Tax Audit Report- More Compliances needed Key Changes / Amendment in Form 3CD

Introduction

CBDT has vide notification no. 33/2014 dated 25.07.2014 revised the format of Tax Audit Report (referred as TAR) to be furnished under section 44AB of the Income tax Act 1961 with effect from 25.07.2014.

The revised report has added some new clauses and amended few existing clauses to increase/improve disclosure requirements. The new form requires tax auditor to furnish more and detailed information in the new form for tax audit report.

Changes:

Major changes have been made with a view to have more information and analysis in standard forms. Many details will have to be furnished in comprehensive, tabular and analytical forms.

Some changes are to incorporate new provisions or more provisions which are in force but were not covered in TAR. The style and pattern of signature has also been changed and more information is required about the person signing the report.

Effective date:

The amended forms shall come into force w.e.f. 25.07.2014. The existing Form No. 3CA, Form No. 3CB and Form No. 3CD have been substituted vide notification no. 33/2014 dated 25.07.2014 with immediate effect. CBDT has withdrawn old utility of form No. 3CD. Taxpayers and CAs are advised to await the release of the new schema and utility to submit in the newly notified aforementioned Forms and advised that any upload using the old Forms will not be valid even for previous AYs in view of the notification of CBDT. CBDT is expected to release new schema and updated utility for e-filing soon.

Key Changes/Amendments made in the Tax audit Report:

Some of major changes having impact of reporting requirements and more detailed working are as follows:

FORM 3CA:

1.     Now we have to mention the period for which profit & loss account/ Income and expenditure account has been prepared. This assumes importance if accounts are prepared for more than or less than 12 months.

2.     In the opinion part, now apart from mentioning that particulars in Form 3CD give a true and correct view we also have to mention our observations/ qualifications if any.

FORM 3CB:

Changes made are similar to that in Form 3CA as mentioned above.

FORM 3CD:

Now it has 41 clauses against 32 clauses prior to this notification. The key changes made in Form 3CD are addition of some new clauses thereby requiring more disclosures and doing away with certification by client/ auditee. Listed below are the all modifications/ additions made in Form 3CD.

To see the changes in the clauses click here

These forms have to be signed (with Seal) by a person eligible to sign the report as per the provisions of section 44AB of the Income Tax Act, 1961.

Further, “Annexure 1” to Form 3CD has been removed from reporting because some of information were found in audited accounts and also in the form of IT Return filed by assessee. Therefore, the omission of Annexure 1 as an annexure makes no impact on reporting requirement or collection of information.

Conclusion:

The attached modificaiton increases the responsibilities of the Chartered Accountants while performing the Tax Audit, as from now the Auditor has to ensure enhanced compliances than earlier. As per revised TAR forms, tax audit will a require lot of additional time for checking various aspects, collection of information not fully disclosed by client’s staff, elaborate checking is needed, method of cross verifications will have to be adopted, more responsibility has been casted upon tax auditors.

As disclosure requirements are also increased substantially, the auditor can no longer just rely on the certification received from the client, as the amendment requires specific disclosures to be made.

Disclaimer: The information contained in this write up is to provide a general guidance to the intended users. The information should not be used as a substitute for expert consultations. An author recommends that professional advice should be sought before taking any action on specific issues.

Download revised Form 3CA 3CB and 3CD 


Author of this article is Harsha Ramnani. She is practicing Chartered Accountant. She can be reached at harsha.ramnani01@gmail.com