The Revision of Tax Audit Reports

Tax audit is a cross-examination of the books of accounts of the taxpayer by a practicing Chartered Accountant under the Income Tax Act 1961.  Section 44AB deals with the conditions under which Tax audit becomes mandatory for some taxpayers. The underline idea of a tax audit is to verify the accuracy of the financial records and avoid any fraud or tax evasion.

THE CONCEPT OF TAX AUDIT

Section 44AB of the Income Tax Act, 1961 provides the law for tax audit. The relevant part of the section relating to this article is being reproduced hereunder:

44AB. Every person,—……….get his accounts of such previous year audited by an accountant before the  specified date & furnish by that date the report of such audit in the prescribed form duly signed and  verified by such accountant & setting forth such particulars as may be prescribed: As per section 2(33)  of the Act “prescribed” means prescribed by rules made under this Act; Rule 6G of the Income Tax Rules, 1962 prescribes the “Form” of audit report and the “Particulars” which are required to be set forth. The Rule 6G reads as follows:

6G. (1) The report of audit of the accounts of a person required to be furnished under section 44AB shall, —

(a) In the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

(b) In the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB.

(2) The particulars which are required to be furnished under section 44AB shall be in Form No. 3CD

TAX AUDIT CAN BE REVISED

Section 44AB as well as rule 6G does mandate and proscribe provisions relating to revision of the tax audit report. The Income Tax (Eighth Amendment) Rules, 2021 has inserted sub-rule (3) in rule 6G vide in view of hardships being faced by assesses due to the provisions of section 40 and section 43B of the Act through Notification No. 28/2021 dated 1.4.2021, w.e.f. 1.4.2021, as follows:

(3) The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub-rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.

Accordingly, if there is payment u/s 40 or u/s 43B by such person after furnishing of report under sub-rule (1) and (2) and any qualification has been made in this regard in Form 3CD, it may cause recalculation of disallowing under section 40 or under section 43B.Therefore, for the purpose of such recalculation the tax audit report may be revised in the manner provided in sub-rule (3).

THE REVISED RULE 6G WITH SUB RULE (3)

After above insertion, the rule 6G reads as follows:

6G. (1) The report of audit of the accounts of a person required to be furnished under section 44AB shall, —

(1) The report of audit of the accounts of a person required to be furnished under section 44AB shall, —

(a) In the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

(b) In the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB.

(2) The particulars which are required to be furnished under section 44AB shall be in Form No. 3CD.

(3) The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub-rule (1) and (2) which necessitates recalculation of disallowing under section 40 or section 43B.

WHO CAN GET IT REVISE?

In view of above, now as per rule 6G (3), w.e.f. 1.4.2021 the tax audit report in Form No. 3CA, Form No. 3CB and Form No. 3CD may be optionally revised. It can be revised after it is furnished under rule 6G. The above conclusion finds support from the expression ―after furnishing of report under sub-rule (1) and (2)” used in the later part of the sub-rule (3). It can be revised by the person who is obliged to get his accounts audited in accordance with the provisions of section 44AB. The same can be revised in the following way:

(a)  by getting revised report of audit from an accountant, duly signed and verified by such accountant, and

(b)  by furnishing the revised report;

(c)  the revised report is to be furnished before the end of the relevant assessment year for which the report pertains.

GUIDENCE NOTE ON REVISION OF TAX AUDIT

Guidance Note of Tax Audit u/s 44AB of Income Tax Act-1961 prescribes that in certain cases, members are called upon to report on the accounts reopened and revised by the board of directors. The accounts of a Company once adopted at its annual general meeting should not normally be re-opened and revised. In case of revision, the audit report should be given in the way suggested by the Institute. (Published in the Chartered Accountant, pp.655, February, 1985. Also refer to Revision/Rectification of Financial Statements, published in Compendium of Guidance Notes – Volume I). The Department of Company Affairs had also clarified that accounts can be revised to comply with technical requirements. 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.

Further After uploading a Tax report if it came to the knowledge of auditor that his client is engaged in another business also this has been not disclosed to him at the time of the original Tax Audit. In such circumstances the tax auditor is having all the right to revise the original tax audit report at its first reporting and not sitting idle and wait for any action from the Tax authority. It is better to compute the revised total taxable income of the client and the revised tax liability. Many opined that the auditor may be at risk because of its first audit report, but this sword is having two-way edge. The auditor has to choose the one, but the auditor is eligible to revise the same within own rights.

REVISED AUDIT REPORT CAN BE REVISED AGAIN

There is no limit to revise the Tax audit reports. The only suggestion from the guidance notes and the department is that it should be in a way suggested in SA- 560. After going through the Guidance Note of Tax Audit u/s 44AB of Income Tax Act-1961, it is very clear that Tax Audit report should not be normally revised. However, there is no bar in revising and revising again with a rider that it can be revised only to meet some technical requirements. It should be assured that the new revised report should carry the reference of old reports and should be signed in the current date. The date of the audit report is the date of signing the physical copy of the tax audit report /revised tax audit report.

CBDT/UDIN PROVIDES FACILITY FOR REVISION

In case, where a member is called upon to report on the revised accounts, then he must mention in the revised report said that the 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. Further, the utility provided by CBDT for filling/ uploading of the TAX Audit report further added under heading “OTHERS” under uploading TAB. When us tick on another, it will ask for further description/details. But here you can write anything & upload the same to the department website. You can also make comments/observations in respect of a particular class of Form No.3CD are to be mentioned in the e-form at a space provided there. Alternatively, they can be uploaded as PDF files in the field ‘Upload other report’ of the portal. The UDIN portal also provides the option of filing tax audit reports for the earlier years. One can generate a new UDIN by selecting the relevant Assessment Year from the drop out list prescribed in the system. Further there is no time limit for revision.