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Tax Audit Reports Section 44AB – 3CA, 3CB, 3CD & 3CE

Check out this blog for information on tax audits, tax audit reports, the purpose of tax audit reports, analysis of tax audit forms, and other relevant information.

All You Need to Know About Tax Audit Reports – 3CA, 3CB, 3CD & 3CE

Introduction

Inspecting and verifying accounts, transactions, or records is termed an audit. A tax audit is done to confirm whether a certain taxpayer is abiding by all the provisions of the income tax laws of the country. Section 44AB of the Income Tax Act, 1961 deals with the audits of taxpayers listed under it. The taxpayers listed in U/s 44AB may be businessmen or professionals. They must get their books of accounts audited by a CA (chartered accountant). The CA inspects and verifies the accounts and prepares the audit report. The findings and observations of the audit are mentioned in the tax audit report. The report’s purpose is to ascertain that the taxpayer is complying with the provisions of the law and that the books of accounts are accurate. 

Reasons for Tax Audits

The tax audits are performed to achieve the following:

  • Maintain the books of accounts and ascertain their accuracy
  • To get the accounts books certified by a tax auditor
  • To ensure that the income tax law provisions are being followed 
  • Tax audits also check/verify whether the records show the actual income of the taxpayer 
  • Also, that the deduction claims are correct/valid

The tax audit reports are made and filed in either of the forms mentioned below:

  • Form 3CA
  • Form 3CB

Form 3CA

This form is used for a taxpayer earning income through a business or profession for whom it is already mandatory to get his books audited under any other country law but for the income tax law. 

Form 3CB

This form is furnished for a taxpayer earning income through business or profession who is not required to get his books of accounts audited under any other law prevailing in the country.

Note: 

With either form – 3CA or 3CB, the auditor must furnish Form 3CD containing prescribed particulars and attach it to the audit report. 

Particulars of Form 3CA

Point – 1

  • Name of the taxpayer
  • Address of the taxpayer 
  • Permanent Account Number of the taxpayer
  • Name of the auditor (firm/individual)
  • Law under which the book of accounts has been audited
  • Date of the audit report
  • Beginning and Eed date of the profit and loss account/income and expenditure account
  • Date of the balance sheet

Point – 2

Declaration mentioning attachment of form 3CD with the audit report.

Point – 3

The observations of the audit. 

Point – 4

  • Place and date of signing the audit report
  • Name, address, and the membership number of the auditor
  • Seal of the Auditor

Particulars of Form 3CB

Point -1

  • Name of the taxpayer
  • Address of the taxpayer 
  • Permanent Account Number of the taxpayer
  • Date of the balance sheet
  • Period of the Income and Expenditure Account/ Profit and Loss Account

Point – 2

  • Address(s) of the places where the books of accounts are kept

Point – 3(a)

  • Audit observations/qualifications/discrepancies/comments

Point – 3(b)

Declaration by the auditor regarding

  • Getting information and explanations needed for the audit
  • Assurance that the books of accounts are maintained accurately
  • The balance sheet and profit and loss account appear to be accurate and true

Point – 4

Declaration of attaching form 3CD along with the audit report.

Point – 5

Audit observations/discrepancies 

Point – 6

  • Place and date of signing the audit report.
  • Name, address, and the auditor
  • Membership number of the auditor.
  • Seal of the auditor

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Form 3CD

Form 3CD is mandatory to be attached with the audit report. It is an elaborate statement of particulars containing forty-one points/items. The details related to the business/profession and its transactions must be filled in correctly.  

Form 3CE

This form is furnished in the case of foreign companies and non-residents. The non-resident Indians and foreign companies that receive a royalty for their technical services must get their book of accounts audited. This audit report will be furnished in form 3CE, and an annexure containing the particulars too will be attached to the report. 

Particulars of Form 3CE

Point – 1

  • Name of the non-resident
  • Address of the non-resident 
  • His/her Permanent Account Number
  • The financial year for which the audit was conducted

Point – 2

Declaration regarding obtaining all necessary information and explanations for the audit.

Point – 3

Certification about the permanent establishment of the profession in India.

Point – 4

Declaration of the income from royalty u/s 44DA for the assessment year.

Point – 5

  • Name and signature of the Auditor along with his seal
  • Details regarding the income through royalty should be mentioned in the Annexures of this form.

Due Date of Obtaining the Tax Audit Report 

The audit report must be obtained by 30th September of the relevant assessment year.

This date may be extended by the department in case of a pandemic. The due date to submit the audit report for the Income Tax Assessment year 2021-22 was extended to 15th January 2022.

Penalty for Not Filing the Tax Audit Report 

If the taxpayer does not get his books of account audited or fails to submit/ file the audit report, he will have to face the consequences. The Assessing Officer (AO) may impose a penalty U/s 271B of the IT return filing Act, 1961. The minimum penalty maybe 0.5 percent of total sales made or turnover/ gross receipts, and the penalty can go up to ₹1,50,000.

Note: 

The Assessing Officer may not charge any penalty if the taxpayer provides a genuine cause with supporting documents for non-compliance with the provision. 

Conclusion

We hope this article has been of help in providing details of the tax audit report. A business audit refers to checking, reviewing, and inspecting records, transactions, and accounts. A tax audit is the verification and inspection of the account books to confirm that the taxpayer abides by all the income tax law provisions. The mandatory tax audit must be carried out to ascertain that all the provisions of the Income Tax Act,1961 are complied with. If the audit report is not submitted in the stipulated period, the taxpayer may have to pay the penalty. 

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