Tax Audit Problems & Solutions – Technical & Other Issues

CA Nitesh More

TECHNICAL ISSUES – FAQ BY ICAI

1. PROCEDURE TO UPLOAD TAX AUDIT REPORT (TAR)

Q1. What is the complete procedure to upload tax audit reports by Tax Professionals?

Ans. 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?0.2231070064008236

However, the procedure in brief is mentioned below:

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:

• Details of membership of ICAI: MRN, Enrollment date
• Personal Details: Surname, Middle Name, First Name, Date of Birth, PAN, E-mail id
• Digital Signature Certificate: upload .pfx file or USB token
• Click ‘Submit’

d) After successful submission of above basic details, enter details in registration form:

• Set Password.
• Set primary secret question and answer thereof.
• Set secondary secret question and answer thereof
• Enter contact details: Landline no., mobile no; alternate number; e-mail id & alternate e-mail id; Fax number
• Postal Address
• Subscribe to e-mail and alerts
• Captcha Code

After successful submission of all above details, the user will receive a confirmation e-mail containing an activation link. The user account will be activated as soon as the user triggers that link, thereby updating the database of Income-tax Department. An SMS will also be sent at the registered contact number of the user notifying that a confirmation mail was sent to his/her registered e-mail id.

Step- II Add Chartered Accountant Action by Assessee

a) Assessee is required to login into his 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

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. NAME / DOB AS PER ICAI & PAN SHOULD BE SAME?

Q2. 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?

Ans. 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

3. WHAT IS RECOMMENDED SYSTEM REQUIREMENTS FOR FACILITATING E-FILING?

Q3. What is recommended system requirements for facilitating e-filing?

Ans. 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

4. EVEN AFTER FILLING COMPLETE DETAILS IN THE FIRST PAGE OF ITR-7, ONE IS NOT ALLOWED TO PROCEED TO 2ND PAGE. WHAT SHOULD BE DONE IN SUCH A CASE?

Q4. 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?

Ans. The trust should first fill the status and then PAN.

TECHNICAL ISSUES – FAQ BY CA NITESH MORE

1. STEPS FOR FILLING ONLINE TAX AUDIT REPORT

Q1. What are the steps to be followed for E-filling of Tax Audit Report?

Ans. Step 1- One Time Registration of Chartered Accountant at E-filling website

Step 2 – Login to Assessee account at e-filling website and Add CA

Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.

Step 4 – Uploading XML file at E-filling website from CA’s Login Id

Step 5 – Approval of form uploaded by CA at E-filling website from Assessee’s Login Id

Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately

2. SOFTWARE REQUIREMENTS

Q2. What are operating system and runtime environment requirement for E-filling of Tax Audit Report?

Ans. Operating System – Windows XP with Service Pack 3/ Windows 7/ Windows 8.

Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.

3. PROBLEM IN SLOWDOWN OF SYSTEM

Q3. Our system becomes very slow during working on e-utility. What should we do?

Ans. Remove all old versions of Java to improve performance. Better use Google chrome. Can also use Mozilla Firefox.

4. PROBLEM OF NEGATIVE FIGURES

Q4. System is not accepting negative figures in brackets i.e. “()”. What should we do?

Ans. Use negative sign. i.e. minus “-“

5. PROBLEM OF PROVIDING QUANTITATIVE DETAILS

Q5. Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?

Ans. Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available, 

a) Write nil in online form 3CD &

b) Report why quantitative details is not provided in the following two places:

i) In paper form 3CD &

ii) Notes to accounts

c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: “Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details”

6. PROBLEM IN ENTRY OF LARGE NO. OF FIXED ASSETS

Q6. An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.

Ans. In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.

i. Assets put to use on or before 2^nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2^nd October, wherever possible.

ii. Assets put to use after 2^nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31^st March, wherever possible.

It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.

The above can be summarized in the following steps:

Step 1 – All fixed assets may be grouped into different blocks of assets.

Step 2 – Each of these groups can be further divided into 2 parts. (i) Assets put to use on or before 2^nd October (ii) assets put to use after 2^nd October (eligible for half of depreciation)

Step 3 – For assets brought on or before 2^nd October, we can argue that those assets were put to use on 2^nd October and accordingly relevant entries can be made in the online form 3CD.

Step 4 – For assets brought after 2^nd October, we can argue that those assets were put to use on 31^st March and accordingly relevant entries can be made in the online form 3CD.

Step 5 – Sale of assets for each of group should be entered in a separate row while filling online form 3CD.

Step 6 – It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.

