APPLICABILITY OF INCOME TAX AUDIT l tax audit applicability

The term “Audit” means ‘to check ’or ‘to review’ or ‘to inspect’. The different laws has prescribed different types of Audits for various persons, like Company Law mandates Company Audit, Cost Accounting Law mandates the cost audit and so on. Likewise, the Income-Tax Act, 1961 mandates the taxpayers having income from business or profession to get the tax-audit done of accounts of the business or profession, subject to income tax audit applicability. In this blog, we will discuss the tax audit provisions in detail.

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What is the concept of Tax-Audit under the IT Act, 1961?

Section 44AB of the Income Tax Act, 1961, gives out the concept of Tax-Audit for prescribed persons. This section mandates certain prescribed persons to get the accounts of their business or profession audit from a Chartered Accountant, and this audit is known as Tax-Audit. The Chartered Accountant who conducts income tax audit is bound to present the findings and observation thereon in a report and this report is known as Audit-Report. Government has prescribed Form 3CA, Form3CB and Form 3CD, to present tax audit.

What is the significance of Tax-Audit under I-T Act, 1961?

The significance of Tax-Audit under I-T Act, 1961 is as under –

Since IncomeTax Audit is done by a professional i.e. Chartered Accountant, with minute scrutiny who ensures that the accounts are accurately prepared and tax has been paid accurately & timely. Inshort, it verifies the details of Income tax return and tax liability of the concerned taxpayer.
It ensures that proper books of accounts are being maintained.
It helps to check and disclose the fraudulent practices undertaken by the taxpayer, if any.
It saves the time of tax-authorities, as they can rely more on audited accounts as compare to non-audited.

Who is mandatorily required to get the accounts audited under I-T Act, 1961?

Whether a person is required to get its accounts audited as per Section 44AB, even when it is required to get its accounts audited under any other law?

The answer is “No’, therefore, when a person who is already required to get the accounts audited under the provisions of any other law then such person is not required to get the accounts audited again under section 44AB of the IT Act. However, when such person is mandatorily required to get its accounts audit as per section 44AB then the person must get the Tax-Audit Report from the Chartered Accountant and subsequently the CA will have to provide the Tax Audit Report in the prescribed forms.

What are the prescribed forms for Tax-Audit Report under IT Act, 1961?

As discussed, The Chartered Accountant is required to conduct the tax-audit and thereafter is required to furnish the Tax-Audit Report. Thus the CA undertaking the Tax-Audit must furnish the Tax Audit Report in the forms prescribed by the IT act that are Form-3CA/3CB and Form 3CD subject to their applicability.

What is the prescribed due-date for Tax-Audit under Section 44AB?

A person who is mandated by Section 44AB to get its accounts audited then the person must obtain the Tax-Audit-Report from the concerned Chartered Accountant on or before 30^th September of the Assessment Year under consideration.Moreover, the CA has to e-file the Tax Audit Report before the Income Tax Department.

What shall be the implications for not complying the Tax Audit under Section 44AB of IT Act?

According to the provisions of Section 271B of the Income Tax Act, 1961, if a person is mandated to comply the tax-audit under the provisions of section 44AB of the IT Act and if fails to get its accounts audited accordingly or fails to furnish the Tax-Audit-Report within prescribed time-limit or due date then the Assessing Officer may impose a penalty which shall be the lower of the following-

5% of the total gross receipts, sales or turnover of the business and/or profession as the case may be, in the concerned defaulting Financial Year, or
1,50,000/-.

However, the assessing office may not impose such penalty when the reasonable cause for default is proved.

Conclusion

Every person carrying on business or is engaged in any profession must be aware of the threshold limit of Income Tax Audit and tax audit applicability in order to avoid penalty against default.

If you are looking for a Team of Chartered Accountants to conduct the Tax-Audit and to guide you through the process then contact your Trustworthy Advisors Manthan Experts by dialing at +91-9643-969-969 or mail at info@manthanexperts.com.

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