accountant the e-filing portal does not provide any restriction. However, members are required to comply with the prescribed ceiling limits.

11.       If there are 10 partners in a firm of Chartered Accountants, then how many tax audits reports can each partner sign in a financial year?As per Chapter VI of Council General Guidelines, 2008 (Tax Audit Assignments under Section 44AB of the Income Tax Act, 1961), a member of the Institute in practice shall not accept, in a financial year, more than the specified number of tax audit assignments as prescribed under Section 44AB of the Income Tax Act, 1961. The specified number of tax audit assignments under Section 44AB of the Income Tax Act, 1961 is 45.

It is further provided in Chapter VI of Council General Guidelines, 2008 that in case of firm of Chartered Accountants in practice, specified number of tax audit assignments means 45 tax audit assignments per partner of the firm, in a financial year.

Therefore, if there are 10 partners in a firm of Chartered Accountants in practice, then all the partners of the firm can collectively sign 450 tax audit reports. This maximum limit of 450 tax audit assignments may be distributed between the partners in any manner whatsoever. For instance, 1 partner can individually sign 450 tax audit reports in case remaining 9 partners are not signing any tax audit report.

It is needless to say that the tax audit assignment should be in accordance with the Standard on Quality Control (SQC) 1: Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements

12.       What is recommended system requirements for facilitating e-filing?To increase the computer processing speed all the previous versions of java be removed from the computer. To use the e-forms utility install Java Runtime Environment Version 7 update 13 (jre 1.7 is also known as jre version 7) or https://incometaxindiaefiling.gov.in

13.       If tax audit report is issued and the ITR is filed prior to issuance of the Notification No. 34/2013, dated 01-05-2013 which mandates e-filing of audit reports. In such cases whether e-filing of audit reports is required?CBDT Notification No. 3 4/2013 dated 1 -05-2013 provides that the rules prescribed therein shall be deemed to have come into force with effect from the 1st day of April, 2013. Accordingly, even if ITR has been filed prior to issuance of said Notification, Tax Audit report is required to be e-filed separately.

14.       In case of e-filing of audit reports what is the date of audit report? Date on which the report is physically signed by the Auditor shall be the date of audit report.15. Is it possible to e-file the ITR first and then e-file the audit report?

e-filing of ITR and Tax Audit report are independent actions. However, it is advisable to first upload tax audit report and then file IT return.

16. Even after filling complete details in the first page of ITR-7, one is not allowed to proceed to second page. What should be done in such a case?

The trust should first fill the status and then PAN.

Some More General issues Raised by ICAI during Presentation on e-Filing of Audit Reports – Webcast to ICAI Members 29th August , 2013 and there resolution as suggested by Income Tax Department :- 

Issue - Date of Receipt of Audit Report (Whether Date of filing by CA or date of Acceptance by  Assessee)

Resolution - While Audit Report will become valid on acceptance by Assessee, Date of upload would be treated as date of filing

Issue -  Mismatch between PAN date of Birth and Date of Birth in ICAI database

Resolution – PAN Correction is the correct resolution

Issue -  DSC May be dispensed with

Resolution - Not acceptable.

Issue -  As per ICAI’s Council Guidelines the Firm Registration Number (FRN) and the name of the firm with which he/she is associated, has to be mentioned in all audits. However, there is no such requirement in Form No. 3CA/3CB & 3CD

Resolution - The field for Capturing FRN will be added in the verification for the CA. In Reports filed so far where the FRN was not captured procedure shall be intimated

Issue -   Guidance Note on tax audit u/s 44AB of the Income-tax Act, 1961” requires the tax auditor to mention his observations/reservations, if any, in respect of various clauses of Form No.3CD in Form No.3CD itself for the ease of the AOs

Resolution -  ICAI had suggested that separate column may be created with the clause itself; this would require a change in the form by TPL. More space is being created. A sub Committee of ICAI and ITD examining the additional space in Para 3 of Form No. 3CA/ Para 3(a) of Form No.3CB,

Issue -   Word limit has been fixed for reporting in the e-filing schema like under each clause of Form no. 3CD limit is set at 100, for observations and comments the limit is fixed at 1000/2000, for ratios and computation thereof the limit is 30

Resolution - More space is being created. A sub Committee of ICAI and ITD examining the additional space requirements

Issue -  Capturing Signatures of More than one CA in the instance of joint Audits.

