COMMON QUESTIONS YOU FACE DURING TAX AUDIT: ANSWERED BY C.A NITIN NANDA

Q1. Will Tax Audit Report u/s 44AD, 44AE, 44AF be counted in the specified limits of 45 Tax Audits? What are the limits on signing of Tax Audit Report?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008:

a) A CA can sign up to 45 Tax Audit.

b) In case of Partnership Firm, limit will be 45 / Partner.

c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF IS NOT APPLICABLE)

Q2. What are the Tax Audit Reports which are to be compulsorily filed online? Should we sign Tax Audit Report on 30^th September?  Where audit is to be conducted u/s 92E & 44AB, what is the last date of filling online Tax Audit Report?

Ans. As per Notification No. 34/2013 dated 01/05/2013, & Notification No. 42/2013 dated 11/06/2013, Audit reports under Sections 10 (23C) (iv), (v), (vi) or (via), 10A, 12A (1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB are to be filed electronically. (It covers audit report u/s 44AD, 44AE, 44AF also) (FROM FY 2012-13, SEC 44AF ISNOT APPLICABLE). As the word “before” has been used in sec. 44AB, we should not sign Tax Audit Report on 30^th September. You should sign Tax Audit Report before 30^th September, since the assessee is required to “obtain” Tax Audit Report before the due date i.e. 30^th September.  Where audit is to be conducted u/s 92E & 44AB, 3Oth sep. is the last date of filling online.

Q3. Please advice in case of partnership firm can only one partner sign all the reports?

Ans.

a) Clause 12 Of Part I of Schedule I of C. A. Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm

b) Sign can be either digital or physical

c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.

Q4. An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps:

a) Combine data of two Tax Audit Reports and submit as one

b) If tax audit conducted by two CAs, any CA can submit.

c) It is advised to attach physical copies of both Tax Audit Reports too, for disclosure of the fact.

Q5. Can Income tax Return be e-filed after 30^th September? However we will file Tax Audit Report within 30^th September?

Ans. Yes, Online Tax Audit Report is to be filed by 30^th September to avoid penalty of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower. However, return may be filed later. However, such return will be treated as belated return.

Q6. What are the steps to be followed for E-filling of Tax Audit Report?

Ans. Step 1- One Time Registration of Chartered Accountant at E-filling website

Step 2 – Login to Assessee account at e-filling website and Add CA

Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.

Step 4 – Uploading XML file at E-filling website from CA’s Login Id

Step 5 – Approval of form uploaded by CA at E-filling website from Assessee’s Login Id

Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately

Q7. What are operating system and runtime environment requirement for E-filling of Tax Audit Report?

Ans. Operating System – Windows XP with Service Pack 3/ Windows 7/ Windows 8.

Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.

Q8. Our system becomes very slow during working on e-utility. What should we do?

Ans. Remove all old versions of Java to improve performance. Better use Google chrome. You can  use Mozilla Firefox.

Q9. I am unable to register as CA as there is difference in name/date of birth as per ICAI and PAN data. What to do?

Ans. It is requested to file form 49 amendment and get data rectified in PAN immediately. Kindly also note that the day you receive a SMS that your pan amendment has been approved, you will be able to register at site whether you actually receive PAN or not. Alternatively, please follow instructions given by ICAI in such case which are available at icai.org.

Q10. What are the documents to be attached to Tax Audit Report?

Ans. B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

Q11. System is not accepting negative figures in brackets i.e. “()”. What should we do?

Ans. Use negative sign. i.e. minus “-“

Q12. Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?

Ans. Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available, 

a) Write nil in online form 3CD &

b) Report why quantitative details is not provided in the following two places:

i) In paper form 3CD &

ii) Notes to accounts

c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: “Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details”

Q13. An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.

Ans. In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.

i. Assets put to use on or before 2^nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2^nd October, wherever possible.

ii. Assets put to use after 2^nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31^st March, wherever possible.

