The Indian tax authorities have amended the tax audit report format recently. The changes are drastic and cast a huge responsibility on the already burdened tax auditors. The changes are discussed in this presentation. The Revised Guidance Note on Tax Audit issued by ICAI has also been considered while preparing this presentation. Only the new clauses or the amended clauses have been considered. The clauses that have not undergone any change have not been considered.

1. Amendments to Form 3CD -
Implications, Reporting Requirements & Revised Guidance Note
September 2014
AMEET N. PATEL
Partner
Sudit K Parekh & Co.
Chartered Accountants
Mumbai | Pune | Hyderabad | New Delhi | Bangalore

2. Due Date has been extended
On 25th July, 2014, the CBDT has notified the new Forms
On 20th August, 2014,
The CBDT has extended the due date for tax audits to 30th November by issuing a notification u/s. 119
On 9th September, 2014, the ICAI has released the Revised Guidance Note on Tax Audit
Question mark over due date for filing return of income u/s. 139(1)
Notification refers only to 44AB and not 139(1)

3. In the past, the notification was as under
Due date for filing return extended in case of Pune, Sangli and Kolhapur
Press Note No. 402/92/2006-MC (20 of 2009), dated 25-9-2009
Order under Section 119 of the Income Tax Act, 1961
On consideration of the reports of local disturbances caused due to Swine Flue and riots of the Pune, Satara, Kolhapur and Sangli Districts of Maharashtra, the Central Board of Direct Taxes, in exercise of powers of conferred under section 119 of the Income Tax Act, 1961, hereby extends the due date of obtaining tax audit reports u/s 44AB of the I.T. Act as well as for filling of returns of income required to be furnished by 30th September 2009 to 31st October 2009 in the cases of income tax assesses in Pune, Satara, Kolhapur and Sangli districts of Maharashtra.
F.No. 225/163/2009 – ITA. II

4. In the latest notification, there is no reference to 139(1)
Several writ petitions are filed across India
The ICAI has made a fresh representation to the CBDT on 15th September
We await the outcome
In the meantime, we have to go by the Revised Guidance Note issued by ICAI

5. 3CD - History
•Introduced for the first time w.e.f. 1st April, 1985
•Prior to latest amendment, there were 34 clauses and 2 annexures
•Now, after the amendment, there are 41 clauses and no annexures

6. EXPLANATORY NOTES ON FINANCE ACT 1984:
“A proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they faithfully reflect the income of the taxpayer and claims for deduction are correctly made by him. Such audit would also help in checking fraudulent practices. It can also facilitate the administration of tax law laws by a proper presentation of the accounts before the tax authorities and considerably saving the time of assessing officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched or not. The time of the assessing officers thus saved could be utilised for attending to more important investigational aspects of a case.”
3CD – WHY WAS IT INTRODUCED?

7. Do the Assessing Officers place reliance on the information certified by a Chartered Accountant?
If not, what is the point in making the reporting requirements greater?
Does the Report as it stands today consist of only routine information ?
Notwithstanding the above, let us consider such audits as an opportunity instead of as a threat
3CD – HAS IT SERVED ITS PURPOSE?

8. •The changes have been notified on 25th July, 2014
•Several tax audits have already been completed before this date (only uploading remained pending)
•The new format also applies to earlier years if the audit is not yet completed / return is not yet filed
•In case of bank audits as also other large entities, it is difficult to again go to the auditee and verify the newly notified details
•The Income-tax department’s website still shows the old form
•The Income-tax department’s e-filing portal has got the new utility only on 20th August
3CD – AMENDMENTS – IMPORTANT ISSUES

9. CHANGES IN FORM 3CA
o“Profit and Loss Account / Income and expenditure account for the period beginning from ___________ to ending on __________” instead of for the year ended __________.
(What can be the rationale? Will previous year be again made flexible?)
oIn case of newly set up business / profession, the date of set up has to be mentioned. This is very important and is also litigative. Auditors will have to be very careful

