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Tax Audit Due Date Extension – Practical Problems And Suggested Measures To Overcome

After lot of struggle by the Tax Payers, Tax Consultants, Chartered Accountants etc., the due date for e filing of tax audit U/s. 44AB of the Income Tax Act has been re extended by the Government to 07th November, 2017.
CA Sharad Jain

INTRODUCTION:

After lot of struggle by the Tax Payers, Tax Consultants, Chartered Accountants etc., the due date for e filing of tax audit U/s. 44AB of the Income Tax Act has been re extended by the Government to 07th November, 2017.

The main reasons for seeking the due date extension were that (a) on one hand, due to last minute rush, the website of the Income Tax Department got crashed and (b) on other hand the Chartered Accountants also felt it difficult to complete the tax audit work within the due date, due to various reasons e.g., large no. of assesses came to their offices for audit only near about due date, due to festivals, GST problems, human tendency, unawareness, other priorities etc.

Since when the provisions for tax audit have been introduced, the demand to extend the above due date has been raised almost every year due to one or more similar or different reasons. It is seen that in the last few years this demand has been raised much strongly. Almost every year an unpleasant and bitter situation has aroused between the Government and the Tax Payers, Tax Consultants etc. on this issue.

This position is not good. There is a strong need for the permanent solution of this persisting problem. For that purposes, firstly, the reasons for the above problem are required to be well known and carefully analyzed. Thereafter, the effective steps will have to be taken by the Government for permanent solution of the problem.

CAUSES BEHIND THE PROBLEM OF TAX AUDIT DUE DATE EXTENSION :

There are many causes behind the above problem. Some are permanent and some may be of temporary nature which arises due to circumstances prevailing in the particular year.

(1) Natural Human Tendency To Do The Work On Last Moment : It is a natural human tendency to do the work on almost last moment. Though every person do not have such tendency but large no. of peoples have this tendency. It is a pain of the Chartered Accountants’ community that even after many reminders, significant no. of clients comes for audit only near about the last date. This creates last minute rush and load in the office of the CA as well as on the IT Department’s website.

(2) No Apparent Business, Monetary etc. Benefit Is Attached With Tax Audit Work : Many assessee generally considers that the tax audit work is merely a formality. It is to be done only to protect themselves from penalty. They will not get any additional business / monetary benefit if they will give priority to the tax audit work over their business / other monetary affairs. Similarly, even if they will get their audit work done on last moment, there existing business / other monetary gains will not be affected. Further, some assesses and / or their accountants believes that if they will go for audit on last moment, then due to time shortage, their accounts will not be examined much and they will have to spare minimum time and energy for audit work.

(3) Tax Audit Due Date Felling In Festival Season : In India, most of the businesses are festival based. Many times above due date fells near about the major Indian festivals like Deepawali etc. Therefore, the assessee gives priority to their business affairs over tax audit work. Due to social, cultural, religious and family reasons, the priority is given to the festivals. Thus, movement of large no. of assesses for tax audit on last moment after the festivals are over, creates heavy rush and load.

(4) Delayed Issuance Of Forms, Rules, Utilities etc. : Many times the relevant forms, rules, utilities etc. are not issued by the Department timely. Due to this the audit work could not be started timely. Further, they are frequently changed when the audit work remains in progress. Due to this, those work which are under process / substantially completed are to be re done significantly.

(5) Inadequate Capacity Of The Departmental Informational Technology infrastructure : It is experienced on almost every occasion that the, server, website etc. of the Department could not bear the load of the work of large no. of assesses which occurs on / near about due date.

(5) Single Due Date For E filing Of Tax Audit Report for All Type Of Assesses / Cases : There is only a single due date for filing of tax audit report of all type of the assesses / cases. Thus, the load of all type of assessee / cases is accumulated on a single date and did not get distributed.

(6) Panic Of Lump Sum Heavy Amount Of Penalty : If an assessee could not file the audit report up to the due date then he his liable for heavy lump sum penalty. So when it appears that audit report may not be filed within due date, due to website failure or other reasons, panic is created and the due date extension is sought strongly.

(7) Ignorance About Penal Consequences : Many assesses, specially who became liable for the tax audit for the first time, do not have knowledge about above heavy lump sum penalty. Therefore, even they could have got their audit work done in earlier stages, they do not move for the same till last date / near about that.

(8) Government Hesitation To Extend Due Date : The due date for filing tax audit report is attached with the due date for filing of Income Tax Return, which in turn is related with the payment of Self Assessment Tax and levy of interest U/s. 234A. Any extension of due date results in probable loss of interest U/s. 234A to the Government as well as of delayed collection of taxes. Therefore, the Government hesitates in extension of due date. This results in clashes between the Government and Tax Payers etc. on this issue.

(9) Temporary / Reasons Related To Particular Year Only : There may also be temporary reasons related to one particular year e.g., natural calamities, economic events, substantial changes in law, procedures etc. This year GST complications were such additional reasons.

