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TABLE OF COTENT
1.1 What is Tax Audit?
1.2 What is the objective of Tax Audit?
1.3 Applicability of Tax Audit
1.4 What Is Tax Audit Report?
1.5 What is the due date by which a taxpayer should get his accounts audited?
1.6 What is the penalty for not getting the accounts audited as required by section 44AB?
1.7 General Principles to be kept in mind while preparing the statement of particulars for Form 3CD
1.8 Important points to be considered by the Tax Auditor while furnishing the particulars in Form No. 3CD
2 Section 44AB of Income Tax Act, 1961 – Compulsory Audit of Accounts of certain persons carrying on Business or Profession
2.1 Section 44AB – compulsory audit of accounts of certain persons carrying on business or profession
2.2 Meaning of accountant [section 288(2)]
2.3 Applicability of tax audit for the A.Y. 2020-21
2.4 What if assessee is having business as well as professional income?
2.5 What if assessee is having more than one business?
2.6 Prescribed limit shall be checked every year
2.7 Tax audit is not an investigation
2.8 Mr. Y, a chartered accountant in practice holds appointments as a statutory auditor of 21 companies
2.9 Company cannot carry profession
2.10 Applicability of section 44AB to non-resident
2.11 Whether tax audit applicable where income is exempt u/s 10?
2.12 Applicability of tax audit on agriculturist
2.13 Clarification by CBDT on applicability of provisions of section 44ab to political parties
2.14 Applicability of tax audit on commission agents, arahtias etc.
3 Business Vs Profession
3.1 Business Vs Profession
4 Meaning of Sales, Turnover and Gross Receipts
4.2 Gross Receipts
4.3 Whether out of pocket expenses received by a professional should form part of his gross receipts for purposes of this section or not?
4.4 Turnover in case of Share Brokers
4.5 Turnover in case of Agency Business
4.6 Turnover in case of Shares, Securities and Derivatives
5 Presumptive Taxation Scheme
5.1 Section 44AD: Special Provision for computation of Income from business on presumptive basis
5.2 Section 44ADA: Special Provision for computation of Income from profession on presumptive basis
5.3 Section 44AE: Special Provision for computing profits and gains of business of plying, hiring or leasing goods carriages
6 Assessee’s and Tax Auditor’s Responsibility
6.1 Assessee’s Responsibility
6.2 Tax Auditor’s Responsibility
7 Penal Provisions
7.1 Penalty for not getting the accounts audited as required by section 44AB
7.2 Instances where Tribunals/Courts have accepted as “reasonable cause”
7.3 Cases where delay in completion of statutory audit was considered reasonable cause for non-compliance with section 44AB
8 Tax Audit Report (Form 3CA/3CB & 3CD)
8.1 Form 3CA
8.2 Form 3CA Components
8.3 Form 3CB
8.4 Form 3CB Components
8.5 Form 3CD
9 Standard on Auditing (SA) 700 and Form 3CD
9.1 Standard on Auditing (SA) 700
10 Accounting Standards Mandatorily required in respect of Tax Audit u/s 44AB
10.1 Accounting Standards Mandatorily required in respect of Tax Audit u/s 44AB
10.2 While discharging their attest function, the members of the Institute may keep the following in mind with regard to the above Standards