10. CHANGES IN FORM 3CA
oThe words “according to examination of books of account including other relevant documents” added
oQualifications and Observations to be mentioned in 3CA itself
oStamp of the auditor also specifically to be affixed (earlier, only signature was required)
oIn the Notes to the Form, the definition of signing authority is removed and reference is made to the ITA

11. CHANGES IN FORM 3CB
oBalance sheet as on instead of as at
oProfit and Loss Account / Income and expenditure account for the period beginning from __________ to ending on _________ instead of for the year ended _________.
oQualifications and Observations to be mentioned in 3CB itself
oStamp of the auditor also specifically to be affixed (earlier, only signature was required)
oIn the Notes to the Form, the definition of signing authority is removed and reference is made to the ITA

12. Changes in Form 3CA
In the new Utility, for qualifications, the following format is prescribed:
Sr. No.
Qualification Type
(to select from a drop down list)
Observations/ qualifications
Proper books of account, to enable reporting in form 3CD, have not been maintained by the assessee
All the information and explanations which to the best of my/our knowledge and belief were necessary for the purpose of my/our audit has not provided by the assessee
Documents necessary to verify the reportable transaction were not made available.
Proper stock records are not maintained by the assessee
Valuation of closing stock is not possible
Yield/Percentage of wastage is not ascertainable

13. Changes in Form 3CA
In the new Utility, for qualifications, the following format is prescribed:
Sr. No.
Qualification Type
(to select from a drop down list)
Observations/ qualifications
Records necessary to verify personal nature of expenses not maintained by the assessee
TDS returns could not be verified with the books of account
Records produced for verification of payments through account payee cheque were not sufficient
Amount of expense related to exempt income u/s. 14A of Income-tax Act, 1961 could not be ascertained
Creditors under Micro, Small and Medium Enterprises Development Act, 2006 are not ascertainable
Prior period expenses are not ascertainable from books of account

14. Changes in Form 3CA
In the new Utility, for qualifications, the following format is prescribed:
Sr. No.
Qualification Type
(to select from a drop down list)
Observations/ qualifications
Fair market value of shares u/s. 56(2)(viia)/(viib) is not ascertainable
Reports of audits carried by Excise/Service tax Department were not made available
GP ratio is not ascertainable from the financial statements prepared by the assessee.
Information regarding demand raised / refund issued during the previous year under any tax laws other than Income-tax Act, 1961 and Wealth-tax Act, 1957 was not made available
Others
One can add further rows as per requirement – no idea of limitation, if any
In all cases, the last column has to be filled up mandatorily

15. Changes in Form 3CD

16. Clauses of 3CD that remain unchanged
New Clause No.
Description
1
Name of the Assessee
2
Address
3
PAN
5
Status
7
Assessment Year
9
Partnership firm related general information
10
Business related general information
11(a)
Whether books of account are prescribed & if yes, list
11(c )
List of books examined

17. Clauses of 3CD that remain unchanged
New Clause No.
Description
13(a)
Method of accounting employed
13(b)
Change in method of accounting
13(d)
Details of deviation from AS prescribed under IT Act
14(a)
Method of valuation of closing stock
15
Details of capital asset converted into stock in trade
16(a)
Amounts not credit to P&L – items falling within scope of S. 28
16(b)
Amounts not credit to P&L – proforma credits, duty drawbacks etc
16(c)
Amounts not credit to P&L – Escalation claims
16(d)
Amounts not credit to P&L – Any other income
16(e)
Amounts not credit to P&L – Capital Receipt

18. Clauses of 3CD that remain unchanged
New Clause No.
Description
18(a)(b)(c)(e)(f)
Depreciation
20(a)
Bonus / Commission paid to employees – S. 36(1)(ii)
23
40A(2)(b)
25
Profit chargeable u/s. 41
26
43B
30
Details of amount borrowed on Hundi
31
269SS / 269T
35
Ratios