7. PROBLEM IN VIEWING STOCK FIGURES

Q7. I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.

Ans. It is the inherent problem of the software but your xml file contains the correct data. Open the xml file in Internet Explorer and check it. You can edit xml file, however you have to adopt unceremonious way to edit the xml file for the necessary correction for the item in subsequent rows of point 28A. Therefore it is advised to fill up point 28A before filling any other point from point 7 onwards.

8. PROBLEM OF DEPRECIATION IN WEBTEL SOFTWARE

Q8.  We have received demand relating to AY 2012-13, for almost for all companies for which income tax return were filled using Webtel software. The demand pertains to non-deduction of deprecation u/s32 in the return processed u/s 143(1) by CPC Bangalore, as claim by us in ITR 6. I just want to know if any other user of Webtel are also facing same problem.

Ans: The Problem Was Faced Many CA Using Webtel Software Due To Non Updation. I Suggest Submitting Revised Return or Making Rectification U/S 154.

9. PROBLEM OF NO SPACE FOR COMMODITY

Q9. In online Form 3CD, nature of business is to be mentioned i.e. Trading/Manufacturing & Retailer/ Wholesaler, but there is no space given for a particular commodity, say, cloth/ medicine/ cement. What should we do?

Ans. You can select, say, retailers & thereafter choose others (i.e. 104, 204, etc as applicable).

10. PROBLEM IN CALCULATION OF NP RATIO

Q10. If any businessman having a cloth business & also keeps photocopy machine/ agent of LIC, the income from photocopy machine / commission received from LIC is used for calculating the NP ratio. If so, then in this case GP ratio is less then NP ratio. So what to do about it?

Ans. You have to calculate NP ratio as a whole of the business for which tax audit was conducted.

11. PROBLEM OF BLANK FIELDS IN SAVED DRAFT XML FILE

Q11. When we reopen draft saved xml file, many fields which we had already entered is showing blank.

Ans. The software has some inherent errors as a result when we reopen draft saved xml file, it shows blank i.e. we have to re-enter the fields again. These fields are 7(B), 8(B), 9(A), 10, 11(D), 12(B), 21(Notes), 22(A), 22 AND 23.

12. PROBLEM OF VIEWING DATA OF XML BEFORE UPLOADING

Q12. How we can view data of XML before uploading?

Ans. You can view the xml file of tax audit report prepared in e utility of department. CA P.K. Agarwalla has prepared the screen shots of the process to view the same. The process is as follows:

Go to Programme → Microsoft Office →Microsoft Office Access 2003/2007 → New blank data base àClick blank data base → A window with file name database1.accdb will appear on the right hand side pane. →Click on create. Your new date base is saved by default in my Documents. (You may save the same to your choice folder)

A new data base is opened. Go to and click External data à Click XML file>Browse the xml file for which you want to create/view or save the data → Click OK → Import XML → Click OK → Check the box “Save import steps” → Close.

Your data base is ready, on the left hand side pane the indexes for “All Tables” do appear. By clicking any Table/ any point you can easily view and save its contents presently appearing in the XML file. Once the xml file is saved and the data base is reopened it will show the updated entries lying in the XML file. If some member finds any error in the tables he can easily make corrections opening the utility.

13. PROBLEM OF PRINTING/SAVING UPLOADED XML FILE

Q13. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans.  U can save the work in middle by using “Save Draft” Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.

14. PROBLEM OF FAKEPATH

Q14. When we are uploading the 3CA and 3CD online one error is coming cannot read fake path file. I have placed the XML file in c drive fakepath folder and using Google chrome for that. Please help on the issue.

Ans. Kindly check the name of folder is “fakepath” and not as fake path, in C drive.

15. PROBLEM IN VIEWING XML FILE FROM CLIENT’S LOGIN

Q15. We uploaded form 3CD of a client. When it is viewed from the client’s login (i.e. for approving or rejecting), the dates in point no. 16(b) of form 3CD is getting interchanged (i.e. in the due dates column actual dates are seen and vice versa). But there is no mistake at our end. We have filled in the data in the income tax offline utility correctly and generated xml.

Ans. Your XML File contains the right data. Do not worry, upload it.

16. HOW TO PRINT UPLOADED XML FILES

Q16. CA has no option to print uploaded xml files. How to print?

Ans. CA has no option to print uploaded xml files. However, it can be printed from assessee’s login id, even before approval by assessee as the said xml file can be downloaded, from assessee’s login id, in the pdf format by default.

