Provisions related to Tax Audit : Section 44AB Income tax Act

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A.  Introduction

The purpose of Tax Audit is to ensure that books of Accounts have been maintained in accordance with the provisions of the Income Tax Act. Tax Audit also ensures that the Accounts are properly being presented to the Assessing Officers when called for.

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B.  Persons Required to get their Accounts Audited

As per section 44AB of Income Tax Act, following persons are required to get their accounts audited -

1. In case of person carrying on business, if his total sales, turnover or gross receipts exceeds one crore rupees. ; or

2. In case of person carrying on profession if his gross receipts exceed twenty-five lakh rupees. ; or

3. In case of person carrying on the business, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year.

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C.  Explanation to Point 3  

Thus as per provisions of Section 44AD r/w Section 44AB person who satisfy all of the following conditions is required to get his books of accounts audited under Section 44AB :

a) Person is an eligible assessee. Eligible Assessee means-

  • An individual.
  • Hindu undivided family.
  • A partnership firm, but not a limited liability partnership firm who is a resident.

b) Person is carrying on an eligible business. Eligible Business means-

  • Any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE.
  • whose total turnover or gross receipts in the previous year does not exceed an amount of one crore rupees.

c) The profits of an assessee engaged in eligible business under the head ‘Profits and gains from business and profession less than 8% of the total turnover of the assessee i.e. less than the profits deemed under this section.

d) Total Income of person is also more than the maximum amount which is not chargeable to tax.

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D. Who Can Do Tax Audit

As per the provisions of Section 44AB, tax audit can be done by a Chartered Accountant in practice.

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E. Due Date For Filing Tax Audit Report

a) Due date for filing Tax Audit report under section 44AB is 30th September. However, For A.Y. 2014-15, the due date for filing tax audit report was extended from 30th September to 20th November. (Refer Official Announcement)

b) In case of a taxpayer who is required to furnish a report in Form No. 3CEB under section 92​ in respect of any international transaction or specified domestic transaction, the due date of filing the return of income is 30th November of the relevant assessment year.

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F. Penalty for non compliance with Section 44AB

​According to section 271B, if any person who is required to comply with section 44AB​ fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover / gross receipts or
(b) Rs. 1,50,000.
However, according to section 273B, no penalty shall be imposed if reasonable cause for such failure is proved. Such penalty can be imposed only after giving the taxpayer a reasonable opportunity of being heard.

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G. Forms Used for Tax Audit Report

a) The form prescribed for audit report in respect of audit conducted under section 44AB​ is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD.

b) In case of persons who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA and the prescribed particulars are to be reported in Form No. 3CD.

Please click on respective forms to download Java Utility for E-filing.

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H. Total Number of Tax Audits by a Chartered Accountant

a) The Institute of Chartered Accountants of India at its 331st meeting held from 10th to 12th February, 2014 decided to increase the specified number of tax audit assignments by a practicing chartered accountant from 45 to 60.

b) This limit is applicable for Financial Year 2014 -15 and onwards.

c) It may be noted that the limit of 60 includes tax assignments undertaken by a chartered accountant in individual capacity and as a partner in a firm. Thus, if a chartered accountant is a partner in a firm and practicing as a proprietor also, he can attest total of 60 audit reports only.

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I.  E Filing of Tax Audit Report

From assessment year 2013-14 onwards, tax audit report under Section 44AB has to be filed electronically. Please download – Step by Step Procedure for E-Filing of tax Audit Report.

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