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TAX AUDIT under section 44AB of Income Tax Act, 1961 CA. ANKIT SHAH TAXPERT PROFESSIONALS 21 August 2015

Taxpert professionals Presentation on Tax Audit

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Page 1: Taxpert professionals   Presentation on Tax Audit

TAX AUDIT under section 44AB of Income Tax Act, 1961

CA. ANKIT SHAH

TAXPERT PROFESSIONALS

21 August 2015

Page 2: Taxpert professionals   Presentation on Tax Audit

Every person,-

carrying on business and his Total Sales/Turnover/Gross receipts,

exceeds Rs. 1 Crore in any previous year ; or

carrying on profession and his Gross Receipts Rs. 25 lakhs in any

previous year; or

carrying on the business or profession and is covered under section

44AD/44AE/44BB/44BBB and claimed that his income from the

business is lower than deemed profits and gains computed under

relevant sections.

Applicability of TAX Audit

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Objective

To assist Income Tax Department to assess correct income of assessee.

Main Report

• As per Rule 6G, Tax Audit is to be furnished in Form 3CA/ Form 3CB

• Alongwith the particulars required in Form 3CD.

• Annexure I – Financial reporting

o Form 3CA & Form 3CD – In case where the Accounts of the business or Profession of a person have already been audited under any other law.

(e.g Private/Public Companies under Company Act, 2013.)

o Form 3CB & Form 3CD – In case where the Accounts of the business or Profession of a person have not been audited under any other law. (e.g Proprietorship concern.)

Tax Audit

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Form 3CA - Report that Statutory Audit was conducted in pursuance of

Statute applicable to assessee.

Form 3CB – Report that Tax Audit is conducted in accordance with

section 44AB. Express opinion whether financial statements give True or

Fair view:-

o State of affairs of assessee as represented by Balance Sheet

o Profit/Loss or Income. Expenditure as represented by Profit/Loss

Account

Express opinion whether particulars mentioned in Annexure 3CD &

Annexure I are True & Correct.

Tax Audit Report

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The Due Date of filing Tax Audit Report u/s 44AB is 30th September of the Assessment Year.

However in case the Assessee is liable for Transfer Pricing Audit under section 92 of Income Tax Act, 1961 the due date of filing Tax Audit is extend to 30th November of the Assessment Year.

Note:

• International Transfer Pricing u/s 92E – No limit fixed

• Domestic Transfer Pricing u/s 92F – If Aggregate value of specified transactions exceeds Rs. 5 Crore (Rs. 20 Crore from A.Y 2016-17 onwards)

As per Notification No. 34 dated 1st May, 2013,

E-filing of Tax Audit report is mandatory from the A.Y 2013-14 onwards.

Due date & Mode of Filing Tax Audit

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The CBDT has notified Income-tax (7th amendment) Rules, 2014 which

substitutes the existing Form No. 3CD with a new form from A.Y 2014-15

onwards.

The New Form 3CD prescribes:

• New reporting clauses and substitutes some existing clauses with new ones.

• Requires tax auditor to furnish more and detailed information.

• Explicit mention of the observations/qualifications, if any, by the auditors

while issuing the true and correct audit report.

Amendments in Form 3CA/3CB &

Form 3CD

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Part A (Clause 1 to 6)

Clause 1 : Name of the assessee

- As per the Certificate of Incorporation / Partnership deed, as the case

may be.

Clause 2 : Address

- Address of Registered office. However, if the administrative / corporate

office is different from the registered office, the address of the same can also

be given.

Clause 3 : Permanent Account Number

- As per the PAN card

Form 3CD

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Clause 4 : Whether the Assessee is liable to Pay Indirect Tax like

• Excise Duty

• Service Tax

• Sales Tax

• Custom Duty etc.

o If Yes, please furnish the Registration Number or any other Identification

number allotted for the same.

Additional Clause in Part A

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Clause 5 : Status

- Status refers to the different class of assessees included in the definition of

‘person’ under section 2(31) namely:

• individual,

• hindu undivided family,

• company,

• firm,

• an association of persons or a body of individuals,

• a local authority, or

• artificial juridical person

o Status should be as per the Return of Income tax. Residential status is not

required.

Clauses in Part A

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Clause 6 : Previous year ended

- It is 31st March (relevant financial year).

Clause 7 : Assessment year

- If the financial year is 31st March 2015, the assessment year is 2015-2016.

Clause 8 : Indicate the Relevant Clause of Section 44AB under which the Audit has been conducted

- Select the Category

(a) Business

(b) Profession

(c) Deemed Audit

Clauses in Part A

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Clause 11(c) : Nature of documents examined by the auditor

- The auditor is required to specify the nature of documents examined by him in the course of tax audit.

