Faqs: Tax Audit Related Problems

CA NITESH MORE

NO. OF TAX AUDIT A CA CAN SIGN

Q1. Will Tax Audit Report u/s 44AD, 44AE, 44AF be counted in the specified limits of 45 Tax Audits? 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 IS NOT APPLICABLE)

ONLINE FILLING, DATE OF SIGNING AND DATE OF FILLING

Q2. What are the Tax Audit Reports which are to be compulsorily filed online? Should we sign Tax Audit Report on 30^th September?  Where audit is to be conducted u/s 92E & 44AB, what is the last date of filling online Tax Audit Report?

Tax Audit Limit

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 ISNOT APPLICABLE). 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.  Where audit is to be conducted u/s 92E & 44AB, 3Oth sep. is the last date of filling online.

CAN A PARTNER SIGN ON BEHALF OF OTHER PARTNERS

Q3. 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 C. A. 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“]

PROBLEM OF TWO TAX AUDITORS OF SAME ASSESSEE

Q4. An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?

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

a) Combine data of two Tax Audit Reports 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.

CAN RETURN BE FILED AFTER DUE DATE

Q5. 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.

STEPS FOR FILLING ONLINE TAX AUDIT REPORT

Q6. 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

SOFTWARE REQUIREMENTS

Q7. 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.

PROBLEM IN SLOWDOWN OF SYSTEM

Q8. 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. You can  use Mozilla Firefox.

PROBLEM OF MISMATCH IN NAME & DOB AS PER ICAI AND PAN DATA

Q9. I am unable to register as CA as there is difference in name/date of birth as per ICAI and PAN data. What to do?

Ans. It is requested to file form 49 amendment and get data rectified in PAN immediately. Kindly also note that the day you receive a SMS that your pan amendment has been approved, you will be able to register at site whether you actually receive PAN or not. Alternatively, please follow instructions given by ICAI in such case which are available at icai.org.

ATTACHMENTS

Q10. What are the documents to be attached to Tax Audit Report?

Ans. B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

PROBLEM OF NEGATIVE FIGURES

Q11. System is not accepting negative figures in brackets i.e. “()”. What should we do?

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

PROBLEM OF PROVIDING QUANTITATIVE DETAILS OF INVENTORY

Q12. 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”

PROBLEM IN ENTRY OF LARGE NO. OF FIXED ASSETS

Q13. 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 – 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.

PROBLEM IN VIEWING STOCK FIGURES

Q14. 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.

PROBLEM OF DEPRECIATION IN WEBTEL SOFTWARE

Q15.  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/s. 32 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.

PROBLEM OF BLANK FIELDS IN SAVED DRAFT XML FILE

Q16. 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.

PROBLEM OF VIEWING DATA OF XML BEFORE UPLOADING

Q17. 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. The process is as follows:

Go to Programme → Microsoft Office → Microsoft Office Access 2003/2007 → New blank data base →Click 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 → 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.

PROBLEM OF PRINTING/SAVING UPLOADED XML FILE

Q18. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans.  You 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.

PROBLEM OF FAKEPATH

Q19. 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.

PROBLEM IN VIEWING XML FILE FROM CLIENT’S LOGIN

Q20. 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.

HOW TO PRINT UPLOADED XML FILES

Q21. 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.

REVISION OF TAX AUDIT REPORT ONCE FILED

Q22. Can online filed Tax Audit Report be revised?

Ans. A Tax Audit Report which has not been approved by assessee can be revised. However after it has been approved by the assessee, it should not be revised. However, there is no restriction by the utility, as of now, to upload revised xml. So we should take due care, so that correct data is uploaded in the first instance itself. However, members may kindly note that, all the xml files uploaded will be there in their domain.

OFFLINE FILED TAX AUDIT REPORT TO BE SUBMITTED ONLINE AGAIN?

Q23. I have uploaded 5 returns without uploading tax audit as it was required to submit offline at that time. Should we submit these again online?

Ans. No, you are not required to submit IT Return online again. However, kindly ensure that Tax audit Report is duly uploaded within due date.

RESPONSIBILITY OF TAX AUDITOR FOR DELAY IN UPLOADING

Q24. 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.

PENALTY FOR NON FURNISHING OF REPORT & WAIVER OF PENALTY FOR NON FURNISHING

Q25. What are the penalties for non furnishing a Tax Audit Report? What are the circumstances under which penalty cannot be imposed for non furnishing of 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.

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.

FORMAT OF MAINTENANCE OF RECORDS OF TAX AUDIT

Q26. 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

COMMUNICATION WITH PREVIOUS AUDITOR  &  ACCEPTANCE  IF UNDISPUTED FEES OF PREVIOUS AUDITOR NOT PAID

Q27. Is communication with the previous tax auditor necessary? Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?

Ans. Yes, communication with the previous tax auditor necessary. 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”

PROBLEM IN GETTING ACTIVATION LINK/SMS FOR COMPLETING REGISTRATION

Q28. 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.

Author can be reached at moreassociate@gmail.com

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

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