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Analysis of audit provision under income tax & companies act

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  • 1. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662 Analysis of Provision of Companies Act 1956 in relation to Audit of AccountsSection 210 – Annual Account and Balance Sheet(1) At every annual general meeting of a company held in pursuance of section 166, the Boardof directors of the company shall lay before the company - (a) a balance sheet as at the end of the period specified in sub-section (3), and (b) a profit and loss account for that period.(2) In the case of a company not carrying on business for profit, an income and expenditureaccount shall be laid before the company at its annual general meeting instead of a profit andloss account, and all references to "profit and loss account", "profit" and "loss" in this section andelsewhere in this Act, shall be construed, in relation to such a company, as referencesrespectively to the "income and expenditure account", "the excess of income over expenditure",and "the excess of expenditure over income".(3) The profit and loss account shall relate –(a) in the case of the first annual general meeting of the company, to the period beginning withthe incorporation of the company and ending with a day which shall not precede the day of themeeting by more than nine months ; and(b) in the case of any subsequent annual general meeting of the company, to the periodbeginning with the day immediately after the period for which the account was last submittedand ending with a day which shall not precede the day of the meeting by more than six months,or in cases where an extension of time has been granted for holding the meeting under thesecond proviso to sub-section (1) of section 166, by more than six months and the extension sogranted.(4) The period to which the account aforesaid relates is referred to in this Act as a "financialyear" ; and it may be less or more than a calendar year, but it shall not exceed fifteen months :Provided that it may extend to eighteen months where special permission has been granted inthat behalf by the Registrar. (5) If any person, being a director of a company, fails to take all reasonable steps to complywith the provisions of this section, he shall, in respect of each offence, be punishable withimprisonment for a term which may extend to six months, or with fine which may extend to1[ten] thousand rupees, or with both :Provided that in any proceedings against a person in respect of an offence under this section, itshall be a defence to prove that a competent and reliabe person was charged with the duty ofseeing that the provisions of this section were complied with and was in a position to dischargethat duty :
  • 2. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662Provided further that no person shall be sentenced to imprisonment for any such offence unlessit was committed willfully.Analysis - As per Provision, Company is to hold an AGM on or before 30th September 2011 ormay apply for extensionSECTION 166 - ANNUAL GENERAL MEETING(1) Every company shall in each year hold in addition to any other meetings a general meetingas its annual general meeting and shall specify the meeting as such in the notices calling it; andnot more than fifteen months shall elapse between the date of one annual general meeting of acompany and that of the next :Provided that a company may hold its first annual general meeting within a period of not morethan eighteen months from the date of its incorporation ; and if such general meeting is heldwithin that period, it shall not be necessary for the company to hold any annual general meetingin the year of its incorporation or in the following year :Provided further that the Registrar may, for any special reason, extend the time within whichany annual general meeting (not being the first annual general meeting) shall be held, by aperiod not exceeding three months.(2) Every annual general meeting shall be called for a time during business hours, on a day thatis not a public holiday, and shall be held either at the registered office of the company or atsome other place within the city, town or village in which the registered office of the company issituate :Provided that the Central Government may exempt any class of companies from the provisionsof this sub-section subject to such conditions as it may impose :Provided further that -(a) a public company or a private company which is a subsidiary of a public company, may byits articles fix the time for its annual general meetings and may also by a resolution passed inone annual general meeting fix the time for itssubsequent annual general meetings ; and
  • 3. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662(b) a private company which is not a subsidiary of a public company, may in like manner andalso by a resolution agreed to by all the members thereof, fix the times as well as the place for itsannual general meeting.SECTION 168 - PENALTY FOR DEFAULT IN COMPLYING WITH SECTION 166 OR 167If default is made in holding a meeting of the company in accordance with section 166, or incomplying with any directions of the 1[Tribunal or the Central Government, as the case may be]under sub-section (1) of section 167, the company, and every officer of the company who is indefault, shall be punishable with fine which may extend to 2[fifty] thousand rupees and in thecase of a continuing default, with a further fine which may extend to 3[two thousand fivehundred] rupees for every day after the first during which such default continues.Analysis of Section 166 read with Section 210 & Section 168The Company is required to hold an AGM on or before 30th of September 2011 or may apply forextension.Penalty under the both section are as followsSerial No Penalty u/s Fine Possibility 1 168 read with section Every officer (including Remote possibility because 166 director) – Rs 50,000 as per our opinion there is no contravention of section 168 2 210 Any person – Rs 10,000 Financial Penalty – High And /or Imprisonment – Low Imprisonment for six month
