Tax Audit In view of the coming Tax audit due date or rather the ongoing tax audit season, I would like to present my first article on audit under section 44AB of the Income Tax Act, 1961. Section 44AB of the Income Tax Act, 1961 specifies the provisions relating to tax audit. Tax Audit is compulsory for the following:
1. A person carrying on business, if the total sales, turnover or gross receipt in business for the accounting year or years relevant to the assessment year exceed or exceeds Rs. 60 lakh. (Increased to Rs.1 crore in F.Y 2012-13)
2. A person carrying on profession, if his gross receipts in profession for an accounting year or years relevant to any of the assessment year exceeds Rs. 15 lakh. (Increased to Rs.25 Lacs in F.Y 2012-13) 3. A person whose income is assessed on a presumptive basis under section 44AE, 44BB or 44BBB. Where such an assessee declares an income lesser than presumed under the sections 44AE, 44BB or 44BBB, they are required to get their accounts audited in accordance with section 44AB. (44AE – business of plying, hiring or leasing goods carriages, 44BB – business of exploration etc. of mineral oils, 44BBB - foreign companies engaged in the business of civil construction, etc in certain turnkey power projects.)
4. A person whose income is assessed on a presumptive basis under section 44AD (w.e.f. 01.04.10). Where such an assessee declares an income lesser than presumed under the sections 44AD, they are required to get their accounts audited in accordance with section 44AB. Unlike the persons specified in the 3rd point, the persons specified here are only required to their accounts or books audited if their income exceeds the basic exemption limit.
The said section 44AD has been reproduced hereunder: - Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee (Ind., HUF, part. Firm – resident but excluding LLP) engaged in an eligible business (any business except the business of Section 44AE and whose turnover does not exceed Rs.60 Lacs), a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and
Audit: Tax audit should be done by a practicing chartered Accountant. The tax audit report should be signed by the CA in practice mentioning the name of the firm, name of the member signing, Membership no. and Registration number of the firm(w.e.f 01.04.10) ·
Form: Tax audit report is required to be submitted in form 3CA in case of corporate assessees and in form 3CB in case of other assessees which should be accompanied by the Statement of particulars required u/s. 44AB in Form 3CD. ·
Due – date for submission: Due date for filing the return of income for persons liable to Tax Audit is 30th September of the year succeeding the relevant financial year. ·
Non-Compliance: Non compliance of the said section attracts penalty under section 271B of the Income Tax Act 1961. The amount of penalty shall be ½% of the turnover/ gross receipts or Rs.150,000/- whichever is lower. The penalty was increased from Rs. 1 Lac to Rs. 1.5 Lacs by the Finance Act 2010 w.e.f. 01.04.11. However, no penalty in case of reasonable cause for the failure. ·
Some additional points to be considered:
1. A person carrying on business, if the total sales, turnover or gross receipt in business for the accounting year or years relevant to the assessment year exceed or exceeds Rs. 60 lakh. (Increased to Rs.1 crore in F.Y 2012-13)
2. A person carrying on profession, if his gross receipts in profession for an accounting year or years relevant to any of the assessment year exceeds Rs. 15 lakh. (Increased to Rs.25 Lacs in F.Y 2012-13) 3. A person whose income is assessed on a presumptive basis under section 44AE, 44BB or 44BBB. Where such an assessee declares an income lesser than presumed under the sections 44AE, 44BB or 44BBB, they are required to get their accounts audited in accordance with section 44AB. (44AE – business of plying, hiring or leasing goods carriages, 44BB – business of exploration etc. of mineral oils, 44BBB - foreign companies engaged in the business of civil construction, etc in certain turnkey power projects.)
4. A person whose income is assessed on a presumptive basis under section 44AD (w.e.f. 01.04.10). Where such an assessee declares an income lesser than presumed under the sections 44AD, they are required to get their accounts audited in accordance with section 44AB. Unlike the persons specified in the 3rd point, the persons specified here are only required to their accounts or books audited if their income exceeds the basic exemption limit.
The said section 44AD has been reproduced hereunder: - Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee (Ind., HUF, part. Firm – resident but excluding LLP) engaged in an eligible business (any business except the business of Section 44AE and whose turnover does not exceed Rs.60 Lacs), a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and
Audit: Tax audit should be done by a practicing chartered Accountant. The tax audit report should be signed by the CA in practice mentioning the name of the firm, name of the member signing, Membership no. and Registration number of the firm(w.e.f 01.04.10) ·
Form: Tax audit report is required to be submitted in form 3CA in case of corporate assessees and in form 3CB in case of other assessees which should be accompanied by the Statement of particulars required u/s. 44AB in Form 3CD. ·
Due – date for submission: Due date for filing the return of income for persons liable to Tax Audit is 30th September of the year succeeding the relevant financial year. ·
Non-Compliance: Non compliance of the said section attracts penalty under section 271B of the Income Tax Act 1961. The amount of penalty shall be ½% of the turnover/ gross receipts or Rs.150,000/- whichever is lower. The penalty was increased from Rs. 1 Lac to Rs. 1.5 Lacs by the Finance Act 2010 w.e.f. 01.04.11. However, no penalty in case of reasonable cause for the failure. ·
Some additional points to be considered:
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