17. PROBLEM IN GETTING ACTIVATION LINK/SMS FOR COMPLETING REGISTRATION

Q17. A Chartered Accountant in practice registered himself with his DSC in the e-filing website. But he neither received any sms nor any activation link in his e-mail. When he tried again to register himself, the message was that he is already registered. But when he tried to log in, it was informed that the link is not activated. What should he do now?

Ans. Go to login page and enter your User ID i.e.  ARCA(Mem. No.) e.g. ARCA300700 and enter your Password as given then click on “Resend Activation Link”. You will get a mail from the site. If it does not work then reset your Password by sending mail at validate@incometaxindia.gov.in.

18. UNABLE TO SEE XML IN ASSESSEE’S LOGIN

18. I had uploaded one Form 3CD, 10 days back and same was reflecting in my log in and I also received message for uploading. Now when I go to assessee log, same form is not available for validation. When I try to re-file from my log in I am getting massage that you are already submitted and assessee has not rejected/accepted.

Ans. Kindly Go to Work lists and approve it.

19. NON ACCEPTANCE OF NEGATIVE FIGURES IN FORM 29B

Q19. In the department utility, the point no.9 of Annexure A of Form 29B is not accepting negative figures.

Ans. Kindly Type 0, Until Such Inherent Error in Software Is Rectified By Department

20. USE OF SPECIAL CHARACTERS

Q20. Can we use special characters while typing address in different places of online form 3CD?

Ans. No, special characters are not allowed while typing address.

21. PROBLEM OF NON GENERATION OF XML

Q21. The department utility is opening the saved data and saving draft successfully but it does not generate XML file when we click generate XML file

Ans. First validate it and generate

22. PROBLEM OF SWAPPING OF DUE DATE AND ACTUAL DATE

Q22. I have noticed that under the Clause No. 16(b) there is an error in the utility. The columns of due date and actual date for payments as show in the utility have been reversed against the actual data being generated in the XML file. The column headers should be swapped. The same is also evident from the form being generated at the time of approval.

Ans. This is the inherent problem. Kindly do not swap the dates at the time of data entry. IT department had been communicated with such problems.

23. TAR REJECTED BY ASSESSEE IF UPLOADED AGAIN

Q23. If a TAR is rejected by assessee and uploaded again, then an error message comes.

Ans. This is the inherent problem. Kindly download and fill up fresh form.

OTHER ISSUES – FAQ BY ICAI

1. SCHEDULES AND NOTES REQUIRED TO BE UPLOADED?

Q1. 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.

2. SCANNED COPY OF SIGNED BS, P&L MANDATORY?

Q2. 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.

3. AUDIT U/S 44AD, 44BB, 44BBB & 44AE REQUIRED TO BE FILED ELECTRONICALLY?

Q3. Whether audit conducted under section 44AD, 44BB, 44BBB & 44AE are 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.

4. FRN MANDATORY IN THE E-FORMS?

Q4. 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.

5. WHERE SHOULD THE COMMENTS OF ANY CLAUSE OF FORM NO.3CD IS TO BE MENTIONED IN THE E-FORM?

Q5. 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.

6. PROCEDURE TO UPLOAD TAR ELECTRONICALLY IN CASE OF JOINT AUDITORS?

Q6. 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.

Comment of CA Nitesh More – You have to follow the below mentioned steps:

a) Combine data of two B/S, P/L, tax audit report and submit as one

b) If tax audit conducted by two CAs, any CA can submit.

c) It is advised to attach physical copies of both Tax Audit Reports too, for disclosure of the fact that (i) two CAs have done Tax audit and (ii) that CA who is filling had relied on the work of other CA

7. HOW TO FURNISH REVISED AUDIT REPORT ELECTRONICALLY?

Q7. 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.

8. IS THERE ANY UPPER LIMIT ON THE NO. OF AUDIT REPORTS WHICH CAN BE UPLOADED BY A CA ON E-FILING PORTAL?

Q8. 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.

9. IF THERE ARE 10 PARTNERS IN A CA FIRM, THEN HOW MANY TARS CAN EACH PARTNER SIGN IN A FY?

Q9. 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.

10. IF TAR IS ISSUED & ITR IS FILED PRIOR TO ISSUANCE OF NOTIFICATION WHICH MANDATES E-FILING OF TAR, THEN E-FILING OF AUDIT REPORTS IS REQUIRED?

Q10. 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. 34/2013 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.

  11. IN CASE OF E-FILING OF AUDIT REPORTS, WHAT IS THE DATE OF AUDIT REPORT?

Q11. 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.

12. IS IT POSSIBLE TO E-FILE THE ITR FIRST AND THEN E-FILE THE AUDIT REPORT?

Q12. 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.