19. Changes in Form 3CD
CLAUSE NO. 4
Registration Number in case of Indirect-tax liability to be given:
“Whether the assessee is liable to pay indirect tax like excise duty, service tax, sales tax, customs duty, etc. If yes, please furnish the registration number or any other identification number allotted for the same”
o“liable to pay tax” – does it refer to a outstanding liability or to general coverage of the law? If former, then as at which date? As at year end or at any time during the year? What if registration taken but not liable?
oLocation wise details to be given?
oEven registration number under other indirect taxes to be reported

20. Changes in Form 3CD
CLAUSE NO. 4 - In the new Utility, for qualifications, the following format is prescribed:
Sr. No.
Type
Registration / Identification Number
Central Excise Duty
Central Custom Duty
Service Tax
Sales Tax/VAT
State Excise Duty
Other Indirect Tax/duty
One can add further rows as per requirement – no idea of limitation, if any

21. •CLAUSE NO 4: The Revised Guidance Note
•“Indirect tax” is not defined anywhere and would differ from State to State. Auditor should obtain from the assessee a list of IDT applicable to him.
•Auditor should also obtain copies of registration certificates
•In case of multiple registrations, each certificate to be obtained
•Where the IDT law does not require any registration, appropriate ID No. to be reported (e.g. Customs Act – copy of IEC Code to be obtained)
•If auditor is of view that a particular IDT is applicable but assessee is not registered, he should report the same
Changes in Form 3CD

22. CLAUSE NO. 8 :
The four clauses of section 44AB under which tax audit can be carried out are -
a.If the person is carrying on business whose total sales, turnover or gross receipts, as the case may be exceeds Rs 1 crore.
b.If the person is carrying on profession whose gross receipts in profession exceed Rs 25 lakhs.
c.If the person is carrying business, provisions of sections 44AE or 44BB or 44BBB are applicable to him and he claims that his income is lower than the amount deemed by sections 44AE or 44BB or 44BBB to his profits and gains
d.If the person is carrying business, provisions of sections 44AD are applicable to him and he claims that his income is lower than the amount deemed by section 44AD to be his profits and gains & his income exceeds the maximum amount which is not chargeable to income-tax
Changes in Form 3CD

23. CLAUSE NO. 8 :
•This might create problems in cases where the distinction between business and profession is not clear – could they link this to the Code in ITR form for the main business / profession?)
•In the utility, a drop down list is provided and we have to select the appropriate one
•What if more than one clause is applicable? (Guidance Note is silent on this aspect)
•In the utility, it is possible to select more than one clause
Changes in Form 3CD

24. CLAUSE NO. 8 – Relevance of distinction between Business & Profession:
•Section 2(13) defines business :
“Business” includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.
•Section 2(36) defines Profession :
“Profession” includes vocation
•Whether a particular activity can be classified as ‘business’ or ‘Profession’ will depend on the facts and circumstances of the each case – CIT v. Manmohan Das (Deceased) (1966) 59 ITR 699 (SC)
•All professions are businesses, but all businesses are not professions. Only those businesses are professions the profit of which are dependent mainly upon the personal qualification and in which no capital expenditure is required or only capital expenditure of comparatively small amount – P. Stanwill & Co. v/s. CIT (1952) 22 ITR 316, 320-21 (All)
Changes in Form 3CD

25. CLAUSE NO. 11:
Books of Account
oTo provide address at which books of accounts are maintained
oIf more than one location, address of each location and books maintained
oNo format prescribed
oLis of books of account & nature of documents examined
oIntention may be to ease search / survey procedures
oWhat if accounts are maintained on servers at other places / in the cloud?
oHow to report SAP modules?
Changes in Form 3CD

26. CLAUSE NO. 11:
oWhat does “nature of documents” mean?
oList of documents is not required – only nature
oCan we categorise on broad basis – say as under:
oBills / Invoices / Receipts issued / received by assessee
oCredit / Debit Notes issued / received by assessee
oStatutory registers maintained under various laws
oContracts / agreements entered into by the assessee
oCorrespondence between the assessee and others
oThird party confirmations / statements of account
Changes in Form 3CD

