TAX AUDIT

•    TAX AUDIT
CONTEMPORARY AUDITING

•    DR SHASHI AGGARWAL

•    TAX AUDIT

1.       EVALUATING WHETHER AN INDIVIDUAL OR COMPANY HAS ACCURATELY FILED THE INCOME TAX RETURNS OF AN ASSESSMENT YEAR.

2.       AN EXTERNAL AGENCY IS MANDATED TO ASSESS RETURN FILED FROM INCOME,DEDUCTIONS AND EXPENDITURES AND OTHER RULES AS MENTIONED BY THE INCOME TAX ACT 1961

3.       TAX AUDIT IS THE EXAMINATION OR REVIEW OF ACCOUNT OF ANY BUSINESS OR PROFESSION CARRIED BY TAX PAYER FROM AN INCOME TAX VIEW POINT AND MAKE THE PROCESS OF INCOME COMPUTATION FOR FILING OF RETURN OF INCOME EASIER.

4.       THE FINANCIAL STATEMENTS ARE CERTIFIED FOR THE TRUTH AND FAIRNESS OF OPERATING AND FINANCIAL POSITION OF A BUSINESS

5.       MEANT FOR GENERAL PURPOSE AND SOMETIMES A SPECIFIC INFORMATION MAY BER REQUIRED BY CERTAIN PEOPLE WHICH MAY NOT BE AVAILABLE IN THESE STATEMENTS

6.       UNDER INCOME TAX ACT PROFIT SHOWN BY PROFIT AND LOSS ACCOUNT HAS T BE ADJUSTED AS PER THE PROVISIONS OF THE ACT

7.       PROFIT AS PER ACCOUNTING IS ASCERTAINED AS PER ACCOUNTING POLICIES AND STANDARDS BUT PROFIT FOR TAX PURPOSES ARE CALCULATED AS PER THE PROVISIONS AND RULES OF INCOME TAX ACT.

8.       TAXPAYERS WHO HAVE TO GET THEIR ACCOUNTS AUDITED UNDER ANY LAW OTHER THAN SECTION 44 AB OF THE INCOME TAX ACT ( FOR INSTANCE STOCK AUDIT OR STATUTORY AUDIT ) DO NOT HAVE TO GET THEIR ACCOUNT AUDITED AGAIN FOR THE PURPOSE OF INCOME TAX AUDIT AND IN SUCH CASES ACCOUNTS AUDITED OTHER LAWS CAN E PRESENTED AS TAX AUDIT REPORT FOR INCOME TAX FILING PROVIDED IT IS SUBMITTED BEFORE THE STIPULATED DUE DATE

•    OBJECTIVES OF TAX AUDIT

•    TAX AUDIT IS NECESSARY :

1.       AN ANALYSIS OF THE ACCURACY OF INCOME TAX RETURNS FILED IN AN ASSESSMENT YEAR BY INDIVIDUALS AND COMPANIES AND MAINTENANCE OF THE RECORDS BY A CA

2.       REPORTING OF THE FINDING BY THE TAX AUDITED AFTER A DETAILED ANALYSIS

3.       REPORTING ESSENTIALS DETAILS REGARDING COMPLIANCE TAX,DEPRECIATION ETC AS PER THE LAWS

4.       ALL THESE ENABLES TAX AUTHORITIES IN VERIFYING THE CORRECTNESS OF INCOME TAX RETURNS FILED BY THE TAX PAYER

5.       CALCULATION AND VERIFICATION OF TOTAL INCOME AND CLAIM FOR DEDUCTION

•    TAX AUDIT

1.       CAN BE CONDUCTED BY AN ACCOUNTANT I.E CA AND ANY OTHER PERSON WHO CAN BE APPOINTED AS AUDITOR U/S 141 OF THE COMPANIES ACT

