3. INTRODUCTION-APPLICABILITY
1. Sec 44AB mandates audit of accounts by a Chartered Accountant:
• For every person carrying on Business, if in previous year his total Sales or
Turnover or Gross receipts exceeds 1 Crore.
• For Professional, if in previous year its Total receipts exceeds 25 Lakhs.
And to furnish report in prescribed form of such audit with in “Specified Date”
“Specified Date” as per Sec 139(1) of the Act. means 30th September of the
concerned Assessment year.
2. Scope of sec 44AB has also been enlarged and made applicable:
• to a person carrying on the business of nature referred to in sec 44AD or 44AE
or 44BB or 44BBB.
AND
• if such person claims that his income is lower than the amount of income
deemed under these sections as presumptive income.
INTRODUCTION-APPLICABILITY Lunawat & Co.
4. INTRODUCTION- DEFINITIONS
1. Business: As per sec 2(13) of the Act. Business includes any trade,
commerce or manufacture or any adventure or concern in nature of trade,
commerce or manufacture.
2. Profession: As per sec 2(36) of the Act. Define Profession to include
Vocation .
The Allahabad High Court in the case of Ram kripal tripathi has given view
that Profession is a word of wide import and includes “ vocation” which is only
a way of living.
3. Sales, Turnover or Gross Receipts are not defined in the I.T. Act. However
the Turnover has been defined in:
• Revised schedule VI of The Companies Act, 1956.
• The Guide to company audit issued by Institute in 1980.
Lunawat & Co.
5. INTRODUCTION-
COMPUTATION OF TURNOVER
However as per Institute Guidance note and Schedule VI. For the Purpose of
calculating Turnover we deduct from the amount of sales the following items(only
important and typical items covered):
• Trade Discount
• Turnover discount
• Special rebate allowed
• Sales Return
• Freight, insurance, dispatch charges and some other similar charges
• Sales proceeds of any fixed Assets or of Property held as property for
Investment.
• Sales proceeds of shares, securities and debentures if same are not part
of stock.
Lunawat & Co.
6. PURPOSE OF TAX AUDIT
The purpose of tax audit is to:
1. Ensure proper maintenance of books of accounts and other records.
2. Reflect true income of tax payer.
3. Facilitate the administration of tax laws by a proper presentation of
accounts before tax authorities.
4. Assist the income tax department to assess the correct income.
5. Ensure that income chargeable has been computed as per sec 145 of the
Act. i.e. Method of accounting And ensure that the AS notified* under section
145 have been followed or not.
* CBDT till now has notified the following two Accounting Standards:
1. AS relating to Disclosure of Accounting Policies.
2. AS relating to Disclosure of Prior Period and Extraordinary Items and
Changes in Accounting Policies.
Lunawat & Co.
7. TAX AUDITOR ROLES AND
RESPONSIBILITIES
1. The Tax Auditor must be Chartered accountant.
2. Obtain Letter of appointment and must agreeing with the terms of audit
engagement letter.
3. Reporting on accounts not computing income.
4. Reporting on relevant information in Form-3CD.
5. The tax auditor shall maintain proper working paper. Such working paper
shall includes:
• Work done while conducting the audit and by whom;
• Explanations and information's received;
• Judicial pronouncements relied;
• Decision on the various points taken;
• Certificates issued by the client.
Lunawat & Co.
8. TAX AUDIT REPORT
New Form-3CA (AY 2014-15)
The Tax Auditor should give audit Report in Form- 3CA, if the accounts of
the Business or Profession have been audited under any other Law and
such report should refer and annexed:
1. Name of the statutory auditor and provisions of the Act.
2. Audited Balance sheet and Profit & loss Account along with notes.
3. Particulars in Form-3CD.
4. Certify Form-3CD.
5. Observations or qualifications. if any:
6. Reasons for negative comment or qualification.
7. Membership No.
Lunawat & Co.
9. TAX AUDIT REPORT
New Form- 3CB(AY 2014-15)
The Tax Auditor should give audit Report in Form- 3CB, if the accounts of
the Business or Profession have not been audited under any other Law
and such report should refer and annexed:
1. Examine and certify Balance sheet & Profit and loss account.
2. Report any discrepancies, inconsistency, observations, if any:
3. Particulars in Form-3CD.
4. Certify Form-3CD.
5. Observations or qualifications. if any:
6. Reasons for negative comment or qualification.
7. Membership No.
Lunawat & Co.
10. TAX AUDIT REPORT
Amended Form-3CD
The tax auditor report should annexed with Form 3CD. Whose important
new amended clause are as follows:
• Clause 4: Registration No., if liable to pay indirect taxes.
• Clause 8: Relevant Clause of sec 44AB.
• Clause 17: Sale of Property, if consideration less than the value adopted
by the state government i.e. Deemed sales Consideration u/s 43CA &
50C of the Act and furnish:
o Detail of Property
o Consideration received
o Value assessable.
Lunawat & Co.
12. •Clause 32(e): Details of loss, if Company Deemed to be carrying
speculative business referred to in section 73.
• Clause 34: Details of TDS e.g. section, Nature of Payment, Amount
Required to be Deducted, actually deducted and deposited.
• Clause 39: Audit u/s 72A of the finance Act, 1994 regarding valuation of
taxable service, details if any disagreement.
• Clause 41: Demand raised and refund in previous year under any laws
other than I.T. Act. or Wealth tax Act. Along with details of relevant
proceedings
TAX AUDIT REPORT Lunawat & Co.