11 Appointment of Tax Auditor
11.1 Letter of Appointment for Tax Audit
11.2 Who cannot be tax auditor?
11.3 Tax Audit assignments under Section 44 AB of the Income Tax Act, 1961
11.4 Removal of Tax Auditor
11.5 Communication required with Previous Auditor
12 Clause by Clause Analysis of Form 3CD
12.2 Checklist for Clause-1
12.4 Checklist for Clause-2
12.6 Checklist for Clause-3
12.8 Checklist for Clause-4
12.10 Checklist for Clause-5
12.12 Checklist for Clause-6
12.14 Checklist for Clause-7
12.16 Checklist for Clause-8
12.18 Checklist for Clause-8a
12.20 Checklist for Clause-9
12.22 Checklist for Clause-10
12.24 Checklist for Clause-11
12.26 Checklist for Clause-12
12.27 Checklist for Clause-13
12.29 Checklist for Clause-14
12.31 Checklist for Clause-15
12.33 Checklist for Clause-16
12.35 Checklist for Clause-17
12.37 Checklist for Clause-18
12.39 Checklist for Clause-19
12.41 Checklist for Clause-20
12.43 Checklist for Clause-21
12.45 Checklist for Clause-22
12.47 Checklist for Clause-23
12.49 Checklist for Clause-24
12.51 Checklist for Clause-25
12.53 Checklist for Clause-26
12.55 Checklist for Clause-27
12.57 Checklist for Clause-28
12.59 Checklist for Clause-29
12.61 Checklist for Clause-29A
12.63 Checklist for Clause-29B
12.65 Checklist for Clause-30
12.67 Checklist for Clause-30A
12.69 Checklist for Clause-30B
12.71 Checklist for Clause-30C
12.73 Checklist for Clause-31
12.75 Checklist for Clause-32
12.77 Checklist for Clause-33
12.79 Checklist for Clause-34
12.81 Checklist for Clause-35
12.83 Checklist for Clause-36
12.85 Checklist for Clause-36A
12.87 Checklist for Clause-37
12.89 Checklist for Clause-38
12.91 Checklist for Clause-39
12.93 Checklist for Clause-40
12.95 Checklist for Clause-41
12.97 Checklist for Clause-42
12.99 Checklist for Clause-43
12.101 Checklist for Clause-44
13 Miscellaneous Concepts
13.1 Commonly found errors mentioned by ICAI
13.2 Signature and Stamp/Seal of the Signatory
13.3 Unique Document Identification Number (UDIN)
13.4 Code of Ethics
14 Relevant Forms
14.1 Form 3CA
14.2 Form 3CB
14.3 Form 3CD
15.1 Appendix-A: Form 61
15.2 Appendix-B: Form 61A
15.3 Appendix-C: Form 61B
15.4 Appendix-D: List of Business Codes
15.5 Appendix-E: Circular No. 208, dated 15th November, 1976 F.No. 208/7/76-ITA-II [Section 69D of the Income-tax Act, 1961 – Clarification Regarding] AND Circular No. 221, dated 6-6-1977 F. No. 208/25/76-IT(A-II) [Whether provisions of the section are applicable to darshani hundi transactions]
16 Frequently Asked Questions (FAQ)
16.1 What is a tax audit?
16.2 In which form the tax audit report has to be furnished?
16.3 If a person has got his accounts audited under any other law, then is it compulsory for him to get his accounts audited again under Income-tax Act?
16.4 What are the due dates for filing Tax Audit Report?
16.5 Who is required to get books of accounts audited?
16.6 Mr. Arun carries on business and his total turnover from the business is Rs. 1.20 Cr? Does he require getting his books audited under Income Tax Act?
16.7 Mr. Sanjay carries on business and his total turnover from the business is Rs. 2.5 Cr? His cash receipts and cash payments do not exceed 5% of the total receipts and payments. Does he require getting his books audited under Income Tax Act?
16.8 Mr. Varun carries on profession and his gross receipts from the profession is Rs. 52 lacs? Does he require getting his books audited under Income Tax Act?
16.9 Mr. Nipun carries a business whose total turnover for the financial year 2020-21 is Rs. 4.5 crore. His total cash receipts and cash payments are less than 5% of total receipts and total payments respectively. Does he require getting his books audited under Income Tax Act?
16.10 Mr. Vishal carries a business whose total turnover for the financial year 2020-21 is Rs. 4.5 crore. His total cash receipts and cash payments are more than 5% of total receipts and total payments respectively. Does he require getting his books audited under Income Tax Act?