Resolution - ICAI  pointed out that only in the case of disagreement would two separate reports be required to be filed. Thus more than audit report under DSC of different CAs are enabled

Issue -   Revised Audit Reports to be enabled

Resolution - Revised Reports can be filed

Issue -   ICAI wanted validations to be built in into various fields such as limits under Chapter VI A or where certain deductions can be claimed by Assessees of certain status.

Resolution - While the general feeling is that the CA’s should themselves exercise caution, certain validations are being developed based on the recommendations of the sub-committee

Issue -  In the Java format of e-filing tax audit reports, it is observed that the user is not able to take print out of the filled in forms before or after uploading the same in the e-filing portal

Resolution - While print option available post upload/approval of Forms. The XML can be imported into the Forms to check the correctness of the particulars keyed in before upload. The suggestion is being examined

Issue -   The facility of import of data form multiple formats (Excel etc) should be created to prevent tedious data entry/ dta entry errors especially with regards to depreciation schedule and other large schedules

Resolution - For ITD to Provide import facility for multiple formats may not be viable. ICAI/ ERIs can consider working on such Utilities. However a standard CSV format for Depreciation schedule shall be made available to permit import

Issue -   CA s could not  view clients

Resolution - Have been resolved

Issue -  There were issues with regards to upload of 20MB/ 50 MB

Resolution - Have been resolved

Issue -  Erasure of certain clauses particularly, the data entered in clauses 7(b), 8(b), 9(a) & 10  after saving

Resolution - Have been resolved

Issue - Special characters disabling

Resolution - Have been resolved

Issue - Companies prior to 1913

Resolution - Have been resolved

Issue -   In case of partnership firm, the total of profit sharing ratio of all partners is equal to 100%. The user should not be allowed to fill in further information if the total of profit sharing ratio is less than 100%

Resolution Consciously a decision has been taken not to put any validation in the Audit Report as it is not being processed.

Issue -   17- Separate disclosure for different nature of disallowance is not possible. Under this clause only single amount of disallowance can be specified in sub-clauses 17(a)/ (b)/ (c)/ (d)/ (e)/ (f).

Resolution - While a change in the form is being suggested to TPL. Increasing space for remarks at the end of the form is being worked out subject to overall limit of 50MB

Issue -  PAN to not be a mandatory field in the 206A cases

Resolution - Have been resolved

Issue -   No order number in case of brought forward loss reference order

Resolution - Have been resolved

Issue -   Difficulty in uploading scanned P&L accounts and balance sheets

Resolution - PDF documents/ Text or Excel documents can be uploaded. Working on convergence with MCA

Also Read- Tax Audit Problems & Solutions – Technical & Other Issues


7 Responses to “Tax Audit issues Raised by ICAI & Reply by IT Department”

  1. vswami says:

    An Add-on :
    Right on/close to the heels of the earlier posted comment, it is by sheer coincidence, one happened to have a look at the related commentary in the latest edition of Kanga & Palkhivala’s leading text book on the law on Income-tax.
    Pointed attention requires to be invited to the relevant commentary in the book, – Tenth Edition (year 2014). In volume I, – on page 3, under 2. Direct Taxes Code, 2012. The experts’ viewpoints set out therein are found to be no different but to truly mirror, and rightly bring to sharp focus, in substance, the commonly aired well-considered criticism against the whole exercise behind the idea of a simplification of the extant law by a new code ever since it came to be mooted and given a shape.
    The referred forthright commentary and the cryptic conclusion that, “it is sincerely hoped that the code does not replace the present Act”, might be regarded to have said all as expected by the right thinking law experts in practice, – of the 1961 enactment , and its predecessor of 1922.

  2. vswami says:

    IMPROMPTU
    May not necessarily wish to go into the merits or otherwise of the controversy raised against the particular DTC provision affecting exclusively the ICAI members’ interests,or especially mind to cross swords with, at this stage. Nonetheless, one is obliged to say with own long-standing firm conviction that, it would have been in the interests of the taxpayers community, besides being in the larger interests of the national economy, had the august body – true to its claim /self- projection as a “Partner in Nation Building”,- made the utmost efforts, as expected / warranted, to go through the highly objectionable and patently obnoxious areas of the DTC and come out with useful suggestions to the Revenue; reference is to the glaringly ill- conceived provisions galore crying aloud for a thorough mindful re-look at/ through.
    As pinpointed repeatedly,if one were to go by experts’ views – one such critical view decrying/ridiculing the entire exercise, not without merits, is to be found in a published article authored by a former chairman of CBDT,- the new code nowhere shows signs of / bears testimony to the tall claim that its objective is ‘simplification’ of the extant law.On the contrary has every potential for increased complicity in tax regime- hence inevitable disputes and litigation.
    More so, in the capacity of ‘semi-regulators’ , the professional bodies such as ICAI would dom well to pay concerted attention to these altruistic aspects, as that might go a long way in checking , if not halting, the tax regime being muddled up any more/any longer.
    Now, over to right minded experts at large,particularly in field practice, to accord more thoughts and further deliberate to av fruitful conclusion.