2.       THE CA MAY NOT BE IN PRACTICE

3.       THE AUDITOR WHILE ACCEPTING THE TAX AUDIT ASSIGNMENT COMMUNICATE WITH THE AUDITOR WHO HAD CONDUCTED THE SUCH AUDIT IN THE PRECEDING YEAR AS IS REQUIRED UNDER CHARTERED ACCOUNTANCY ACT

4.       LETTER OF APPOINTMENT FROM THE ASSESS

5.       THE AUDITOR AND MANAGEMENT OR THOSE CHARGED WITH GOVERNANCE SHOULD BE AGREED UPON THE TERMS OF AUDIT ENGAGEMENT –SA 210 AND IT SHOULD NE SEND TO THE AUDITOR BEFORE THE COMMENCEMENT OF ENGAGEMENT

6.       CANNOT BE CONDUCTED BY THE EMPLOYEE OF THE CA  OF THE CONCERN

7.       NOT AN INTERNAL AUDITOR

8.       SHOULD NOT BE ACCEPTED BY THE CA OR HIS PARTNER OR FIRM WHO IS MAINTAINING BOOKS OF ACCOUNT

9.       VARIOUS ANNEXTURES TO THE AUDIT REPORT AUTHENTICATED BY THE ASSESSEE SHOULD BE OBTAINED BY THE AUDITOR

10.   THE AUDITOR SHALL TAKE INTO ACCOUNT CEILING OF ASSIGNMENT OF TAX AUDIT BEFORE ACCEPTING THE APPOINTMENT

11.   TAX AUDITOR CAN BE REMOVED BY THE MGMT ON CERTAIN VALID GROUNDS

12.   WHILE REPORTING CONSIDER VARIOUS RELEVANT STANDARDS

13.   AS PER PROFESSIONAL ETHICS TAX AUDIT OF AN ASSESSES WHO IS INDEBTED MORE THAN A SPECIFIED LIMIT SHOULD NOT BE ACCEPTED

•    COMPULSORY AUDIT

1.       A BUSINESS OWNER WHO HAS NOT OPTED FOR PRESUMPTIVE TAXATION SCHEME WITH GROSS RECEIPTS OR TURNOVER OR TOTAL SALES EXCEEDING RS ONE CRORE

2.       A BUSINESS OWNER WHO HAS OPTED FOR PRESUMPTIVE TAXATION SCHEME UNDER SECTION 44 AD OF THE INCOME TAX ACT 1961. WITH GROSS RECEIPT OF TURNOVER OR TOTAL SALES EXCEEDING RS 2 CRORES

3.       A TAX PAYER WHOSE BUSINESS WHICH IS ELIGIBLE FOR PRESUMPTIVE TAXATION UNDER SECTION 44AE,44BB AND 44BBB CLAIMS PROFITS THAT ARE LESSER THAN PRESCRIBED LIMIT UNDER RESPECTIVE PRESUMPTIVE TAXATION SCHEME.

4.       A BUSINESS OWNER WHO IS NOT ELIGIBLE TO CLAIM PRESUMPTIVE TAXATION UNDER SECTION 44AD BECAUSE HE OR SHE OPTED FOR IT IN A CERTAIN ASSESSMENT YEAR AND NOT ANY OF THE FIVE CONSECUTIVE ASSESSMENT YEAR FROM THE TAX YEAR.

5.       A PERSON CARRYING ON PROFESSION IS REQUIRED TO GET HIS BOOK OF ACCOUNT COMPULSORILY AUDITED U/S 44AB IF HIS GROSS RECEIPT IN PROFESSION FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR EXCEEDS RS 50 LACS

6.       AN EMPLOYEE OF AN ORGANIZATION THAT IS ELIGIBLE FOR PRESUMPTIVE TAXATION UNDER SECTION 44 ADA AND CLAIMS PROFIT THAT ARE LESSER THAN PRESCRIBED LIMIT UNDER PRESUMPTIVE TAX AND INCOME IS MORE THAN THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX

