The document analyzes provisions of the Companies Act 1956 and Income Tax Act 1956 relating to audit of accounts. Section 44AB of the Income Tax Act requires audit of accounts if total sales exceed Rs. 60 lakhs or gross receipts exceed Rs. 15 lakhs. It must be conducted before September 30th. Failure to do so can result in a penalty of Rs. 150,000 under Section 271B. Section 210 of the Companies Act requires companies to present audited financial statements at the AGM. The penalty for non-compliance is a fine up to Rs. 10,000 and possible imprisonment of up to 6 months.

1. Mahipal & Co.
Chartered Accountant
New Delhi, India – +91 99998 63662
Analysis of Provision of Companies Act 1956 in relation to Audit of Accounts
Section 210 – Annual Account and Balance Sheet
(1) At every annual general meeting of a company held in pursuance of section 166, the Board
of 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 expenditure
account shall be laid before the company at its annual general meeting instead of a profit and
loss account, and all references to "profit and loss account", "profit" and "loss" in this section and
elsewhere in this Act, shall be construed, in relation to such a company, as references
respectively 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 with
the incorporation of the company and ending with a day which shall not precede the day of the
meeting by more than nine months ; and
(b) in the case of any subsequent annual general meeting of the company, to the period
beginning with the day immediately after the period for which the account was last submitted
and 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 the
second proviso to sub-section (1) of section 166, by more than six months and the extension so
granted.
(4) The period to which the account aforesaid relates is referred to in this Act as a "financial
year" ; 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 in
that behalf by the Registrar.
(5) If any person, being a director of a company, fails to take all reasonable steps to comply
with the provisions of this section, he shall, in respect of each offence, be punishable with
imprisonment for a term which may extend to six months, or with fine which may extend to
1[ten] thousand rupees, or with both :
Provided that in any proceedings against a person in respect of an offence under this section, it
shall be a defence to prove that a competent and reliabe person was charged with the duty of
seeing that the provisions of this section were complied with and was in a position to discharge
that duty :

2. Mahipal & Co.
Chartered Accountant
New Delhi, India – +91 99998 63662
Provided further that no person shall be sentenced to imprisonment for any such offence unless
it was committed willfully.
Analysis - As per Provision, Company is to hold an AGM on or before 30th September 2011 or
may apply for extension
SECTION 166 - ANNUAL GENERAL MEETING
(1) Every company shall in each year hold in addition to any other meetings a general meeting
as its annual general meeting and shall specify the meeting as such in the notices calling it; and
not more than fifteen months shall elapse between the date of one annual general meeting of a
company and that of the next :
Provided that a company may hold its first annual general meeting within a period of not more
than eighteen months from the date of its incorporation ; and if such general meeting is held
within that period, it shall not be necessary for the company to hold any annual general meeting
in the year of its incorporation or in the following year :
Provided further that the Registrar may, for any special reason, extend the time within which
any annual general meeting (not being the first annual general meeting) shall be held, by a
period not exceeding three months.
(2) Every annual general meeting shall be called for a time during business hours, on a day that
is not a public holiday, and shall be held either at the registered office of the company or at
some other place within the city, town or village in which the registered office of the company is
situate :
Provided that the Central Government may exempt any class of companies from the provisions
of 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 by
its articles fix the time for its annual general meetings and may also by a resolution passed in
one annual general meeting fix the time for its
subsequent 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 and
also by a resolution agreed to by all the members thereof, fix the times as well as the place for its
annual general meeting.
SECTION 168 - PENALTY FOR DEFAULT IN COMPLYING WITH SECTION 166 OR 167
If default is made in holding a meeting of the company in accordance with section 166, or in
complying 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 in
default, shall be punishable with fine which may extend to 2[fifty] thousand rupees and in the
case of a continuing default, with a further fine which may extend to 3[two thousand five
hundred] rupees for every day after the first during which such default continues.
Analysis of Section 166 read with Section 210 & Section 168
The Company is required to hold an AGM on or before 30th of September 2011 or may apply for
extension.
Penalty under the both section are as follows
Serial 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 63662
Analysis of Provision of Income Tax Act 1956 in relation to Audit of Accounts
SECTION 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 date
and 16 [furnish by] that date the report of such audit in the prescribed form duly signed and
verified 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 nature
referred 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 get
his accounts audited 20 [***], it shall be sufficient compliance with the provisions of this section if
such person gets the accounts of such business or profession audited under such law before the
specified date and 21 [furnishes by] that date the report of the audit as required under such other
law 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 63662
SECTION 271B – FAILURE TO GET ACCOUNT AUDITED
If any person fails 42[***] to get his accounts audited in respect of any previous year or years
relevant to an assessment year or 43[furnish a report of such audit as required under section
44AB], the 44[Assessing] Officer may direct that such person shall pay, by way of penalty, a sum
equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in
business, or of the gross receipts in profession, in such previous year or years or a sum of 45[one
hundred 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 of
the 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 of
the 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 ___________________ along
with a copy each of -
(a) the audited * profit and loss account/income and expenditure account for the year ended on
31st 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 loss
account/income and expenditure account and balance sheet.
2. The statement of particulars required to be furnished under section 44AB is annexed herewith
in Form No. 3CD.
3. In * my/our opinion and to the best of * my/our information and according to explanations
given to * me/us, the particulars given in the said Form No. 3CD and the Annexure thereto are
true and correct.
** Signed
Place ___________ Name : ________________________
Date___________ Address

6. Mahipal & Co.
Chartered Accountant
New Delhi, India – +91 99998 63662
Analysis of Section 44AB along with 271B and Form 3CA
As 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 provision
of section 210 of Companies Act 1956
In case of any concern / Query,
CA Amit Mahipal
+91 99998 63662
amit@mahipal.co.in
akmahipal@gmail.com
Delhi, India
Disclaimer:
This publication is intended for private circulation. It has been prepared for general
guidance on matters of interest only, and does not constitute professional advice. No
person should act upon the information contained in this publication without
obtaining specific professional advice. Due care has been taken while compiling the
information, however no representation or warranty (express or implied) is given as
to the accuracy or completeness of the information contained in this publication.