Comment of CA Nitesh More – In my view, Date of furnishing TAR to department is to be mentioned in ITR. So TAR is to be filed first.

OTHER ISSUES- FAQ BY CA NITESH MORE

1. NO. OF TAX AUDIT

Q1. Whether Tax Audit Report u/s 44AD etc will be counted in the specified limits of 45 Tax Audits?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, these will not be included and you can file unlimited such Tax Audit Reports

Q2. What are the limits on signing of Tax Audit Report?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008,

a) A CA can sign up to 45 Tax Audit.

b) In case of Partnership Firm, limit will be 45 / Partner.

c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF ISNOT APPLICABLE)

2. ONLINE FILLING, DATE OF SIGNING AND DATE OF FILLING

Q3. What are the Tax Audit Reports which are to be compulsorily filed online?

Ans. As per Notification No. 34/2013 dated 01/05/2013, & Notification No. 42/2013 dated 11/06/2013, Audit reports under Sections 10 (23C) (iv), (v), (vi) or (via), 10A, 12A (1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB are to be filed electronically. (It covers audit report u/s 44AD, 44AE, 44AF also) (FROM FY 2012-13, SEC 44AF is not applicable)

Q4. Should we sign Tax Audit Report on 30^th September?

Ans. As the word “before” has been used in sec. 44AB, we should not sign Tax Audit Report on 30^th September. You should sign Tax Audit Report before 30^th September, since the assessee is required to “obtain” Tax Audit Report before the due date i.e. 30^th September.

Q5. Where audit is to be conducted u/s 92E, what is the last date of filling online Tax Audit Report?

Ans.  Normally, Tax Audit Report is to be submitted by 30^th September. However, for these assesses Report u/s 92E as well as Tax Audit Report can be filled by 30^th November.

3. CAN A PARTNER SIGN ON BEHALF OF OTHER PARTNERS

Q6. Please advice in case of partnership firm can only one partner sign all the reports?

Ans.

a) Clause 12 Of Part I of Schedule I of Chartered Accountants Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm

b) Sign can be either digital or physical

c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.

[Clause 12 of Part I of Schedule I of Chartered Accountants Act states that “A CA in practice will be guilty if he allows a person not being a member of the institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, any balance-sheet, P&L a/c, report or financial statements“]

4. CAN RETURN BE FILED AFTER DUE DATE

Q7. Can Income tax Return be e-filed after 30^th September? However we will file Tax Audit Report within 30^th September?

Ans. Yes, Online Tax Audit Report is to be filed by 30^th September to avoid penalty of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower. However, return may be filed later. However, such return will be treated as belated return.

5. ITR 7 TO BE FILED ONLINE?

Q8. Whether e-Filing of ITR 7 For AY 2013 – 14 mandatory or can we file paper returns also?

Ans.  It Is Mandatory To Submit Online.

6. MANDATORY E-FILLING OF TRUST, SOCIETY

Q9. Are All Charitable Trust and Cooperative Society’s Income Tax Return Are to E-File?

Ans: The Charitable Trusts etc. are Required To File Return Online Also.

7. RESPONSIBILITY OF TAX AUDITOR FOR DELAY IN UPLOADING

Q10. Is tax auditor responsible for delay in uploading of Tax Audit Report?

Ans.  Guidance Note on Tax Audit states that normally, it is the professional duty of the CA to ensure that the audit accepted by him is completed before the due date. Hence, yes, if delay is attributable to his part.

8. PENALTY FOR NON FURNISHING OF REPORT

Q11. What are the penalties for non furnishing a Tax Audit Report?

Ans. Sec 271B states that, if any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.

9. WAIVER OF PENALTY FOR NON FURNISHING

Q12. What are the circumstances under which penalty cannot be imposed for non furnishing of Tax Audit Report?

Ans. As per section 273B, no penalty is imposable under section 271B on the assessee for the above failure if he proves that there was reasonable cause for the said failure. The onus of proving reasonable cause is on the assessee. Some of the instances where Tribunals/Courts have accepted as “reasonable cause” are as follows:

(a) Resignation of the tax auditor and consequent delay;

(b) Bona fide interpretation of the term `turnover’ based on expert advice;

(c) Death or physical inability of the partner in charge of the accounts;

(d) Labour problems such as strike, lock out for a long period, etc.;

(e) Loss of accounts because of fire, theft, etc. beyond the control of the assessee;

(f) Non-availability of accounts on account of seizure;

(g) Natural calamities, commotion, etc.