•    HOW TO CONDUCT TAX AUDIT

1.       THE TAX AUTHORITIES SHALL BE GUIDED BY THE AUDITNG STANDARDS AND GUIDANCE NOTE ISSUED BY INSTITUTE CHARTERED ACCOUNTANT OF INDIA

2.       OBTAINING BOOKS OF ACCOUNT FINANCIAL STATEMENTS AND OTHER STATEMENTS OF PARTICULARS DULY AUTHENTICATED

3.       EVALUATION OF INTERNAL CONTROL SYSTEM

4.       PROVISION AND OBJECTIVES OF SECTION 44 AB

5.       THROUGH KNOWLEDGE OF THE TAXATION PROVISIONS AND JUDICIAL PRONOUNCEMENT

•    TAX AUDIT REPORT

1.       SHALL FURNISH HIS REPORT IN A PRESCRIBED FORMAT WHICH COULD BE EITHER FROM 3 CA OR FORM CB

2.       3 CA IS FURNISHED WHEN A PERSON CARRYING ON BUSINESS OR PROFESSION IS ALREADY MANDATED TO GET HIS ACCOUNT AUDITED UNDER ANY OTHER LAW

3.       FORM NUMBER 3 CB IS FURNISHED WHEN A PERSON CARRYING ON BUSINESS OR PROFESSION TO GET HIS ACCOUNT AUDITED UNDER ANY OTHER LAW

4.       IN CASE OF EITHER OF AFOREMENTIONED AUDIT REPORTS,TAX AUDITOR MUST FURNISH THE PRESCRIBED PARTICULARS IN FORM 3 CD WHICH FORMS PART OF THE AUDIT REPORT

5.       IF THE PERSON CARRIES ON PROFESSION FROM 3CC SHALL BE USED FOR TAX AUDIT AND FORM 3 CE FOR THE STATEMENT OF PARTICULARS

6.       TAX AUDITOR’S OPINION AS TO THE TRUTH AND FAIRNESS OF FINANCIAL STATEMENTS IS 3CC AND STATEMENTS OF PARTICULARS IN 3 CE

•    FURNISHING OF TAX AUDIT REPORT

1.       THE TAX AUDIT SHALL FURNISH TAX AUDIT REPORT ONLINE BY USING HIS LOG IN DETAILS IN THE CAPACITY OF CHARTERED ACCOUNTANT

2.       TAX PAYER SHALL ALSO ADD CA DETAILS IN THEIR LOG IN PORTAL

3.       ONCE THE TAX AUDITOR UPLOADS THE AUDIT REPORT SAME SHOULD BE EITHER ACCEPTED/REJECTED BY TAX PAYER IN THEIR LOG IN PORTAL

4.       IF REJECTED FOR ANY OF THE REASON ALL THE PROCEDURES NEED TO BE FOLLOWED AGAIN TILL THE AUDIT REPORT IS ACCEPTED BY THE TAX PAYER

5.       FILING OF THE TAX AUDIT REPORT ON OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME.

6.       30 TH NOVEMBER OF THE SUBSEQUENT YEAR IN CASE THE TAX PAYER HAS ENTERED INTO AN INTERNATIONAL TRANSACTION AND 30 TH SEPTEMBER OF THE SUBSEQUENT YEAR FOR OTHER TAX PAYER

•    PENALTY

•    FOR NON FILING OR DELAY IN FILING TAX AUDIT REPORT LEAST OF THE FOLLOWING MAY BE LEVIED AS PENALTY

1.       .05 % OF THE TOTAL SALES,TURNOVER AND GROSS RECEIPT

2.       RS  1,50,000

•    TAX AUDIT ASSIGNMENT CEILING

•    SHALL NOT ACCEPT MORE THAN 30 TAX AUDIT ASSIGNMENT UNDER SECTION 44 AB OTHER WISE HE WILL BE GUILTY OF PROFESSIONAL MISCONDUCT