SUGGESTED MEASURES TO OVERCOME THE PROBLEM OF TAX AUDIT DUE DATE EXTENSION :

In this regard, various steps may be taken by the Government to ensure the permanent / substantial solution of the above problem. These are discussed as under :

(1) REMINDER LETTER BY THE DEPARTMENT : The Department may issue reminder letters in the months of June-July for timely filing of tax audit report, specially to those assesses who had filed their tax audit report on or near about due date in the immediately last year. This is practicable as presently the Department has already practice to send the reminder letters e.g., for deposit of advance tax to those who had deposited large amount of self assessment tax in preceding years, for filing of return who have entered in to specified transactions etc. The peoples takes the Departmental notices seriously. Therefore, this may gear up the tax audit process in much early stage.

(2) REMINDER MAIL AND MESSAGES : Presently, the Department has practice to send mail and messages to the assesses for various matters. Similarly, the reminder mail and messages may also be send to the existing tax audit assesses 5-6 times starting from the months of June-July mentioning the due date, penal consequences for not filing the report up to due date and warning that due date will not be extended. It may be effective as it is seen that generally the peoples takes the mails and messages from the CPC very seriously.

(3) NEWS PAPER AND ELECTRONIC MEDIA ADVERTISEMENT : Presently, the Department has practice to give advertisements in print and electronic media for various matters e.g., for deposit of advance tax etc. This may also be done for spreading awareness regarding tax audits.

(4) TIMELY ISSUANCE OF FORMS, RULES, UTILITIES : Apart from making the assesses aware and gearing them up timely, the Department is also required to issue the relevant forms, rules and utilities up to the 1st April of the assessment year and is also required to refrain from frequent changes therein up to the due date.

(5) MAINTAINING SUFFICIENT INFRASTRUCTURAL CAPACITY : The Department should also increase and maintain the capacity of its servers, website etc. at sufficient level (considering that almost 50%-60% assesses file their reports on or about last date) so that its system can bear the heavy load due to last minute rush.

(6) DIFFERENT DUE DATES FOR DIFFERENT TYPES OF ASSESSES / CASES : Different due dates for filing of tax audit report may be fixed for different types of assesses / cases e.g., The audits in the 44AD, 44AE etc. cases generally remains small and easy, The due date in respect thereof may be kept earlier and in respect of normal audits it may be kept later. This bifurcation may also be done on some other practical criteria/ basis. In such case, the last minute rush and load in CA offices as well as on IT Department website may get distributed.

(7) INSTEAD OF LUMPSUM HEAVY PENALTY, PENALTY / LATE FEE ON PER DAY BASIS ON SOME TIME BLOCK BASIS MAY BE PROVIDED : Instead of lump sum heavy amount, the penalty may be kept on the basis of per day up to which the default continuous (up to present penalty quantum of maximum of ½ percent of turnover or Rs. 1,50,000/- whichever is higher). This may reduce panic situation on last day or near about that, as the capable assesses may find themselves comfortable in filing the tax audit report even after the due date by paying the bearable late fee. This may increase the Government’s revenue on one hand and on other hand the auditor and the assesses will get sufficient time for good quality audit.

(8) ENSURING EARLY FILING OF TAX AUDIT REPORT THROUGH BANKS ETC. OTHER INSTITUTIONS: Many assesses gets loans / renewal of loans / subsidies and other benefits from the banks and other institutions. For this purpose they are required to submit the audited statements, audit report etc. to these institutions. The deadline for submitting the same for obtaining these benefits may be fixed earlier e.g., up to the month of August. Further, these institutions may be directed to make follow up for obtaining tax audit reports from earlier period e.g., from June July itself. Since in such situation, when the direct business / monetary benefit will be affected, the assessees may himself move for audit in early stage.

(9) SEPARATION OF TAX PAYMENT WITH TAX AUDIT AND RETURN FILING DUE DATE: The payment of self assessment tax and levy of interest U/s. 234A may be separated from the due date of filing of TAR and ITR. In that case the Government will be in a comfortable position to extend the due date as and when required, without any fear of probability of loss / delayed collection of revenue. Presently, there is already a successful independent system for the payment of advance tax and levy of interest U/s. 234B and C for non payment / delayed payment of advance tax. They are not related with due date of filing of TAR and ITRs.

(9) SUO MOTO EXTENSION OF DUE DATE FALLING IN FESTIVAL SEASON: Whenever the due date fell on or near about the major festivals, the Government should suo moto extend the same. Further, it should also be seen that the extended due date do not fell on or near about any other major Indian festival.

(10) EXTENSION SHOULD NOT BE TOO EARLIER OR TOO LATE: Whenever the due date is extended, it should not be extended much earlier or too later. Because in both the situations, the extension do not have required benefit. This year the first extension was made too earlier. Due to that the assesses became engaged in their other business etc. work and again moved for audit near about extended date and then further extension was required to be sought. The second extension was made too late when almost audit work was completed in any how manner. Thus, to obtain required benefit, the due date should be extended at least 7-8 days before the due date. Similarly, it should be extended in piecemeal of 10-10 days (instead of for lump sum period) as per the requirements of prevailing circumstances.