27. CLAUSE NO. 11:
oIn the utility, there is no separate section or drop down list for “nature of documents”
oHowever, for location, there is a provision for showing a non Indian location
Changes in Form 3CD

28. CLAUSE NO. 11 - The Revised Guidance Note:
oPara 14.3 of GN – “other relevant documents directly related to transactions reflected in the books of accounts like original purchase invoice, copy of bank statements, bills, vouchers, various agreements/contracts or any other document on the basis of which preliminary entries are passed in the books of accounts.”
oPara 14.4 of GN – Reference to “document” under Information Technology Act, 2000. Includes “electronic record” which means “data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.”
Changes in Form 3CD

29. CLAUSE NO. 11 - The Revised Guidance Note:
oPara 20.10 of GN – refers to bills, vouchers, debit/credit notes, inventory register, agreements, orders etc.
oUnderlying documents would differ from assessee to assessee
Changes in Form 3CD

30. •CLAUSE NO. 11: The Revised Guidance Note
•Format prescribed by the Guidance Note for obtaining information from the client:
•No guidance on issue of e-books of account and their storage
•“In case of a company assessee auditor should also verify as to whether any forms are filed under the Companies Act for maintenance of books of accounts at a place other than the registered office
Changes in Form 3CD
Sr No
Principal place of maintenance of books of accounts
Details of books maintained

31. CLAUSE NO. 13
Effect of change in method of accounting on P&L to be given :
oGross impact to be disclosed
oNet effect cannot be given
oFollowing format prescribed:
•What if the impact cannot be quantified? Can we write NIL?
•Distinction between method of accounting & accounting policy remains relevant
Changes in Form 3CD
Sr. No.
Particulars
Increase in profit
Decrease in profit

32. CLAUSE NO. 14
Effect of Change in method of valuation of stock on P&L
oGross impact to be disclosed
oNet effect cannot be given
oFollowing format has been prescribed:
Changes in Form 3CD
Sr. No.
Particulars
Increase in profits
Decrease in profits

33. CLAUSE NO. 17
Value adopted or assessed or assessable by any authority of a State Government referred to in section 43CA or 50C to be reported
Reporting will be required under this clause if the following conditions are cumulatively satisfied –
•the assessee has transferred land or building or both;
•the transfer is during the previous year;
•consideration for transfer is less than the value adopted or assessed or assesable by any authority of a State Government
Changes in Form 3CD

34. CLAUSE NO. 17
oFollowing format prescribed:
oIn the utility, complete postal address has to be provided
oIn case of individuals, whether transactions of capital assets forming / not forming part of audited accounts to be reported?
oIn case of unregistered documents, ready reckoner value to be adopted?
oWhether sale of under construction flats would be covered?
oWhether sale of TDR would be covered?
Changes in Form 3CD
Details of property
Consideration received or accrued
Value adopted or assessed or assessable

35. CLAUSE NO. 17
oControversy on whether transfer has taken place in the FY concerned:
oAuditor’s liability in this case.
oTo what extent will it hold good if the assessee’s stand in the ROI differs from the auditor’s stand?
oControversy on applicability in case of land/building forming part of the block of asset & upon sale, the block does not become negative (& thus, section 50 is not applicable) – what stand should the auditor take?
Changes in Form 3CD

36. •CLAUSE NO. 17 – The Revised Guidance Note
•The auditor should obtain:
oregistered sale deed in case, the property is registered.
oIn case the property is not registered, the auditor may verify relevant documents from relevant authorities and/or others (lawyers etc) to satisfy the compliance of sections 43CA/50C.
oIf documents are not available, he may state the same through an observation in his report 3CA/CB.
oAuditor to apply professional judgement as to what constitutes land or building
Changes in Form 3CD

