Tax Audit under section 44AB

Tax Audit under section 44AB is required to be conducted by a Chartered Accountant holding full time Certificate of Practice. Tax Audit ensures the correctness of Books of Account maintained by taxpayer and income is computed as per the provisions of the Income-tax Act. Tax audit report is furnished in Form no. 3CA/3CB & Form no. 3CD.

Form no. 3CA is required to be furnished when the assessee is required to get its accounts audited under any law other than Income-tax law.

Audit report in Form no. 3CB is required to be furnished in case where books of account of assessee aren’t required to be audited under any other law (i.e. law other than income tax law).

In Form No. 3CB, the chartered accountant gives a declaration that he has examined the financial statement of the assessee for the period under consideration and forms an opinion on such audited financial statements that these statements reflect true and fair view and reports the observations/comments/ discrepancies/ inconsistencies figured out, if any.

Form No. 3CD is the format in which the statement of particulars of tax audit is required to be furnished. This form has a total of 44 clauses where the auditor has to report on various matters contained therein.

Form No. 3CD is divided into two parts, Part A and Part B, wherein;

1. Part A covers the basic factual details about the assessee and
2. Part B requires the particulars of various compliances under the provisions of Income Tax Law.

• Tax audit makes the income computation for filing the returns more efficient.
• The main intention behind tax audit is to assist the tax authorities in determine correct tax liability.
• Tax audit also restricts the fraudulent practices.
• Tax audit facilitates proper maintenance of books of accountsand revenue / expense.
• Tax audits ensure proper administration of tax laws presentation and submission before the prescribed authorities.

1. For persons or individuals carrying on a business or a profession whose accounts are to be audited-
   - Form No. 3CA - Audit Form
   - Form No. 3CD- Statement showing relevant particulars
2. For persons or individuals carrying on a business or a profession whose accounts are not required to be audited
   - Form No. 3CB- Audit Form
   - Form No. 3CD- Statement showing relevant particulars

If a person has failed to audit his books of accounts as per the provisions of act then he shall be liable to pay penalty under section 271B of income tax act. As per section 271B penalty is 0.50% of turnover to the maximum of Rs 1, 50,000. However there is no penalty if there is reasonable cause for such failure.

Some of the accepted causes are-

1. Resignation of tax auditor
2. Death of partner in charge of accounts
3. Strikes, lockouts for a long period
4. Loss of accounts on cause of fire or theft
5. Other Natural calamities

As per section 44AB of Income Tax act 1961, every person shall get his books audited by a chartered accountant if his gross receipts in the previous year exceeds

1. In case of person carrying on business – Turnover exceeds Rs 1 crore
2. In case of person carrying on profession – Gross receipts exceeds Rs 50 lakhs
3. Person carrying on business or profession under section 44AD, 44ADA, 44AE claims income lower than the specified limits– The specified percentage i.e.(6% (transactions through banking system), 8% (business) or 50% (professionals).

Due date for filing Tax Audit report under section 44AB is 30th September of Assessment Year of the relevant Previous Year. However, if the assessee is required to submit report pertaining to international or specified domestic transactions under section 92E, then due date of filing Tax Audit Report is 30th November of the relevant Assessment Year.