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The Central Board of Direct Tax, apex direct tax policy body of India has recently amended tax audit report formats w.e.f. 5th March, 2024 and through this, has cast a wider responsibility on the tax auditor. Let us explore the provisions of CBDT Notification No. G.S.R. 155(E) and changes made in Tax Audit Report in Form 3 CD:

1. Special Tax Regime of low tax rates by resident cooperative society: Tax Auditor will report whether the assessee has opted for such low tax regime under Section 115BAE in Clause 8a and e-filed the Form 10-IFA. In case of “Yes” e-filing already done, the auditor will obtain a copy. In case the assessee does not intend to claim, the auditor will seek a management representation letter. In case of “No”, not yet, the auditor will obtain the letter of intention to avail or not under Section 115BAE. In case of the assessee opting by e-filing Form 10-IFA, the implications on other sections like additional depreciation etc. need to be evaluated and reported by the tax auditor.

2. In Profit and Loss Account, the profits under presumption tax scheme are to be reported in Clause 12. The reporting obligation change is only related to professionals under Section 44ADA.

3. Adjustment to written down value under Section 32 in Clause 18: The tax auditor will report the adjustment to written down value in case of domestic companies opting for reduced tax rates, for AY 2024-25.

4. Amounts admissible under Section 32AC, 32AD etc:

Clause 19 has added two new entries:

  • Row with entry “35ABA”
  • Row of “any other relevant section

Tax Auditor is required to certify all deductions claimed in computation of income. He needs to obtain draft computation of income and give cross references in his notes to avoid multiple allowances/disallowances. This provision has cast wide and huge responsibility on a tax auditor.

Tax Auditor-Recent Onerous Responsibility

5. Impact on auditor’s responsibility on changes in items of expenditure covered under 6th, 7th and 8th items in Tabular format.

  • Entry 6: “Expenditure for any purpose which is an offence or is prohibited by law or expenditure by way of penalty or fine for violation of any law (enacted in India or outside India”. Any such expenditure debited in P&L account requires reporting whether in violation of laws in India or abroad.
  • Entry 8: “Expenditure incurred to compound an offence under any law for the time being in force, in India or outside India.”

The tax auditor is required to report even if the amount paid is under foreign law.

  • Entry 9: “Expenditure incurred for any purpose which is an offence or which is prohibited by law” with a more specific description related to providing benefits or perquisites to a person, regardless of their business or professional status, which violates any law, rule, regulation, or guideline governing their conduct. Here there is no reference of outside India.

Tax auditor is required to report on the amounts debited to P & L Account, and not on allowability or otherwise of these items.

6. Reporting on delayed payment to Micro and Small Enterprises (MSEs) under Section 43B (h) under Clause 26:

  • In case of payments outstanding to MSEs on 31st March, 2024, the tax auditor will report them, even of the payment is made before due date of filing of return. Further, the interest payable as per Section 16 of MSMED Act will be reported in Clause 22.
  • The auditor shall  report whether the assessee has system to identify MSE suppliers and has done  upward classification to medium enterprise, MCA filing on half yearly basis, payment by cheques to MSEs, checking BRS, Advance payments, payment for capital goods etc.

These changes will have consequences on the upward revision of fees, upgrading infrastructure, hiring more manpower and auditor to be microscopic in analysing the financial statements etc. Expecting tax auditor to know foreign laws and reporting in any other sections are sweeping changes to shift the burden on tax auditors.

In case you have any concern and queries or need any support in tax compliance/Tax Audit, you may like to contact us.


Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; +91 9910744992,

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The writer is an expert in the areas of compliance and government approvals in India. He writes very often on regulatory matters in areas of DPIIT, RBI, FDI, MCA, International taxation, GST, Valuation-SFA, NRI and other similar areas. View Full Profile

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April 2024