16.11 Mr. Nitin carries a business whose total turnover for the financial year 2020-21 is Rs. 12 crore. His total cash receipts and cash payments are less than 5% of total receipts and total payments respectively. Does he require getting his books audited under Income Tax Act?
16.12 How to avail the benefit of the enhanced limit of Rs. 10 Crores for the tax audit?
16.13 Can the professionals avail the benefit of the enhanced turnover limit of Rs. 5 Crore for the tax audit?
16.14 Is it necessary to appoint statutory auditors as tax auditors?
16.15 I am working in a public limited company having businesses in more than one state. Can we appoint more than one CA firms as Tax Auditor?
16.16 In case tax audit is conducted by joint auditors, what is the procedure to upload tax audit report electronically?
16.17 What is the procedure to furnish revised audit report electronically?
16.18 Is there any upper limit on the no. of audit reports which can be uploaded by a Chartered Accountant on e-filing portal?
16.19 If there are 10 partners in a firm of Chartered Accountants, then how many tax audits reports can each partner sign in a financial year?
16.20 My relative is A CA in practice since last 10 Years and I want to appoint him as Tax Auditor of my Company. Can I appoint my relative as the Tax Auditor?
16.21 Whether Schedules and Notes to Accounts are also required to be uploaded with Balance Sheet and P&L?
16.22 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?
16.23 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.
16.24 Is tax auditor responsible for delay in uploading of Tax Audit Report?
16.25 What are the penalties for non-furnishing a Tax Audit Report? What are the circumstances under which penalty cannot be imposed for non-furnishing of Tax Audit Report?
16.26 Is communication with the previous tax auditor necessary? Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?
16.27 How to calculate the gross receipt or sales turnover for a tax audit?
16.28 How to calculate the sales turnover of the commission agent?
16.29 How to calculate the sales turnover of share broker?
16.30 How to calculate sales turnover in case of a speculative transaction?
16.31 How to calculate sales turnover in case of derivatives?
16.32 How to calculate sales turnover in case of multiple businesses?
16.33 Whether GST shall be included while calculating the gross turnover or receipt?
16.34 Whether a person opting for presumptive taxation scheme under section 44AD is required to get his accounts audited?
16.35 What are the due dates for filing of tax audit report?
16.36 How to furnish the tax audit report to Income-tax Dept.?
16.37 Whether a tax audit report can be revised?
16.38 Is there any penalty on late filing of Audit report?
16.39 Whether the provisions of tax audit applicable to business under section 11(4A)?
16.40 Whether the reporting in Form 3CD shall be made as per books of Account or after adjustment as per the Income Computation & Disclosure Standards (ICDS)?
16.41 Who has to follow ICDS?
16.42 Who is required to maintain books of accounts as per Section 44AA?
16.43 What documents should be maintained by the taxpayers to comply with the requirement of maintenance of books of accounts as per Section 44AA?
16.44 Mr. Keshav is maintaining books of accounts at more than one location. Whether the address of all the locations is to be mentioned in the audit report?
16.45 An assessee has changed the method of accounting from mercantile to cash basis. What disclosure is required in Form 3CD?
16.46 Whether adoption of Ind AS for the first time could be considered as ‘Change in Method of Accounting’ for disclosure in Form 3CD?
16.47 Whether GST registration no. of the assessee has to be furnished in Form 3CD if the assessee is liable to pay tax under reverse charge?
16.48 If an assessee has multiple GSTIN, which registration no. needs to be furnished in Form 3CD?
16.49 If shares of members of AOP are unknown during the previous year, whether it is required to be reported in Form 3CD?
16.50 Whether it is mandatory to disclose the nature of all the businesses carried on by the assessee and any change therein?
16.51 Mr. Vikas has opted for the presumptive scheme under Section 44AD in respect of one of his business. Whether auditor is required to mention details of such business in the audit report?
