TAX AUDIT UNDER SECTION SECTION 44AB

Tax Audit means an official examination and verification of financial accounts and records. It is required to be performed only by a Chartered Accountant u/s. 44AB of the Income Tax act, 1961.

Important Provisions regarding Tax Audit are as follows:-

Who is required to get his accounts audited?

·         Persons carrying on Business: Every person carrying on business shall if his/her total Sales, turnover or gross receipts exceeds Rs. 1 Crore in the financial year gets his/her accounts compulsorily audited by a Chartered Accountant before the due date.

·         Persons carrying on Profession: Every person carrying on profession shall if his/her total gross receipts in profession exceeds Rs. 25 Lakhs in the financial year gets his/her accounts compulsorily audited by a Chartered Accountant before the due date.

·         Persons covered u/s.44AD/44AE/44BB/44BBB: Persons covered under these sections are required to get their accounts compulsorily audited if they claim that their income from the said business is lower than the deemed profits and gains computed under the relevant sections.

·         Where accounts are audited under any other law: It is sufficient compliance with the  provisions if such person gets the accounts audited under such other law before the due date and furnishes by that date the report of the audit as required under such other law.

Due Date

Due date is 30^th September of the relevant assessment year. Thus due date for Tax Audit for FY 2012-13 would be 30^th Sep, 2013.

Report of Audit of Accounts

The report of audit of accounts of a person required to be furnished under section 44AB:-

FORM 3CA

In case of persons who carries on business and profession and whose accounts have been audited under any other law.

FORM 3CB

In case of persons who carries on business and profession but not being a person referred to       above.

FORM 3CD

Statement of particulars required to be furnished under section 44AB of the Income tax Act, 1961 by the persons carrying on business and profession.

Penalty

If any person fails to get his/her accounts audited as required u/s 44AB before the due date then penalty u/s 271B will be attracted. The amount of penalty leviable will be half percent of total sales, turnover, or gross receipts, etc. Or Rs. 150000 whichever is less. No penalty shall be levied if there is a reasonable cause for such failure.

Ceiling Limit

A Chartered Accountant in full time practice cannot accept more than specified number of Audit assignments and the specified number of audit assignments are 45. This limit does not include audits under section 44AD, 44AE of the Income Tax Act, 1961.

If a member is a partner in more than one firm then the total assignments taken by him in all the firms shall not exceed 45.

Furnishing of Tax Audit Report

Earlier Audit Reports u/s 44AB were not required to be attached with Income Tax returns due to e-filling of returns. The Income Tax department noticed some discrepancies that companies were furnishing fake name and registration number of auditors. Some people were not getting their accounts audited to save money.

 Hence Income Tax Department vide Notification no. 34/2013 dated 1^st May, 2013 has made certain changes in Income Tax Rules. From the Assessment year 2013-14 onwards, in case an assessee is required to furnish report under sections 10(23C)(iv), 10(23C)(v), 10(23C)(vi), 10(23C)(via), 10A, 12A(1b), 44AB, 92E or 115JB he shall file the report electronically on or before the date of filling the return of income.

This Article has been Shared by Student of ICAI Palak Aggarwal. She can be reached at aggarwal.palak2809@gmail.com