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Changes in Form 3CD of Tax Audit Report
Presented by
CA. Alok Gupta(S.S. Kothari Mehta & Co.)
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Due Date Has Been Extended
On 20 August, 2014, The CBDT has extended the due date for tax audits to 30th November by issuing a notification u/s. 119
Question mark over due date for filing return of income u/s. 139(1)
Notification refers only to 44AB and not 139(1)
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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
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Clauses of 3CD that remained UnchangedNew Clause 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
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Clauses of 3CD that remained unchanged…. Contd…
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 – Performa credits, duty drawbacks etc
16(c) Amounts not credit to P&L – Escalation claims
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New Clause Description
16(d) Amounts not credit to P&L – Any other income
16(e) Amounts not credit to P&L – Capital Receipt
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
Clauses of 3CD that remained unchanged…. Contd…
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New Clauses IntroducedS.No. Clauses
1 4
2 8
3 17
4 28
5 29
6 32(c)
7 32(d)
8 32(e)
9 39
10 41
11 36(b)
12 36(c)
13 34(c)
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Clause 4 Registration no. in case of
Indirect Tax Liability
Clause Reiterated ;
“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”
Interpretation
Tax Auditor now has to check under what other statue assessee is liable to pay taxes and has to report accordingly.
Auditor may also obtain such list from his client.
Purpose – To obtain data for cross verification from other Indirect Tax Dept.
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Clause 8Relevant Clauses of Section
44AB
Clause Reiterated ;
“Indicate the relevant clause of section 44AB under which the audit has been conducted”
Interpretation
Now Auditor has to report under which clause of Tax Audit the Audit is been conducted.
Auditor has to report if the Audit is of Business or Profession or under Presumptive taxation scheme.
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Clause 17Transfer of Land/Building for Less than Stamp Duty Value
Clause Reiterated ;
Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of a State Government referred to in section 43CA or 50C, please furnish:• Details of property• Consideration received
or accrued• Value adopted or
assessed or assessable
Interpretation
Any Land or Building or both are covered ( incl. rural agricultural land ).
Extensive reporting required in case of Real Estate Sector.
In case of installment, reporting is to be made in the year in which property is transferred.
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Clause 28For Shares acquired without/inadequate
considerationClause Reiterated ;
“Whether during the previous year the assessee has received any property, being share of a company not being 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.”
Interpretation
For Shares of a Pvt. Ltd Company
Valuation to be done as per Rules 11U & 11UA
Purpose – To report transaction of briefcase companies and to strengthen Sec 56(2)(viia) for reporting.
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Clause 29Issue Of Share Above FMV
Clause Reiterated ;
“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.”
Interpretation
If a Pvt. Company issues shares more than its NAV then difference has to be reported .
It also covers issue of shares at premium
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Clause 32(c)Speculation Losses u/s 73
Clause Reiterated ;
“Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year, If yes, please furnish the details of the same.”
Interpretation
Reporting of Speculation Loss
Commodity Loss from agriculture produce is
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Clauses Changed in the Form 3CD
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Clause 11(b)& 11(c)Location of Books of
accountsOld Clause 9(b) & 9(c) Reiterated ;
(b) Books of account maintained. (In case books of account are maintained in a computer system, mention the books of account generated by such computer system.) (c) List of books of account examined.
New clause 11(a) & 11(b) Reiterated;
(b) List of books of account maintained and the address at which the books of accounts are kept.(In case books of account are maintained in a computer system, mention the books of account generated by such computer system. If the books of accounts are not kept at one location, please furnish the addresses of locations along with the details of books of accounts maintained at each location.)
(c) List of books of account and nature of relevant documents examined.
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Impact of the change
Books of accounts includes Ledgers, daybooks, cash books and any other books.
Place of business includes where books of accounts are kept and if more than one place then give detail of all the places.
Information is useful for department for the purpose of survey u/s 133(A).
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Clause 13(c) & 14(b)Change in method of
Accounting/Stock Valuation
Old Clause Reiterated ;
Clause 11:
“(b) Whether there has been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year.
(c) If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.”
Clause 12:
“(b) Details of deviation, if any, from the method of valuation prescribed under section 145A, and the effect thereof on the profit or loss.”