  • 4. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662Analysis of Provision of Income Tax Act 1956 in relation to Audit of AccountsSECTION 44 AB -[Audit of accounts of certain persons carrying on business or profession. 5 Every person,— (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds 6 [sixty lakh rupees] in any previous year 7 [***]; or (b) carrying on profession shall, if his gross receipts in profession exceed 8 [fifteen lakh rupees] in any 9 [previous year; or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under 10 [section 44AE ] 11 [or section 44BB or section 44BBB], as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any 12 [previous year; or]] 13 [***] 14 [(d) carrying on the business shall, 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,]get his accounts of such previous year 15 [***] audited by an accountant before the specified dateand 16 [furnish by] that date the report of such audit in the prescribed form duly signed andverified by such accountant and setting forth such particulars as may be prescribed :17[Provided that this section shall not apply to the person, who derives income of the naturereferred to in 18 [***] section 44B or 19 [section 44BBA], on and from the 1st day of April, 1985 or,as the case may be, the date on which the relevant section came into force, whichever is later :Provided further that] in a case where such person is required by or under any other law to gethis accounts audited 20 [***], it shall be sufficient compliance with the provisions of this section ifsuch person gets the accounts of such business or profession audited under such law before thespecified date and 21 [furnishes by] that date the report of the audit as required under such otherlaw and a further report 22 [by an accountant] in the form prescribed under this section.Explanation.—For the purposes of this section,— (i) “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288; 23 [(ii) “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the 24 [30th day of September] of the assessment year.]]
  • 5. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662SECTION 271B – FAILURE TO GET ACCOUNT AUDITEDIf any person fails 42[***] to get his accounts audited in respect of any previous year or yearsrelevant to an assessment year or 43[furnish a report of such audit as required under section44AB], the 44[Assessing] Officer may direct that such person shall pay, by way of penalty, a sumequal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, inbusiness, or of the gross receipts in profession, in such previous year or years or a sum of 45[onehundred fifty thousand rupees], whichever is less.] FORM NO. 3CA [See rule 6G(1)(a)]Audit report under section 44AB of the Income-tax Act, 1961, in a case where the accounts ofthe business or profession of a person have been audited under any other law* I/We report that the statutory audit of ______________________________________________[mention name and address ofthe assessee with permanent account number] was conducted by * me/us/M/s.______________________________________________ in pursuance of the provisions of the___________________ Act, and *I/we annex hereto a copy of * my/our/their audit report dated ___________________ alongwith a copy each of -(a) the audited * profit and loss account/income and expenditure account for the year ended on31st March,___________________;(b) the audited balance sheet as at 31st March, ___________________; and(c) documents declared by the said Act to be part of, or annexed to, the * profit and lossaccount/income and expenditure account and balance sheet.2. The statement of particulars required to be furnished under section 44AB is annexed herewithin Form No. 3CD.3. In * my/our opinion and to the best of * my/our information and according to explanationsgiven to * me/us, the particulars given in the said Form No. 3CD and the Annexure thereto aretrue and correct.** SignedPlace ___________ Name : ________________________Date___________ Address
  • 6. Mahipal & Co. Chartered Accountant New Delhi, India – +91 99998 63662 Analysis of Section 44AB along with 271B and Form 3CAAs per form 3CA, Tax auditor should mention the name of auditor & date of actual audit.A Penalty of Rs 150,000 (Maximum) shall be imposed if company contravenes the provisionof section 210 of Companies Act 1956In case of any concern / Query,CA Amit Mahipal+91 99998 63662amit@mahipal.co.inakmahipal@gmail.comDelhi, IndiaDisclaimer:This publication is intended for private circulation. It has been prepared for generalguidance on matters of interest only, and does not constitute professional advice. Noperson should act upon the information contained in this publication withoutobtaining specific professional advice. Due care has been taken while compiling theinformation, however no representation or warranty (express or implied) is given asto the accuracy or completeness of the information contained in this publication.