Attention of members is invited towards the changes in the Guidance Note on tax Audit under section 44AB of the Income-tax Act, 1961 approved subsequent to the publication of the Supplementary Guidance Note, issued by the erstwhile Fiscal Laws Committee, as a part of the publication Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961 in 2006.

The Fifth Edition of the Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 incorporating the law as amended by the Finance Act, 2005 was published in September, 2005. Subsequently, a supplementary Guidance Note has been published on the amendments made by the notification No. 208/2006 dated 10th August, 2006 issued by the Central Board of Direct Taxes in Form No. 3CD.

Subsequent to the publishing of the above Supplementary Guidance Note, the Finance Act, 2007 has made amendments in section 40A(3). New Rule 6DD was inserted in the Income-tax Rules by notification No. 208/2007 dated 27.6.2007 w.e.f. A.Y. 2008-09.

The Council thereupon approved some more changes subsequent to the publication of the Supplementary Guidance Note. These may be taken into consideration while reading in the Guidance Note on Tax Audit [2005 Edition] and the Supplementary Guidance note on Tax Audit [2006 Edition published along with the Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961].

For convenience of members the clauses wherein there have been changes are listed hereunder and the full text which forms part of the Guidance to members is available at http://220.227.161.86/20408announ11236a.pdf . Please note that some changes approved relating to fringe benefits have not been given here since they are no longer relevant.

  1. 1. Clause No. 12(a) and (b) of Form 3CD Para No. 23 of the Guidance Note[2005 Edition]
  2. 2. Clause 17(h) of Form 3CD Para 35 of the Guidance Note (Subsequent changes have been made in section 40A(3) by the Finance Act, 2008 and Finance (No. 2) Act, 2009 and also in Rule 6DD.These changes may have an effect on the computation of the amount to be reported but no further guidelines in this regard is considered necessary)
  3. 3. Clause 17(l) of Form 3CD
  4. 4. Clause 17A in Form 3CD Amount inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
  5. 5. Select issues in accounting for state level VAT. (These do not represent the views of the Council but are based on the original draft prepared by Indore Branch of the CIRC of the Institute.)

In this connection, we would also like to invite the attention of members towards the announcement dated 12.12.2008, in the light of which from the A.Y.2010-11, an internal auditor of an assessee cannot be appointed as his tax auditor.Click here for Announcement and further clarification regarding non- applicability of the same only for tax audit relating to financial year ending 31st March,2009 in certain cases.

Internal Auditor cannot be tax auditor – Further Clarification – (09-03-2009)

The Council in its 281st meeting held from 3rd to 5th October, 2008 decided that an internal auditor of an assessee, whether working with the organization or an independently practicing Chartered Accountant being an individual chartered accountants or a firm of chartered accountants, could not be appointed as his tax auditor.

The said decision came into effect from December 12, 2008. As per the decision an internal auditor cannot carryout tax audit on or after December 12, 2008. Subsequently representations have been received pointing out the hardship being caused by the abovesaid decision in respect of those internal auditors who have been appointed as tax auditors for the financial 2008-09 on or before December 12, 2008. The Council considering this hardship has decided that the decision taken by the Council at its meeting between 3rd to 5th October, 2008 shall be applicable to all appointments as tax auditor made on or after December 12, 2008 and accordingly those internal auditors whose appointment have been made as tax auditors before December 12, 2008, can carry out the tax audit of the financial year ending on March 31, 2009, i.e., Assessment Year 2009-2010 only.

Internal Auditor cannot be appointed as a Tax Auditor – (12-12-2008)

The Council in its 281st meeting held from 3rd October, 2008 to 5th October 2008 at New Delhi considered an issue arising from the Guidance Note on Tax audit under section 44AB of the Income-tax Act,1961 as to “Whether the internal auditor of an assessee, being an individual chartered accountant or a firm of chartered accountants can be appointed as his tax auditor”.

The Council decided that an internal auditor of an assessee, whether working with the organisation or independently practising chartered accountant or a firm of chartered accountants, cannot be appointed as his tax auditor.

Guidance note on Tax Audit Revised

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Tags : section 44AB (128) Tax Audit (258)

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