    (OPEN to ‘Edit’)

  3. Satish Aradhya says:

    Very useful information, an eye opener for not much tech savy Chartered Accountants

  4. Bhaskaran Chakrapani Warrier. says:

    Very much valuable information.

  5. CA SHWETA VERMA says:

    CREDIT THROUGH BOOK ENTRY IN A LOAN / DEPOSIT ACCOUNT COVERED U/S 269 SS , CANNOT BE TREATED AS TAKEN THROUGH A CROSSED CHEQUE , AND IN FORM NO 3 CD POINT NO 24 A COLUMN NO 7 UTILITIES THERE IS NO SPACE FOR JE OR BE THEN IT CAN NOT BE WRITTEN AS “NO” AND IF WE REPORT “YES” IT IS NOT CASH TRANSACTION.

  6. H.P.MAHAJANI says:

    Form 3CEB (report on transfer pricing) is structured as if there will be only one auditor doing audit of boht international and domestic transactions. what happens where there are separate auditors auditing international and specified domestic transactions

  7. Avinash Rawani says:

    Chapter VI
    Tax Audit assignments under Section 44 AB of the Income-tax Act, 1961
    6.0 A member of the Institute in practice shall not accept, in a financial year, more than the “specified number of tax audit assignments” under Section 44AB of the Income-tax Act, 1961.
    Provided that in the case of a firm of Chartered Accountants in practice, the
    “specified number of tax audit assignments” shall be construed as the specified
    number of tax audit assignments for every partner of the firm.
    Provided further that where any partner of the firm is also a partner of any
    other firm or firms of Chartered Accountants in practice, the number of tax audit assignments which may be taken for all the firms together in relation to such partner shall not exceed the “specified number of tax audit assignments” in the aggregate.
    4
    Provided further that where any partner of a firm of Chartered Accountants
    in practice accepts one or more tax audit assignments in his individual capacity,
    the total number of such assignments which may be accepted by him shall not
    exceed the “specified number of tax audit assignments” in the aggregate.
    Provided also that the audits conducted under Section 44AD, 44AE and
    44AF of the Income Tax Act, 1961 shall not be taken into account for the purpose
    of reckoning the “specified number of tax audit assignments”.
    6.1 Explanation:
    For the above purpose, “the specified number of tax audit assignments” means –
    (a) in the case of a Chartered Accountant in practice or a proprietary firm of
    Chartered Accountant, 45 tax audit assignments, in a financial year,
    whether in respect of corporate or non-corporate assesses.
    (b) in the case of firm of Chartered Accountants in practice, 45 tax audit
    assignments per partner in the firm, in a financial year, whether in
    respect of corporate or non-corporate assesses.
    6.1.1 In computing the “specified number of tax audit assignments” each year’s audit would be taken as a separate assignment.
    6.1.2 In computing the “specified number of tax audit assignments”, the number of such assignments, which he or any partner of his firm has accepted whether singly or in combination with any other Chartered Accountant in practice or firm of such
    Chartered Accountants, shall be taken into account.
    6.1.3 The audit of the head office and branch offices of a concern shall be
    regarded as one tax audit assignment.
    6.1.4 The audit of one or more branches of the same concern by one Chartered
    Accountant in practice shall be construed as only one tax audit assignment.
    6.1.5 A Chartered Accountant being a part time practicing partner of a firm shall not be taken into account for the purpose of reckoning the tax audit assignments of the
    firm.
    6.1.6 A Chartered Accountant in practice shall maintain a record of the tax audit assignments accepted by him in each financial year in the format as may be
    prescribed by the Council.

    Based on this it may never be the intention of the ICAI to allow more than the specified number of tax audit assignments signing by any one partner on behalf of the other partners. ICAI needs to give a detailed clarification in this regard in the interest of small and medium sized practicing professionals. In any way the maintainence of integrity and quality of the audit is the concern of priority and in no way this should be endangered in the interest of the profession and other professionals.

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