37. CLAUSE NO. 20
Contribution received from employees towards a fund – as per section 36(1)(va)
oTo be given in the below format:
oAdditional column for actual amount paid
Changes in Form 3CD
Sr. No.
Nature of fund
Sum received from employees
Due date for payment
The actual amount paid
Actual date of payment to the concerned authorities

38. CLAUSE NO. 21
oEarlier the heading of clause 17 – “amounts debited to the profit and loss account, being :-” applied to all sub clauses – now the wording is different
oNow, reference to “debited to the profit and loss account” is only in some of the sub clauses.
oDoes it mean that in the other sub clauses, the amounts inadmissible are to be mentioned even if not debited to the P&L A/c?
Changes in Form 3CD

39. CLAUSE NO. 21(b)
oAmounts inadmissible u/s 40(a).
oDetails of payments to NR for interest, royalty, FTS or any other sum chargeable to tax on which:
oTax is not deducted
oTax has been deducted but has not been paid before expiry of time u/s 200(1)
oDetails of all* payments to residents on which:
oTax is not deducted
oTax has been deducted but has not been paid before expiry of time u/s 139(1)
(* refer to amendment vide Finance (No. 2) Act, 2014
Changes in Form 3CD

40. CLAUSE NO. 21(b)
oNew format of reporting:
oDate of payment
oAmount of payment
oNature of payment
oName and address of the payee
oAmount of TDS if any
oRevised Guidance Note Format suggests that auditor should also obtain the PAN of the payee, if available. Also, auditor can rely on legal opinions / certificates issued by other Cas (15CB)
For all the items of TDS, .csv templates can be downloaded and then filled up in excel and later imported into the utility
Changes in Form 3CD

41. CLAUSE NO. 21(d) – Section 40A(3) / 40A(3A)
oRequirement of certificate from the assessee done away with
oDeemed income u/s 40A(3A) also required to be reported now
oFormat prescribed for reporting:
oBoth reports to be based on examination of books of account & other relevant documents/evidence. Auditor cannot merely rely on the assessee’s certificate. Should we reinstate earlier disclaimer?
Changes in Form 3CD
Sr. No.
Date of Payment
Nature of payment
Amount
Name and PAN, if available

42. •CLAUSE NO. 21(d) and (h) – Section 40A(3) / 40A(3A) – Revised Guidance Note:
oIf payments traceable by banking channels, then the same need not be reported.
oAppropriate certificate to be obtained from assessee
oWhere reporting is done on the basis of the certificate, the fact shall be mentioned in Form 3CA or 3CB in the observations section
Changes in Form 3CD

43. CLAUSE NO. 28 – INCOME U/S. 56(2)(viia) – applicable to firms and closely held companies
•Whether during the previous year the assessee has received any property, being share of a company other than a company in which the public are substantially interested, without consideration or for inadequate consideration as referred to in section 56(2)(viia), if yes, please furnish the details of the same
•Valuation to be done as per Rules 11U & 11UA
•Auditor can rely on valuation reports provided by the company / third party valuers
Changes in Form 3CD

44. CLAUSE NO. 28 – INCOME U/S. 56(2)(viia) – applicable to firms and closely held companies
Controversy where the assessee has received shares by way of rights issue, bonus shares, allotment of shares by a company, conversion of debentures, buy back of shares, on amalgamation, demerger, on dissolution of a firm, etc
Changes in Form 3CD

45. CLAUSE NO. 28 – INCOME U/S. 56(2)(viia) – applicable to firms and closely held companies
No format prescribed in the 3CD itself. But, in utility, following details are called for:
•Name of the person from which shares are received
•PAN of the person, if available
•Name of the company whose shares are received
•CIN of the company
•No. of Shares Received
•Amount of consideration paid
•Fair Market Value of the shares
Changes in Form 3CD

46. CLAUSE NO. 28 – INCOME U/S. 56(2)(viia) – Revised Guidance Note
•Auditor to obtain list from assessee & verify with books of account and other documents
•Verify demat account / share certificates
•Auditor to obtain copy of valuation report (Reference to Standard on Auditing-620 “Using the work of an Auditor’s expert”
Changes in Form 3CD