Clause 13 & 14 : Change in method of accounting/stock valuation

- A tabular format is specified for reporting of financial impact of changes in method of accounting and method of stock valuation

Clause 17 : Transfer of land/building for less than stamp duty value

- Details of land or building transferred by assessee for less than stamp duty value (under section 43CA or under section 50C) shall be reported.

Clause 19 : Deduction allowable under Sections 32AC/35AD/

35CCC/35D

- Deductions allowable under sections 32AC, 35AD, 35CCC and 35DDD.

Amendments in Part B (Form 3CD)

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Clause 21 : Disallowances

- Old Form 3CD required reporting of inadmissible payments only when they were

debited to Profit and loss account. However, the new Form 3CD requires reporting

of following disallowable payments, even if they are not debited to profit and loss

account

(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 14A

(vii) Interest inadmissible under the proviso to section 36(1)(iii)

Amendments in Part B (Form 3CD)

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Clause 24 : Deemed income under Section 32AC

- Section 32AC of the Act provides for investment allowance of 15% for

investment in plant and machinery.

- Reporting of deemed income which results from sale or transfer of new

asset, (if asset was acquired and installed by the assessee for the purpose of

claiming deductions under Section 32AC within a period of five years from

the date of its installation.

Clause 28 : Receipt of unlisted shares

- Reporting of all unlisted shares which were received by assessee either for

inadequate consideration or without consideration in view of section

56(2)(viia).

Amendments in Part B (Form 3CD)

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Clause 29 : Issue of shares above fair market value

- Reporting of all transactions of issue of shares where consideration received by

assessee exceeds its fair market value in view of section 56(2)(viib)

Clause 32(c) : Speculation losses

- Reporting of losses from speculation business as referred to in Section 73.

Clause 32(d) : Losses from business specified under section 35AD

- Assessee shall furnish details of losses incurred as referred to in Section 73A in

respect of specified businesses mentioned in Section 35AD.

Clause 33 : Reporting of deductions claimed under Sections 10A and 10AA

- If any deduction has been claimed by assessee under Sections 10A and 10AA.

Amendments in Part B (Form 3CD)

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Clause 34 (a) : Compliance with TCS provisions

- Reporting on compliance with TCS provisions along with TDS provisions

Clause 34(b) : Filing of TDS/TCS statements

- 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(c) : Assessee-in-default

- If assessee is deemed as an assessee-in-default and he is liable to pay

interest under Section 201(1A) or 206C(7), the tax auditor shall furnish the

TAN of assessee, interest payable and interest actually paid.

Amendments in Part B (Form 3CD)

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Clause 36 : Dividend Distribution Tax

- Reporting of following reductions as referred to in clause (i) and clause (ii) of

Section 115-O(1A).

(i) Dividend received by domestic company from its subsidiary, and

(ii) The amount of dividend paid to any person for or on behalf of the New

Pension System Trust referred to in Section 10(44).

Clause 37, 38 & 39 : Audits

(i) Cost audit

(ii) Audit under Central Excise Act

(iii) Special Audit under Service Tax

- Report if any audit as mentioned above is carried out and qualifications (if any)

made by the auditor.

- Attached the copy of Audit Report.

Amendments in Part B (Form 3CD)

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Clause 40 : Ratios

- Reporting of ratios of Current financial year as well as preceding

financial year.

Clause 41 : Demand raised or refund issued

- Reporting of demand raised or refund issued under any tax laws (other

than Income Tax Act, 1961 and Wealth Tax Act, 1957)

- Details of relevant proceedings (if any)

Amendments in Part B (Form 3CD)

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The Procedure for E-filing can be summarized in the following Four

steps:

Registration as Tax Professional on Income Tax E filing website

(Incometaxindiaefiling.gov.in)

Engaging Tax Professional by Assessee

Uploading of Form 3CB by Tax Professional (CA) and

Approval of Form 3CB by Assessee

Procedure for E-Filing

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Non Compliance of the provisions of this act

Attract Penalty under section 271B of the Income Tax Act

If any person required to get his audit done under section 44AB fails to

do so before specified date shall be liable to penalty:

• ½ % of Turnover/Gross Receipts subject to

• Maximum of Rs. 1,50,000/-

Penalty for Non Compliance of

Section 44AB

Page 20: Taxpert professionals   Presentation on Tax Audit

THANK YOU

Please feel free to call/mail us for further clarification

Contact:

Taxpert Professionals Private Limited

Tel: +91 9769134554

E-mail us: [email protected]

Visit us at: www.taxpertpro.com

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