General Errors noticed in Reporting in Form 3CD -Section-44AB of Income Tax Act 1961
(TAX AUDIT U/S-44AB of Income Tax Act 1961)
♦ Legislation for A/Y 2020-21 U/s-44AB
-Business:-Sales etc > Rs.1 Cr/5 Cr.
-Profession:-Gross Receipt etc > Rs.50 Lacs
-Business:- U/s-44AE/BB/BBB, Income<Deemed Profit
-Profession:- U/s-44ADA, Income<50% Plus TI >Basic Exemption Limit
-Business:- U/s-44AD, Income<8%/6% Plus TI >Basic Exemption Limit
♦ Rule– 6G: Prescribe the form for Report of audit U/s-44AB
| Form-3CA | Report if, Audit under any other Law |
| Form-3CB | Report in Other Cases |
| Form-3CD | Annexure to Report-Form-3CA/3CB |
♦ Section-271B-Penalty for failure to get audited U/s-44AB
Lower of the Following:-
1. 5 % of Total Sales/Turnover/Gross Receipt
Or
2. 1.50 Lacs
♦ Form-3CA & 3CB : Qualification Para
Observation:-
- Many Tax audit report does not contain the “Assessee responsibilities” and “Tax auditors Responsibilities” as required by Guidance note on SA 700.
- Also observed that Qualification Para Certain TAR contains reference to Form-3CD which is not a qualification but it is only general additional information
♦ Clause-(8) of Form-3CD: Indicate the relevant clause of section 44AB under which the audit has been conducted
- Clause (a) of 44AB
- Clause (b) of 44AB
- Clause (c) of 44AB
- Clause (d) of 44AB
- Clause (e) of 44AB
- 3rd Proviso to 44AB:Audit under any other Law
3rd Proviso to 44AB:-
Provided also that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section.
Observation:-
It has been noticed that Tax Audit report of “Companies/LLP “which required Audit under Co. Act 2013 & LLP Act 2008 respectively select the clause (a) instead of option 3rd Proviso to 44AB.
♦ Clause-(2) of Form-3CD: Address
Observation:-
- It has been noticed that in Certain TAR address in Form-3CA/3CB does not match with that of provided in “Annual Reports to MCA”
- As per GN, TAR should contain address as communicated by assessee to Income Tax dept. for assessment purpose as on date of signing of A.R.
♦ Clause-11(a) of Form-3CD: Whether books of account(BOA) are prescribed under section 44AA, if yes, list of books so prescribed.
Observation:-
- U/s-44AA Books of account is prescribed only for Specified profession.
- No any books prescribed for business.
- Also company’s act 2013 also not prescribes any BOA for Companies.
- So, w.r.t BUSINESS, TAR should contain “No” under this sub-clause.
♦ Clause-11(c) of Form-3CD: List of books of account and nature of relevant documents examined.
Observation:-
- It has been observed that Tax auditors does not provide details of reference of all relevant documents examined like Invoices, bills, Client certificates, Confirmation etc.
- It is a requirement of Guidance note so please mention it.
♦ Clause-22 of Form-3CD: Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
Observation:-
Notices that interest paid to MSME is reflected in Annual report but does not reported in TAR.
♦ Clause-34(a) of Form-3CD: Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish.
Observation:-
- It has been observed that Total Expenses in TAR like salary, Rent, Professional Charges, and Commission does not match with figures in Audited F.S.
Author Bio
Very useful information and great observation noticed by you in 3CD Report