It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.

The above can be summarized in the following steps:

Step 1 – All fixed assets may be grouped into different blocks of assets.

Step 2 – Each of these groupscan be further divided into 2 parts. (i) Assets put to use on or before 2^nd October (ii) assets put to use after 2^nd October (eligible for half of depreciation)

Step 3 - For assets brought on or before 2^nd October, we can argue that those assets were put to use on 2^nd October and accordingly relevant entries can be made in the online form 3CD.

Step 4 - For assets brought after 2^nd October, we can argue that those assets were put to use on 31^st March and accordingly relevant entries can be made in the online form 3CD.

Step 5 - It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.

Q14. I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.

Ans. It is the inherent problem of the software but your xml file contains the correct data. Open the xml file in Internet Explorer and check it. You can edit xml file, however you have to adopt unceremonious way to edit the xml file for the necessary correction for the item in subsequent rows of point 28A. Therefore it is advised to fill up point 28A before filling any other point from point 7 onwards.

Q15. When we reopen draft saved xml file, many fields which we had already entered is showing blank.

Ans. The software has some inherent errors as a result when we reopen draft saved xml file, it shows blank i.e. we have to re-enter the fields again. These fields are 7(B), 8(B), 9(A), 10, 11(D), 12(B), 21(Notes), 22(A), 22 AND 23.

Q16. How we can view data of XML before uploading?

Ans. You can view the xml file of tax audit report prepared in e utility of department. The process is as follows:

Go to Programme → Microsoft Office → Microsoft Office Access 2003/2007 → New blank data base →Click blank data base → A window with file name database1.accdb will appear on the right hand side pane → Click on create →Your new date base is saved by default in my Documents. (You may save the same to your choice folder)

A new data base is opened. Go to and click External data → Click XML file>Browse the xml file for which you want to create/view or save the data → Click OK → Import XML → Click OK → Check the box “Save import steps”→  Close.

Your data base is ready, on the left hand side pane the indexes for “All Tables” do appear. By clicking any Table/ any point you can easily view and save its contents presently appearing in the XML file. Once the xml file is saved and the data base is reopened it will show the updated entries lying in the XML file. If some member finds any error in the tables he can easily make corrections opening the utility.

Q17. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans.  You can save the work in middle by using “Save Draft” Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.

Q18. CA has no option to print uploaded xml files. How to print?

Ans. CA has no option to print uploaded xml files. However, it can be printed from assessee’s login id, even before approval by assessee as the said xml file can be downloaded, from assessee’s login id, in the pdf format by default.

Q19. Can online filed Tax Audit Report be revised?

Ans. A Tax Audit Report which has not been approved by assessee can be revised. However after it has been approved by the assessee, it should not be revised. However, there is no restriction by the utility, as of now, to upload revised xml. So we should take due care, so that correct data is uploaded in the first instance itself. However, members may kindly note that, all the xml files uploaded will be there in their domain.

Q20. I have uploaded 5 returns without uploading tax audit as it was required to submit offline at that time. Should we submit these again online?

Ans. No, you are not required to submit IT Return online again. However, kindly ensure that Tax audit Report is duly uploaded within due date.

Q21. Is tax auditor responsible for delay in uploading of Tax Audit Report?

Ans.  Guidance Note on Tax Audit states that normally, it is the professional duty of the CA to ensure that the audit accepted by him is completed before the due date. Hence, yes, if delay is attributable to his part.

Q22. What is the format for maintaining records of Tax Audit Assignments?

Ans. Record of Tax Audit Assignments

1. Name of the Member accepting the assignment

2. Membership No.

3. Financial year of audit acceptance

4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.

Sl. No.	Name of the Auditee	AY of the Auditee	Date of Appointment	Date of acceptance	Name of the firm on whose behalf the member has accepted the assignment	Date of communication with the previous auditor (applicable)
1	2	3	4	5	6	7

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