Tax Audit ensures that inter alia no taxable income escapes the scrutiny of Income Tax Officials. It is pertinent to note that audit under this section is carried out by Chartered Accountants who have to record their findings in form nos duly. 3CA/3CB and 3CD prescribed under rule 6G(1)(a), 6G(1)(b), and 6G(2) of the Income Tax Rules 1962 (“Rules”), respectively.
As per Section 44AB of the Act, certain classes of businesses and professionals have to get audited compulsorily. Section 2(3) of the Income Tax Act defines business as “any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce, and manufacture.” At the same time, under Rule 6F of the Income Tax Rules, 1962, categories of professionals have been provided. Applicability of Section 44AB of the Act is briefly discussed below:
Section 44AB(e)- If the possible beneficiary of presumptive taxation under Section 44AD quotes lower income than the stipulated limits under Presumptive Taxation but in reality has a higher income than the stipulated limits in any previous years.
However, some categories of assesses like companies and co-operatives are mandated to get their accounts audited under their parent act. Thus to avoid duplicity of efforts, an audit under Income Tax Act is not required, and Chartered Accountants are allowed to record this finding in form nos. 3CA/3CB and 3CD, as applicable.
If an audit is conducted under Section 44AB, then the report by Chartered Accountant has to be prepared under Form 3CB, and the particulars have to be furnished in Form 3CD whereas if the audit is conducted under any other law, then report by Chartered Accountant has to be prepared under Form 3CA and the particulars have to be furnished in Form 3CD.
As per the Income Tax Act mandate, assesse has to get the audit report of the previous financial year completed on or before 30th September of the assessment year, which then is e- filed by the Chartered Accountant and e- verified by the assesse on www.incometaxindiaefiling.gov.in.
In the event of compliance failure, assesse under Section 271B of the Income Tax Act is chargeable with either a fine of 0.5% of the total sales/turnover/ gross receipts in the relevant year/ years or a flat fine of Rs. 1,50,000, whichever is lower.