16.52 How to ensure that the profit has been computed correctly if the profit & loss account also includes the profit computed on a presumptive basis?
16.53 How to compute the amount of increase or decrease in profit due to compliance with ICDS-IV?
16.54 Sub-clause (d) of Clause 13 requires the details in respect of the adjustment required for complying with the provisions of ICDS. Whether such adjustments are required to be entered separately for income taxable under the head “PGBP” and Income taxable under the head “Other Sources”?
16.55 An assessee has applied for a refund of Special Additional Duty (SAD) but same wasn’t credited in profit & loss account. Whether the disclosure is required in Form 3CD?
16.56 Whether employees’ contribution to provident fund, Superannuation fund etc. after the due dates are deductible?
16.57 Whether Auditor has to quantify whether the payment to a related person is unreasonable or excessive under Clause 23?
16.58 As Section 43B specifically disallows the interest expense which is converted into a loan, whether such disallowance shall be of permanent in nature?
16.59 Whether sum payable to Indian Railways for advertisement at railway stations would be disallowed under Section 43B?
16.60 If the statutory auditor does not consider an item as a prior period expense, whereas tax auditor feels that such item should be considered as a prior period, should that expense be disclosed in Clause 27(b) of Form 3CD?
16.61 There is a difference in opinion between the tax auditor and the client with respect to the applicability of a TDS provision on a particular payment. How to report such difference in the tax audit report?
16.62 Mr. Suresh, a sole proprietor, agreed to transfer his personal property to Mr. Naresh and received some non-refundable advance against such deal. The sale could not materialize as Mr. Naresh could not pay the whole amount and the advance money was forfeited by Mr. Suresh. What are the disclosure requirements?
16.63 Whether advance received from a person for sale of goods shall also be disclosed under Clause 31?
16.64 ABC Ltd. has rendered services to its Associated Enterprise resulting in a net profit of 15% on cost. Transfer Pricing Officer (TPO) calculated ALP of this transaction at 20% of the cost and accordingly made adjustment. Is it required to be reported in Form 3CD?
16.65 How to calculate the interest on excess money that need to be repatriated after a primary adjustment?
16.66 My client has borrowed money from its foreign holding company and interest paid on such loan was Rs. 1.05 crore during the previous year. Whether this transaction is reportable in Form 3CD?
16.67 How the details of loans accepted and repayment thereof shall be reported in Clause 31 of Form 3CD?
16.68 My client has furnished the statement of tax deducted or tax collected within the prescribed time limit. Do I have to report the details of such returns in form 3CD?
16.69 Whether capital expenditure shall be reduced from the actual cost of a capital asset if tax was not deducted from such expenditure?
16.70 Whether quantitative details of each and every stock is to be mentioned in clause 35?
16.71 In case of a manufacturing concern, the auditor had failed to ascertain yield of finished goods because of different measurement unit of raw material and that of the finished product. How to report this in Form 3CD?
16.72 In the case of first Ind AS financial statements, whether the details regarding turnover, gross profit, ratios, etc., for the previous year and preceding previous year shall be as per Ind AS financial statements.
16.73 In case of Ind AS financial statements, if liability increases due to change in actuarial assumptions taken to calculate the provision of gratuity, which is debited to OCI, whether the entity can claim the deduction for such additional liability?
16.74 How the deduction of interest charged to Statement of Profit & Loss due to “effective interest rate method” of Ind AS should be allowed under the Income-tax Act?
16.75 A demand was raised with respect to Custom duties on my client and the same was adjusted against the refund due in his name. So no amount was paid by him to the department. As an auditor, do I need to disclose the same in form 3CD?
16.76 Whether any consideration for issue of shares which exceeds the fair market value of the shares as referred to in section 56(2)(viib) received by a start-up to be reported in clause 29?
16.77 Whether a change in shareholding of a start-up company is to be reported in Clause 32(b) of Form 3CD?