CONCLUSION : These were few suggested measures. There may be some more other effective steps which may help in ensuring timely completion of tax audits within the due dates, obtaining maximum benefits from date extension, if any in avoiding clashes arising on this issue almost every year.

Categories: Income Tax

View Comments (13)

  • Being one of the Chartered Accountants in India since 1970 , I do not agree with yours views for blaming Departments , Institute , etc as referred by you.
    If you wanted to find out solutions , I feel we are not up to the Mark for discharge our duties and obligation s , We do not have adequate trained staff, infrastructure in our Own offices , no planning , The Income tax department has given letters to the Institute that large number of Chartered Accountants filled Tax audit returns and Reports does not have duly approved Audit reports , ( visit ICAI web -site )
    We / I am Not suited to dealt with our obligations .
    Majority of our members are not best suited to dealt with Tax Audit , and e-filling experiences , set of audit programmes, why they are not able to completed the assignments ? Festival times ? No , not at all. We are able to do on finished products , We love money Just like ATM in Banks , Flash our membership Cards, signed sealed, deliver and take money in cash , raising bills will be latter on !!
    I am sure if Either Institute Picks 5000 Members e-filed Tax audit returns and reports and ask them to submit to the Institute the Program of them , More than 4500 members will failed to submit , this experience I gained by conducting Peer Review as one of the peer Reviewers of the Institute of Chartered Accountants of India .
    I will have to catch a flight/ Train from a particular Air port / Rly. Station departure time is 6PM , But I reached there at 5.55 PM . I will definitely miss the Aircraft/ Train ,
    Subhash Podder .
    FCA,
    MRN : 012073
    Date 07/11/2017
    Kolkata

    • Perfectly Said sir, Just only the sole reason once the membership is obtained anyone can sign but yet so many lack to do it despite of rigorous remainder by our institute they take it for granted.
      If this persists we may loose the trust in the name of Chartered Accountants as entrusted with Gov. and common people and we could see many other profession are taking the advantage of it.If we do not take this seriously then we make loose this also like other things ( VAT , Excise , Customs , Company Law and GST) upon which Govt. has given indications in the Draft " DTC " about our sister concerns.

      It has to be given in clear words by the Institute if not enacted properly the respective CA should loose the Licence and also every year our institute should pick up some common files filed with the Incometax department in mututal understanding to check the quality of it. Else CA would become just an Certifying authority and very soon if the quality does not stand at par even we may loose that.

      Fellow Member of ICAI

  • I am practically facing for the complexity of GST and got least time to view the documentations are used for AUDIT REPORT
    - One of the Basic Problem can’t ignore of DIGITAL SIGNATURE,
    A large number of Assessee has mobile but don't know how to revert the mail / massages for DIGITAL SIGNATURE VERIFICATION OFFICES,
    A large Number of Assesse completely unaware regarding massages received in their mobile and having no Idea how to operate the mail ID
    This is one of the critical condition and cause the assessee; have no knowledge of computer.
    I hope The Income Tax Department may think on Problems in Getting Digital Signature, A large number of assessee also not qualified to read the massages hence Requesting to the Department kindly Extend the Date and open other procedure for either Digital Signature or allow the Assessee with Careered Account to file their Audit 3CB WITH Aadhar AS USES IN GST MIGRATION
    THANKING YOU
    -

  • ऑडिट रिपोर्ट के प्रस्तुतिकरण में विलम्ब पर एक मुश्त दण्ड के स्थान पर जितने दिन विलम्ब हो , उतने दिन का दण्ड लगाया जाना चाहिए।

  • In the presentation of the audit report, the penalty should be imposed on the delay in place of a lump sum penalty, the number of days delayed..

  • Good Article,
    I also agree with the following points
    1. The different categories of tax audit assesses abound have different dates so that the server is not burdened and the issue of all clients coming at last moment is also take care of. E. G. 3CA/CB should have a date say 15 days prior to 3CA/CD. or say Companies, Proprietary Forms and Others should have different dates or some other criterion should be devised.

    2. The idea of reminder sms/emails are also a good idea.

    3. A major technical headache would be resolved of the MCA / INCOME TAX DEPTT/ GSTN devise a common platform and environment wrt use of Digital Signatures E. G. Common Java, Browser and System requirements so that the time wasted and tension of digital signature or java problems are minimal and one can concentrate on work rather than technical issues

    4. The lumpsum penalty leads to panic and ultimately compromise on quality. Incremental fine pm a daily basis is a good idea as lesser but surer penalty would definitely prompt unprepared assesses or CAs to pay a smaller amount of fine but not do a last moment mop-job. Also panic pressure on the server will also be reduced.

    5. There are lot of unnecessary details asked in tax audits which are easily available to authorities in other returns such as service tax, excise or PF etc. A lot of hard work can be saved if these are eliminated.

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