According to section 44AB of Income Tax Act 1961, every assessee falling within the scope of this section is required to get its books of accounts audited by a Chartered Accountant. This audit is completely different from the General Audit from which we are regularly exposed. The scope of Tax Audit is to check whether the assessee has correctly complied with all the rules and regulations or not. The concept of Tax Audit has been introduced to prevent Revenue Authorities from major Tax Loss.
However, the system of Tax Audit was not so strong in the earlier years. Major Changes were bought by the appropriate authorities from the A.Y. 2013-14. Previously Tax Audit Reports were not required to be filed electronically however from A.Y. 2013-14 it was made mandatory to file Income Tax Returns Online too. This brought a radical change in the system of Tax Audit & the responsibilities of CAs suddenly grew up numerous times. Moreover to increase the quality of work & bring transparency The ICAI restricted maximum the number of Tax Audit Report to be signed by one Chartered Accountant in a single assessment year to 45 however it was increased to 60 by The ICAI in its 331st Meeting held from 10th to 12th February 2014.
One CA is allowed to sign 60 Tax Audit Reports in one Assessment Year. It is often confused with the limit of the firm. It is clearly mentioned by The ICAI that one CA can sign maximum up to 60 Tax Audit Reports hence the maximum limit of firms is the combined limit of all the CA partners of that firm. Hence if a CA firm has 3 partners then the total number of Tax Audit the Firm can take is 3X60=180.
If we discuss the applicability of Tax Audit then section 44 AB read with section 44AD & 44AE states that An Assessee is required to get his Tax Audit done by a Chartered Accountant if the Assessee satisfies any of the fallowing criteria:-
1) Total Turnover from one or more business severally or jointly is more then Rs 1 Crore in the case of Business Person.
2) The Gross Receipt from the Profession is more then Rs 25 Lakhs in case of Professional Person or
3) The deemed profit of the business or profession is less then the deemed profit as specified in section 44AD (Lesser then 8% profit of the Turnover/Gross Receipt comes in the ambit of Tax Audit) or 44AE (Only Applicable in the case of Hiring, Plying & Leasing Goods carriage business)
Several Changes in the Tax Audit Report has been introduced by ministry of finance vide Income Tax Rules 2014 (7th Amendment) which are applicable from A.Y. 2014-15 onward. Form 3CA, 3CB & 3CD has been amended by CBDT & now they require specific mention of the observations & Qualifications if any.
Tax Audit Report Efiling
As per notification no.34 dated 1st of May 2013 e-filing of Tax Audit Report is mandatory from A.Y. 2013-14 onwards. Tax Audit Report is to be furnished form 3CA or 3CB & the allied information with them is to be furnished in form 3CD as per rule 6G.
3CA & 3CD – These forms should be used only if the accounts of the assessee has already been audited according to any other law of the land. However, Internal Audit, Management Audit, Social Audit or any such audit do not make these forms applicable on the assessee. These forms are generally used for companies as their accounts are audited as per The Companies Act 2013.
3CB & 3CD – These forms are to be used if the books of accounts of the assessee have not been audited in any other law.
Penalty for Non-Compliance of the provisions of Section 44AB
Non-Compliance with the provisions of section 44AB attracts a penalty of 0.5% of Turnover/ Gross Receipt maximum up to Rs 1,50,000.00. The penalty u/s 271B of Income Tax Act will be attracted. However, section 273B states that no penalty u/s 271B shall be imposed if there is reasonable cause for such failure. Some of the acceptable causes of reasonable failure by courts & Tribunals are:-
a) Strikes, Labour Problems etc. for long period
b) Death or physical inability of Chartered Accountants, Managing Person of the business, or the accountant.
c) A resignation of Tax Auditor
d) Loss of Accounts by Natural Calamities beyond the control of the assessee.