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Audit Under Income Tax Service

What Is Tax Audit?

The provisions for the tax Audit Under Income Tax Service are laid out in Section 44AB of the Income Tax Act. An income tax audit is carried out to confirm that the books of accounts and other records have been kept up to date and accurately reflect the taxpayer's income. The Income Tax Act, which mandates that all taxpayers have their business or organization's finances audited in accordance with the Act's provisions, has made tax audits mandatory.
Additionally, it aims to confirm that the assessee has complied with several obligations, such as completing income tax forms and accurately specifying claims and deductions for income tax, among others. A tax audit is a measure that is, in essence

As Per Section 44AB, Who Is Covered By Tax Audit?

Certain classes of people who are listed under Section 44AB of the IT Act are subject to tax audit. Therefore, the following list summarises the kinds of people who must compulsorily follow the income tax audit procedures and have their accounts audited, in accordance with the provisions of Section 44AB of the Income Tax Act of 1961:

  • 1. Taxpayer whose total sales, turnover or gross receipts from business exceeds Rs 1 cr or where Professional receipts exceed Rs 50 Lakh:

    • It is mandatory to fill the Part A of Schedule Profit & Loss A/c and part A of Balance Sheet and also to file the Audit report u/s 44AB of Income Tax Act where the Total Sales, Turnover or Gross Receipts of the business exceeds Rs.1 cr or where Professional receipts exceed Rs 50 Lakh for the Financial Year 2017-18.
    • The Audit Report u/s 44AB has to be electronically filed prior to or along with the return of income before the due date.
    • The taxpayer has to approve the Audit Report u/s 44AB after it is e-filed by the Chartered Accountant. Without taxpayer approval, the submission of the Audit Report u/s 44AB is NOT COMPLETE.
    • For the purpose of all the provisions of Income Tax Act, 1961, the date of approval by the taxpayer will be considered as the date of filing of the Audit Report u/s 44AB.

  • 2. A taxpayer reporting Presumptive income under section 44AD:

    • As per the provisions of Income Tax Act, the benefit of Section 44AD shall not be applicable where the gross receipts from business exceed Rs.2 cr in the financial year 2017-18.
    • Hence, where the gross receipts/total turnover from the business exceeds Rs.2 cr, it is mandatory to fill the Part A of profit and Loss A/c and Part A of Balance Sheet and also file the Audit Report u/s 44AB of Income Tax Act.
    • The taxpayer is advised to follow the process as per Sl. No. 1 above strictly in such cases. The benefit of Section 44AD is not available in such cases.
    • A person who is eligible to opt for the presumptive taxation scheme of section 44AD but claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of section 44AD. This is also applicable in case his income exceeds the amount which is not chargeable for taxation.
    • If an eligible assessee opts out of the presumptive taxation scheme, after a specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years after the decision to opt out is taken.

  • 3. Taxpayer whose gross receipts in profession exceed Rs 50 Lakhs:

    • It is mandatory to fill the Part A of Schedule Profit & Loss A/c and part A of Balance Sheet and also file the Audit report u/s 44AB of Income Tax Act where the gross receipts in profession exceed Rs 50 Lakhs for the Financial Year 2017-18.
    • The audit report has to be electronically filed along with the return of income before the due date.
    • The taxpayer is also required to approve/reject the audit report once the same is e-filed by the Chartered Accountant.
    • A person who is eligible to opt for the presumptive taxation scheme of sections 44AE but he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of sections 44AE.
    • A person who is eligible to opt for the presumptive taxation scheme prescribed under section 44BB(*) or section 44BBB(*) but he claims the profits or gains for such business to be lower than the profits and gains computed as per the taxation scheme of these sections.

For the purpose of all the provisions of Income Tax Act, 1961, the date of approval by the taxpayer will be considered as the date of filing of the Audit Report.

What Are Form Nos. 3CA/3CB And 3CD?

A registered Chartered Accountant's tax audit reports must be delivered in a specific format. According to section 44AB of the IT Act, the audit report must be submitted in Form No. 3CB and include the necessary information in Form No. 3CD.
When someone wants their accounts audited under a legislation other than 44AB, the form required for the audit report is Form No. 3CA, and the required information must be supplied on Form No. 3CD.

What Is The Due Date By Which A Taxpayer Should Get His Accounts Audited?

On or before September 30 of that specific year, which is the deadline for filing the income tax return, anyone covered by section 44AB should have their accounts audited. They should also acquire the audit reports.
The Chartered Accountant must electronically submit the tax audit report to the Income Tax Department. After the Chartered Accountant files the Income Tax Report, the taxpayer must accept the submitted reports using their e-filing account with the Income Tax Department.

What Is The Penalty For Not Getting The Accounts Audited As Required By Section 44AB?

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, a penalty may be imposed on him. The penalty shall be lower of the following amounts:
1. 0.5% of the total sales in case of a business organization or 0.5% of the total receipts in case of the profession of the current financial year.
2. The business may be fined with an amount of Rs.1,50,000/-.

However, if a legitimate explanation for the failure is demonstrated in accordance with section 273B, no punishment will be applied to the individual. Therefore, a tax audit is a crucial prerequisite for people who must go through such an audit. People who want to avoid penalties should make sure that they fully comply with all of the income tax audit's requirements. Penalties would apply if the guidelines weren't followed. We are best Audit Under Income Tax Service Provider In Pune.