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Clause 13(c)& 14(b)
New clause Reiterated;Clause 13:(b) Whether there had been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year.
(c) If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.
Clause 14:(b) In case of deviation from the method of valuation prescribed
under section 145A, and the effect thereof on the profit or loss, please furnish:
Serial number Particulars Increase in profit (Rs.) Decrease in profit (Rs.)
Serial number Particulars Increase in profit (Rs.) Decrease in profit (Rs.)
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Impact of the Changes
Tabular format has been inserted for proper reporting.
Self Explanatory.
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Clause 19Deduction allowable u/s 32AC to
35AD
Old Clause Reiterated ;Clause 15: Amounts admissible under sections - (a) 33AB (b) 33ABA (c) 33AC (wherever applicable) (d) 35 (e) 35ABB (f) 35AC (g) 35CCA (h) 35CCB (i) 35D (j) 35DD (k) 35DDA (l) 35E:- (a) debited to the profit and loss account (showing the amount debited and deduction allowable under each section separately); (b) not debited to the profit and loss account.
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Clause 19
New clause Reiterated;
Clause 19 :Amounts admissible under sections:
Section Amount debited to profit and loss account
Amounts admissible as per the provisions of the Income Tax Act, 1961 and also fulfils the conditions, if any specified under the the conditions, if any specified under the relevant 14provisions of Income Tax Act, 1961 or Income Tax Rules,1962 or any other guidelines, circular, etc., issued in this behalf.
32AC
To
35AD
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Impact of the Changes
Some more sections like 32AC,35AD,35CCC and 35DDD are also required to be reported in the revised form.
Investment in new Plant and Machinery w.e.f. 01-04-2014.(Section 32C)
Deduction in respect of expenditure on specified business. (Section 35AD)
Amortization of certain preliminary expenses (Section 35D)
No major changes in reporting.
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Clause 20(b)Contribution from employees for various
fundsOld Clause Reiterated ;Clause 16(b):
(b) Any sum received from employees towards contributions to any provident fund or superannuation fund or any other fund mentioned in section 2(24)(x); and due date for payment and the actual date of payment to the concerned authorities under section 36(1)(va).
New clause 20(b) Reiterated;Clause 20(b):
(b) Details of contributions received from employees for various funds as referred to in section 36(1)(va):Serial number Nature of fund Sum received
from employees
Due date for payment
The actual amount paid
The actual date of payment to the concerned authorities
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Impact of the Changes
Tabular format has been inserted for proper reporting.
Self Explanatory.
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Clause 21(a),(b)&(c)Disallowances
Clause 17:
Clause 17:
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Clause 21(a),(b)&(c)
New Clause ;Clause 21(a),(b)&(c):
New Form 3CD requires reporting of following disallowable payments, even if they are not debited to profit and loss account[clause 21 of Part B]:
(i) Disallowance for TDS default under Section 40(a) (ii) Disallowance for cash payments under section 40A(3) iii) Disallowance for provision for gratuity under section
40A(7) (iv) Disallowance under Section 40A(9) (v) Particulars of any liability of a contingent nature (vi) Amount of deduction inadmissible under section 14(vii) Interest inadmissible under the proviso to section
36(1)(iii)
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Impact of the Changes
Tabular format for all the sub clauses has been given in revised Form 3CD..
Self Explanatory.
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Clause 21(d)Additional Reporting of
disallowance u/s 40A(3A)
Clause 17 (h) Reiterated:“(A) whether a certificate has been obtained from the assessee regarding payments relating to any expenditure covered under section 40A(3) that the payments were made by account payee cheques drawn on a bank or account payee bank draft, as the case may be;(B) amount inadmissible under section 40A(3), read with rule 6DD [with break-up of inadmissible amounts;”
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Clause 21(d)
New Clause ;Clause 21(d):
Disallowance/deemed income under section 40A(3):(A) On the basis of the examination of books of account and other
relevant documents/evidence, whether the expenditure covered under section 40A(3) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft. If not, please furnish the details
(B) On the basis of the examination of books of account and other relevant documents/evidence, whether the payment referred to in section 40A(3A) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft If not, please furnish the details of amount deemed to be the profits and gains of business or profession under section 40A(3A);
Serial number Date of payment Nature of payment Amount
Name and Permanent Account Number of the payee, if available
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Impact of the Changes
Earlier Auditor had to report only the cash payment for expenses incurred during the year in excess of prescribed limit but now the CBDT has casted additional responsibility on auditor to report the cash payment made during the year in respect of expenses incurred in earlier years exceeding the prescribed limit U/s. 40A(3A). Now auditor has to verify all the cash payments in excess of prescribed limits to report under section 40A(3) and 40A(3A). In addition to this auditor also needs to report Cash payment under section 269T if the same relates to any loan or deposit exceeding the limit prescribed under section 269T.
