Tax Audit

Income Tax Audit 

Income Tax audit, as evident from the name, is aimed at evaluating whether an individual or company has accurately filed the income tax returns of an assessment year. An external agency is mandated to assess returns filed from income, deductions and expenditures and other rules as mentioned by the Income Tax Act, 1961. The tax audit process simplifies the computation of tax returns. The Chartered Accountant of the concerned agency performing the tax audit has to submit Form 3CA or Form 3CB, and Form 3CD, as an audit report comprising of the observations.

Income Tax Audit for companies whose tax audit is not conducted under Section 44AB of the Income Tax Act, 1961

Taxpayers who have to get their accounts audited under any law other than Section 44AB of the Income Tax Act, 1961, (for instance, stock audit or statutory audit) do not have to get their accounts audited again for the purpose of income tax audit. In such cases, accounts audited under other laws can be presented as a tax audit report for income tax filing, provided it is submitted before the stipulated due date.

The following are the other sections under Income Tax Act, 1961, which also lay down regulations related to income tax audit in India.

 These are presumptive taxation schemes, wherein a pre-determined percentage of income is assumed to be the gain or profit meant for taxation.

  • Section 44BB: For Non-Resident Indians (NRIs) involved in business specialising in the mineral oils industry, like exploration.
  • Section 44BBB: International company involved in the business of civil construction etc. in certain power projects.
  • Section 44AD: Any business except those businesses mentioned under Section 44AE.
  • Section 44ADA: This section focuses on the regulations regarding income tax audits for eligible professionals.
  • *Section 44AE**: Businesses specialising in leasing, hiring and plying of goods carriages.

Forms Required for Tax Audit

  • Tax Audit reports can be presented in two different ways by tax auditors, differing on the basis of the laws under which the accounts have been audited.
  • Form 3CB and Form 3CD: For tax audit reports presented under Section 44AB of the Income Tax Act, 1961, Form 3CB and the prescribed details have to be reported in the Form 3CD.
  • Form 3CA and Form 3CD: When a taxpayer prefers to get the accounts audited under any law other than Section 44AB, then the relevant form is Form 3CA, while the prescribed details have to be reported in the Form 3CD.

Tax Audit Report Filing Process

The following is the procedure for filing tax audit report:

  • The Chartered Accountant assigned for conducting tax audit of an individual or an organisation has to present the tax audit report online, using his/her official login credentials.
  • The taxpayer also has to mention the relevant information about their Chartered Accountant in their login platform.
  • Once the tax audit report is uploaded by the auditor, it has to be either accepted or rejected by the taxpayer on their login portal. If the taxpayer rejects the tax audit report, the entire process has to be repeated until the tax audit report is accepted by him/her.
  • Tax audit report has to be filed on or before the pre-determined due date of filing income return, i.e., 30th November of the subsequent assessment year for taxpayers who have engaged in an international transaction and 30th September of the subsequent assessment year for other taxpayers.

Penalty for Non-compliance of Tax Audit

  1. Non-compliance of tax audit regulations by taxpayers attracts a penalty of whichever is lower from the following:
  • 0.5% of total sales or
  • Turnover or
  • Gross receipts or
  • Rs. 1,50,000

2.  A penalty is waived only when a taxpayer is able to show a reasonable cause for non-compliance. If the account books of a business or profession is not audited as per Section 44AB, then the assessee has to pay penalty as per Section 271B of the Income Tax Act. In case of a delay in completing audit and submitting the report on time (before or on September 30), then 0.5% of the turnover, a maximum of Rs. 1.5 lakh, has to be paid as penalty. If there is a genuine reason for delay or non-filing of audit report, then as per Section 273B, no penalty will be applicable. Among the permitted reasons are:

  • Delay caused by resignation of the tax auditor
  • Delay caused by death or physical inability of the partner responsible for accounts
  • Delay caused by labour issues such as strikes or lock-outs
  • Delay caused by loss of accounts due to theft or fire, or incidents that are not under the assessee’s control
  • Natural calamities


Is tax audit once applicable always applicable?

tax audit whether applicable or not depends on rel fin years gross receipts or gross turnover there is no such hard and fast rule that once tax audit is applicable it is applicable for every year.

Who is required to get his accounts audited?

Ans: As per section 44AB, following persons are compulsorily required to get their accounts audited : A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.

Is tax audit mandatory for companies?

Tax Audit is not compulsory for companies. Tax Audit depends on turnover of company. If the Turnover exceeds Rs. 40.00 Lacs then a company is compulsory liable to Tax Audit.

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