10. FORMAT OF MAINTENANCE OF RECORDS OF TAX AUDIT

Q13. What is the format for maintaining records of Tax Audit Assignments?

Ans. Record of Tax Audit Assignments

1. Name of the Member accepting the assignment

2. Membership No.

3. Financial year of audit acceptance

4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.

Sl. No.	Name of the Auditee	AY of the Auditee	Date of Appointment	Date of acceptance	Name of the firm on whose behalf the member has accepted the assignment	Date of communication with the previous auditor (applicable)
1	2	3	4	5	6	7

 11. COMMUNICATION WITH PREVIOUS AUDITOR

Q14. Is communication with the previous tax auditor necessary?

Ans. Yes

12. SHOULD CA ACCEPT TAX AUDIT IF UNDISPUTED FEES OF PREVIOUS AUDITOR NOT PAID

Q15. Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, “a member of the Institute in practice shall not accept the appointment as auditor of an entity in case the undisputed audit fee of another CA for carrying out the statutory audit under the Companies Act, 1956 or various other statutes has not been paid”

13. TAR OF PVT LTD COMPANY

Q16. Whether Form 3CA or Form 3CB to use for Tax Audit Report purpose of a Pvt. Ltd. Co. having statutory Audit done by the same CA.

Ans. Form No 3CA-3CD

14. ADDRESS FOR NRI DIRECTOR IN ITR

Q17. While filling Director Details in ITR 6, only Indian Address is accepted in the form. However, one of the directors is an NRI and having foreign address. Should we fill in a local address of the Director and proceed or there is some other way out?

Ans. ITR-6 Required Residential Address. If Indian Address Available Then Give.

Particulars of MD, Directors, Secretary and Principal officer(s)who have held the office during the previous year	Name	Designation	Residential Address	PAN
S.No.

 15. PAN OF RELATIVE FOR UNSECURED LOAN

Q18. Whether it is mandatory to mention Pan No of Party Related with Unsecured Loan in online 3CD Form

Ans. EFiling software is not accepting it without PAN. Hope error will be rectified soon.

16. RETURN CAN BE UPLOADED BEFORE TAR

Q19. Is there any problem in uploading Income Tax Return before filing/approval of Tax Audit forms?

Ans. Date of furnishing TAR to department is to be mentioned in ITR. So TAR is to be filed first.

17. PROBLEM OF THREE TAX AUDITORS OF SAME ASSESSEE

Q20. An Individual Has Three Businesses Audited By Same/Different Tax Auditors. How To Submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps.

a) Combine data of all B/S, P/l, tax audit report and submit as one

b) If tax audit conducted by different CAs, any CA can submit.

c) It is advised to attach physical copies of all Tax Audit Reports too, for disclosure of the fact that (i) different CAs have done Tax audit and (ii) that CA who is filling had relied on the work of all other Cas. (iii) There are three different Tax audit report whose data has been combined while submitting online TAR.

18. PROBLEM OF DIFFERENT METHODS OF VALUATION OF STOCK IN TWO FIRMS

Q21. An Individual Have 2 Firms. In One Firm, Method Of Valuation Of Closing Stock Is Cost Or Market Price Whichever Is Less. However, In Other Firm, Stock Is Valued At Market Price. How To Show It In Online Form 3cd?

Ans. It is better to mention the facts in separate sheet and attach with the online audit report.

19. APPROVAL OF TAR BY ASSESSEE IS MANDATORY

Q22. What If The Assessee Does Not Approve The Audit Report Submitted Before The Due Date

Ans. It may be presumed that no tar has been submitted by assessee

20. HOW TO SHOW ADDITIONAL DEPRECIATION

Q23. How To Show Additional Depreciation in the Online Form 3CD.

Ans. Add It with Normal Depreciation

21. DATE OF TAX AUDIT REPORT VS DATE OF FURNISHING TAX AUDIT REPORT

Q24. What is the difference between date of TAR and date of furnishing of TAR?

Ans. Date of TAR is the date of signing by the auditor and date of furnishing TAR is the date on which CA uploads TAR. 22. FOMAT FOR TAX AUDIT U/S 44AD

Q25. What is the format for Tax Audit u/s 44AD?

Ans. The Tax Audit under the provisions of section 44AD are to be conducted u/s 44AB. Hence, the format prescribed for Tax Audit u/s 44AD is 3CB & 3CD.

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Author can be reached at moreassociate@gmail.com

Courtesy – CA Deepak Tibrewal, CA P.K. Agarwalla & CA Raj Singhania

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