A. Tax Audit is Conducted to achieve the following objectives

♣ Ensure proper maintenance and correctness of books and certification of the same by a tax auditor

♣ Reporting

a) observations/discrepancies noted by tax auditor AFTER EXAMINATION

b) prescribed information such as tax depreciation, compliance of income tax law

♣ Checks frauds and malpractices in filing income tax returns.

 All these enable tax authorities  in verifying the correctness of income tax returns filed by the taxpayer. Calculation and verification of total income, claim for deductions etc. also becomes easier

Audit

B. Who is mandatorily subject to tax audit?

Refer Table

C. What happens if a person is required to get his accounts audited under any other law

Like Statutory audit of companies under company law provisions?

In such cases, the Taxpayer need not get his accounts audited again for income tax purposes. It is sufficient if accounts are audited under such other law before the due date of filing the return

D. What constitutes Audit Report?

Tax auditor shall furnish his report in a prescribed form which could be either Form 3CA or Form 3CB where:

Form No. 3CA is furnished when a person carrying on business or profession is already mandated to get his accounts audited under any other law.

Form No. 3CB is furnished when a person carrying on business or profession is not required to get his accounts audited under any other law.

In case of both above mentioned reports, tax auditor must furnish the prescribed particulars in Form No. 3CD, which forms part of audit report.

E. How and when tax audit report shall be furnished?

    Tax auditor shall furnish tax audit report online

  • By using his login details in the capacity of ‘Chartered Accountant’.
  • Taxpayer shall also add CA details in their login portal.

Once the tax auditor uploads the audit report, same should either be accepted/rejected by taxpayer in their login portal.

If rejected for any reason, all the procedures need to be followed again till the audit report is accepted by the taxpayer.

You must file the tax audit report on or before the due date of filing the return of income i.e. 30 September of the subsequent year

in case the taxpayer has entered into an international transaction then 30 November of the subsequent year

F. Penalty of non-filing or delay in filing tax audit report

Least  of the following may be levied as a penalty:

  • 0.5% of the total sales, turnover or gross receipts
  • Rs 1,50,000

TABLE

FOR BUSSINESS

Business owner who has NOT-OPTED for presumptive taxation scheme Gross receipts or turnover or total sales exceeding Rs. 1 crore
Business owner, who has OPTED for presumptive taxation scheme u/s 44AD Gross receipts or turnover or total sales exceeding Rs. 2 crore
Taxpayer whose business eligible for presumptive taxation u/s

44AE –

44BB

44BBB

CLAIMS profits LESSER than the PRESCRIBED limit under respective presumptive taxation scheme.

44AE –

44BB

44BBB

* A business owner who is not be eligible to claim presumptive taxation under section 44AD because he or she has opted for it in a certain assessment  year and not for any of the five consecutive years subsequently. This is applicable when his/her annual income is more than the maximum amount not chargeable to tax in the following 5 consecutive assessment year from the tax year.

FOR PROFESSION

Employee of an organisation Gross receipts is more than Rs. 50 lakhs
Employee of an organisation that is eligible for presumptive taxation under Section 44ADA CLAIMS PROFITS LESSER than the PRESCRIBED  LIMIT under presumptive taxation scheme

and

INCOME IS MORE THAN THE MAXIMUM AMOUNT not chargeable to tax.

SOME  RECENT  AMENDMENTS    MADE  BY   FINANCE ACT 2020 i.e APPLICABLE FOR FY 2020-21

The Finance Act 2020 has made amendment in section 44AB by inserting  a proviso in clause (a) of Section 44AB. As per the new proviso, the tax audit turnover limit would be INR 5 Crores in case the following two conditions are satisfied:

Condition-1: Total of all the amount received (including the amount received towards sales or turnover or gross receipts) IN CASH during the previous year doesn’t exceed 5% of such amounts; and

Condition-2: Total of all the payments (including amount incurred for expenditure) IN CASH during the previous year does not exceed 5% of such payments

Thus, in case the person satisfies both the above conditions, then the person is not required to gets the books of accounts audited  till the sales or turnover or gross receipts of the person exceeds INR 5 Crores.

Author Bio

Qualification: CA in Practice
Company: RAHULJAIN & ASSOCIATES
Location: KARNAL, Haryana, IN
Member Since: 04 May 2020 | Total Posts: 2

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7 Comments

  1. Devyani says:

    I have filed revised tax audit report and revised return also ,but in tax audit report status it is showing as filing type original instead of revised, whether it would attract any consequences

  2. Deepak Bubna says:

    Consider a situation where turnover of a business above Rs. 1 Crore to Rs. 2 Crore and has more than 95% of its receipts in non-cash form yet the profit derived is below 6% or 8% of gross turnover. Is that entity still subject to tax audit ?

    1. ca.rahuljain6229 says:

      no the enitity is not liable to tax audit as the turnover does not exceed two crores
      if u r showing profits from business as per section 44 AD.

  3. CA ANCHAL VERMA says:

    Penalty for non-filing of tax audit report is 0.5% of total turnover/gross receipts or 150000 which ever is less??
    You have mentioned 5% as penalty….is there any change in the provision??

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