47. CLAUSE NO. 29 – INCOME U/S. 56(2)(viib) - applicable to companies
•Whether during the previous year the assessee received any consideration for issue of shares which exceeds the fair market value of the shares as referred to in section 56(2)(viib), if yes, please furnish the details of the same.
•Valuation to be done as per Rules 11U & 11UA
•How much can the auditor rely on valuation reports provided by the company / third party valuer?
Changes in Form 3CD

48. CLAUSE NO. 29 – INCOME U/S. 56(2)(viib) - applicable to companies
•Remember – VCUs receiving consideration from VCF/VCT are not covered by this provision
•Only money received from Residents is covered. Auditor will have to verify the residential status of the shareholder?
Changes in Form 3CD

49. CLAUSE NO. 29 – INCOME U/S. 56(2)(viib) - applicable to companies
No format prescribed in the 3CD itself. But, in utility, following details are called for:
•Name of the person from whom consideration received for issue of shares
•PAN of the person, if available
•No. of Shares issued
•Amount of consideration paid
•Fair Market Value of the shares
Changes in Form 3CD

50. CLAUSE NO. 31 – 269SS & 269T
Sub clause (c) replaced :
Whether the taking or accepting of loan or deposit, or repayment of the same were made by account payee cheque drawn on a bank or account payee bank draft based on the examination of books of account and other relevant documents
Reference to certificate from assessee has been done away with
In the utility, a drop down list off answers is provided:
YES
NO
NA
Changes in Form 3CD

51. CLAUSE NO. 31 – 269SS & 269T – Revised Guidance Note
•Where evidence is not available, the auditor should make a suitable comment
•E-payments NOT to be reported [reference is made to amendment brought in by Finance (No. 2) Act, 2014]
•Where reporting solely on the basis of the certificate, the fact shall be mentioned in Form 3CA or 3CB in the observations section
•The note re: necessary evidence not being available continues
Changes in Form 3CD

52. CLAUSE NO. 32 – Losses
•New sub clause added :
oReporting of details of losses from speculation business as referred to u/s 73
oReporting of details of losses from specified business (S. 35AD) as referred to u/s 73A
•Additional reporting – auditor will have to deal with the Explanation to S. 73
Changes in Form 3CD

53. CLAUSE NO. 33 – Deductions Admissible
•Deductions admissible under following Chapters to be reported:
oChapter VI-A
oChapter III (Section 10A, 10AA) (newly included)
•To verify whether conditions in the Act / Rules or any other Guidelines, Circular etc fulfilled
•No space provided for auditor to report the assumptions, case laws etc.
•“admissible” was there earlier also but now, for 10A/10AA it will pose problems
•Tax audit and computation of income have now become cross linked – which comes first ?
Changes in Form 3CD

54. CLAUSE NO. 33 – Deductions Admissible – Revised Guidance Note
•For 10A / 10AA deductions, auditor can rely on the certificate issued by another CA (but the issue of how that can be issued by the other CA without tax audit being completed is not touched upon in the GN)
Changes in Form 3CD

55. CLAUSE NO. 34(a) - TDS and TCS
TCS reporting incorporated along with TDS in foll format
Changes in Form 3CD
TAN
Section
Nature of payment
Total amount of payment or receipt of the nature specified in column (3)
Total amount on which tax was required to be deducted
Or collected out of (4)
Total amount on which tax was deducted or collected at specified rate out of (5)
Amount of tax deducted or collected out of (6)
Total amount on which tax was deducted or collected at less than specified rate out of (7)
Amount of tax deducted or collected on (8)
Amount of tax deducted or collected not deposited to the credit of the Central Government out of (6) and (8)
1
2
3
4
5
6
7
8
9
10
Note: The above format is being used by TDS officers for collecting information either during a scrutiny or for S. 197 purposes
The entire data dump of TDS to be uploaded? No import facility!