Clause has further removed the reporting requirement of certificate if any been obtained by the Auditor from the Assessee U/s. 40A(3).
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Clause 31(c)Non Reporting of Certificate u/s 269SS
and 269TOld Clause 24 (c) Reiterated;“Whether a certificate has been obtained from the assessee regarding taking or accepting loan or deposit, or repayment of the same through an account payee cheque or an account payee bank draft”.
New Clause 31(c) Reiterated;
Whether the taking or accepting 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
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Impact of the Changes
Requirement of obtaining certificate from the assessee has been removed.
Now reporting to be made on the basis of examination of books and other relevant documents.
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Clause 33Deductions
Old Clause Reiterated:Clause 26:Section-wise details of deductions, if any, admissible under Chapter VIA.
New Clause 33 Reiterated;
Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA).
Section under which deduction is claimed
Amounts admissible as per the provision of the Income Tax Act, 1961 and fulfils the conditions, if any, specified under the relevant provisions of Income Tax Act, 1961 or Income Tax Rules,1962 or any other guidelines, circular, etc, issued in this behalf.
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Impact of the Changes
Tabular format has been inserted for proper reporting.
Self Explanatory.
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Clause 34(a)&(b)
Old Clause Reiterated:Clause 27:(a) Whether the assessee has complied with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government.
(b) If the provisions of Chapter XVII-B have not been complied with, please give the following details*, namely:-(i) Tax deductible and not deducted at all (ii) shortfall on account of lesser deduction than required to be deducted (iii) tax deducted late (iv) tax deducted but not paid to the credit of the Central Government
New Clause 34 (a) and (b) ;
Tabular format for all the sub clauses has been given in revised Form 3CD which is Self Explanatory.
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Impact of the Changes
Old Form 3CD required reporting on compliance with TDS provisions only. However, New Form No. 3CD requires reporting on compliance with TCS provisions as well[clause 34(a)].
The tax auditor shall report on the compliance by the assessee with the provision of furnishing of TDS or TCS statement within prescribed time[clause 34(b)].
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Clause 36Dividend Distribution Tax
Old Clause Reiterated:Clause 29:In the case of a domestic company, details of tax on distributed profits under section 115-O in the following form :—(a) total amount of distributed profits;(b) total tax paid thereon;(c) dates of payment with amounts.
New Clause 36 Reiterated;
In the case of a domestic company, details of tax on distributed profits under section 115-O in the following form :-(a) total amount of distributed profits;(b) amount of reduction as referred to in section 115-O(1A)(i); (Newly Inserted)(c ) amount of reduction as referred to in section 115-O(1A)(ii); (Newly Inserted)(d) total tax paid thereon;(e) dates of payment with amounts.
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Clause 40Ratio Analysis
Old Clause Reiterated:Clause 22:Accounting ratios with calculations as follows :— (a) Gross profit/Turnover; (b) Net profit/Turnover; (c) Stock-in-trade/Turnover; (d) Material consumed/Finished goods produced.
New Clause 40 Reiterated;
Details regarding turnover, gross profit, etc., for the previous year and preceding previous year: 1. Total turnover of the assessee2. Gross profit/turnover3. Net profit/turnover4. Stock-in-trade/turnover5. Material consumed/finished goods produced
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Impact of the Changes
Ratio Analysis to be given for PY and preceding PY.
Total Turnover comparison has been added.
Annexure – A has been deleted
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Thank You