56. CLAUSE NO. 34(a) - TDS and TCS
Example :
Let us consider that the amount of Legal and Professional fees debited to the P&L is Rs 2,00,000.
Column 1 : TAN under which tax is deducted
Column 2 : Section = 194J
Column 3 : Legal and Professional fees
Column 4 : Rs 2,00,000 (Should accrual be considered? – Yes)
Column 5 : If Rs 2,00,000 contains payment to X and Y of Rs. 9,000 each, amount on which tax was required to be deducted = Rs 1,82,000
Column 6 : Out of Rs 1,82,000, Rs 1,00,000 is paid to Z & Co which has provided a lower deduction certificate/default done by assessee on Rs 1,00,000 – Report Rs 82,000 in Column 6
Changes in Form 3CD

57. Example (continued)
•Column 7: Amount of tax deducted or collected out of 6 in our example has to be Rs. 8,200 or 10% of Column 6
•Column 8 : Typo in the form
•“Total amount on which tax was deducted or collected at less than specified rate out of (7)”
•Total amount on which tax is deducted cannot be out of tax amount as reported in “column 7” It should be column 5
•Rs 1,00,00 to be reported here
•Column 9 : Tax deducted on Rs. 1,00,000 which shall be less than Rs 10,000 shall be reported, say Rs 7,000
Changes in Form 3CD

58. Example (continued)
•Column 10 : Typo in the form
•“Amount of tax deducted or collected not deposited to the credit of the Central Government out of (6) and (8)”
•Column 6 and 8 are total amount on which tax is to be deducted/collected and not amount of tax deducted/collected
•Should be column 7 and 9
•Amount to be reported = Rs 8,200 + Rs 7,000 = Rs 15,200
Total P&L items to be reported (having same deduction/collection section to be one line item) are not party- wise and hence perhaps import facility not given as line items considerably reduced in data in P&L item-wise
Changes in Form 3CD

59. •CLAUSE NO. 34(a) - TDS and TCS – Revised Guidance Note
•Guidance Note mentions that the auditor should obtain a copy of the TDS/TCS returns filed by the assessee which shall form the basis of reporting under this clause, to the extent possible
•Guidance to conduct test check not removed – therefore, test check is still permissible
•There may be difference in Column 4 and 5 due to :
o197/195 certificates
oThreshold limits in various sections
oDifference of opinion w.r.t applicability
•Difference of opinion to be brought out as qualification/observation in 3CA and 3CB
•Column 6,7,8,9,10 to be drawn from TDS/TCS returns
Changes in Form 3CD

60. CLAUSE NO. 34 (b) - TDS and TCS
If TDS/TCS statements are not furnished within time prescribed, the details thereof are to be furnished in the following format:
Changes in Form 3CD
Tax deduction and collection account number
Type of Form
Due Date for furnishing
Date of furnishing , if furnished
Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported
What kind of checking to ensure all transactions required to be reported are reported? - The Guidance Note permits test checks and materiality to be applied The report is silent on such requirement if TDS return filed on time

61. CLAUSE NO. 34(c) - TDS and TCS
Whether assessee liable to pay interest u/s 201(1A) 206C(7) ? If yes, the details thereof are to be furnished in the following format:
Changes in Form 3CD
Tax deduction and collection Account Number (TAN)
Amount of interest under section 201(1A)/206C(7) is payable
Amount paid out of column (2) along with date of payment

62. CLAUSE NO. 34(c) - TDS and TCS
•Invariably, there is a difference in number of months as computed by Traces & by the assessee.
•Should auditor take cognizance of default notices?
The Guidance Note specifically mentions verification of the amounts with Part – G of Form 26AS. However he can recalculate if he is of the opinion that 26AS has the wrong figure.
This needs to be specifically mentioned in the observation/ qualification section in Form 3CA or 3CB, as the case may be, as per the Guidance Note
•To take demand as per rectification application or as per CPC? As per Guidance Note - If different view from 26AS permissible, same shall apply here
Changes in Form 3CD

63. CLAUSE NO. 36 - Tax on distributed profits of domestic companies
•In addition to the total amount of distributed profits, total tax paid thereon and dates of payment, following are additionally required to be reported:
oAmount of reduction as referred u/s 115 – O(1A)(i) i.e. dividend received by domestic companies from its subsidiary
oAmount of reduction as referred u/s 115 – O(1A)(ii) i.e. dividend paid to any person for or on behalf of the New Pension System Trust referred to in section 10(44)
Changes in Form 3CD

64. CLAUSES 37, 38, 39 - Cost Audit / Excise Audit / Service-tax Audit
•No need to attach the Audit Reports
•Tax Auditor needs to report disqualifications and disagreement on any matter, item, value, quantity reported / identified in the respective audit reports
Changes in Form 3CD

65. CLAUSES 37, 38, 39 - Cost Audit / Excise Audit / Service-tax Audit – Revised Guidance Note
•What if audit done but report not issued? Or what if audit is in progress?
•What if audit ordered but not done?
•For which period should the audit be done?
•Guidance Note says:
If audit ordered but is still in progress, then auditor has to report appropriately in this report stating that cost audit is not completed and the cost audit report is not available with the assessee
Tax auditor need not express any opinion in a case where such audit has been ordered but the same has not been carried out.
Audit period must be covered within the tax audit previous year
Changes in Form 3CD

66. CLAUSE 40 - Ratios
•Earlier year’s ratios are also to be given
•Will make it easier for the AO to compare
•Whether to recompute or just copy from earlier year’s 3CD (in case of regrouping)
•If earlier year’s 3CD was signed by some one else, a suitable note to be given
•In the utility, turnover figure is to be entered first but it is not picked up in the computation of the ratios
Changes in Form 3CD

67. CLAUSE NO. 41 - Demand raised/Refund Issued
•Demands raised / refunds issued under any other tax law to be reported
•Details of proceedings to be mentioned
•Service Tax / Profession Tax / Sales-tax / VAT / LBT / Excise Duty / Octroi / Customs Duty / Entertainment Tax / Stamp Duty / Anti Dumping Duty – what else?
Changes in Form 3CD

68. CLAUSE NO. 41 - Demand raised/Refund Issued
•Auditor will have to obtain list of external consultants and then get confirmations from them
•Will the CPC / AO match this with contingent liabilities reported in the accounts?
Changes in Form 3CD

69. CLAUSE NO. 41 - Demand raised/Refund Issued
•In the utility:
odrop down list for financial years (to which demand / refund pertains) is provided – 1980-1981 to 2020-21
oFor date of demand /refund – drop down calendar is provided – from 1914 to 2019!!!
oThe last column of “REMARKS” appears to be mandatory
Changes in Form 3CD

70. Other Changes:
oAcronym of Permanent Account Number added (PAN)
oMODVAT is replaced by CENVAT in the report
oClause No. 12 - If income from shipping companies (Chapter XII-G) and Insurance Business (First Schedule) is included in P&L, mention the amount (along with other provisions of presumptive income)
Changes in Form 3CD

71. Other Changes:
oDeduction allowable u/s 32AC, 35 (with separate clause variations), 35AD, 35CCC, 35CCD, 35D (Clause 19)
oRevised Guidance Note says - ”In case the auditor relies on a judicial pronouncement, he may mention the fact in his observations para provided in Form No.3CA or Form No.3CB, as the case may be”
oAmounts deemed to be profit u/s 32AC to be reported (Clause 24)
oAnnexures I & II have been done away with (Finally, FBT is dead and buried)
oCertain details of annexure i.e ratios incorporated in the report itself with ratios of the previous FY as well
Changes in Form 3CD

72. •Lots of changes in the 3CD
•Made at a late hour
•ICAI Guidance Note released only recently
•Utilities changed again and again but only at last moments
•FM’s intervention would be required and he needs to be reminded about “Taxtortion”
CONCLUSION

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Ameet N. Patel, Partner
Sudit K Parekh & Co., CAs
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