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    Income Tax Audit

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    Income Tax Audit

    Now conducting Income Tax Audit  is easy, hassle fee and quick,
    With EAdvisors professionals

    Drop Query

    Fill the form and wait for our expert to contact you for further processing.

    Discussion with Expert

    EAdvisors expert will contact you to discuss about all the requirements and will then begin the next step.

    Drafting of Application

    Recording of sale, purchase and other transactions is done.

    Income Tax Audit

    And after all the documents are drafted and updated on software, the next step is conducting of Income Tax Audit.

    Income Tax Audit

    INTRODUCTION

    To know in-depth detail of Tax Audit, it is necessary to be well-versed with the term “Audit”. The term “audit” is not explained in any of the acts. Therefore, the ICAI statute of Chartered Accountants has given its own meaning to this term, which defines an audit as an “independent examination” of the financial information of any entity may it be a profit-earning entity or non-profit earning. It is done with a view to expressing an opinion on the financials.

    Whereas in layman’s terms, an audit is a difference between what should be done and how it is done. So, a professional is appointed who identifies and measures the difference and assures that it is done in the correct manner. The professional appointed is expected to reduce the difference and ensure that all the accounts and financial transactions are in accordance with the way it should have been done. And if the difference is more, then it is the responsibility of the auditor, the professional to inform about the non-compliance and ask to rectify it.

     With effect from 1st April 1985, section 44AB was introduced in the Income Tax Act which implemented compulsory provision for audit in the non-corporate sector. The main objective is “intended to ensure that the books of account and other records are properly maintained and faithfully reflect the true income of the taxpayer.”

    ELIGIBILITY

    In the well-known case law of Venkata Rao v. Union of India [1999], the Hon’ble Supreme Court has granted the power to *Chartered Accountants as they have special aptitude in this field. As per Income-tax Act, 1961 there are two approaches to be followed, stating the obligation to get their accounts compulsorily audited by a Chartered Accountant.

    The first approach is that of turnover-linked obligation. It states that the following persons are liable to get accounts audited and furnish an audit report in terms of Section 44AB if their total sales or turnover or gross receipts for the previous year exceed the threshold exemption limit of Rs. 1 crore.

    The second approach is the non-turnover linked obligation. Section 44AB casts the obligation to get accounts audited on certain persons without reference to turnover or gross receipts i.e. irrespective of whether turnover or gross receipts exceeds a certain threshold.

    The persons who are required to get accounts audited regardless of their turnover/gross receipts/ sales in a financial year are as follows:

    • Assessee carrying on the business of plying, leasing or hiring goods carriages and who owns not more than 10 goods carriages at any point of time in the previous year and claims the income under the given section.
    • Assessee carrying on business referred to in Section 44AB and claims his income from that business to be lower than the amount presumed to be income under that section.
    • Assessee carrying on business referred to in Section 44BBB and claims his income from that business to be lower than the amount presumed to be income under that section.
    • Assessee carrying on business who is eligible to opt for presumptive taxation scheme under Section 44AD opts out of the scheme in violation of Section 44AD(4) and his income exceeds the maximum amount not chargeable to tax under that section.

    In addition to it, a tax audit under Section 44AB may also be done by a firm of chartered accountants. However, in that case, the name of the partner who signs the tax audit report on behalf of the firm should be stated and his membership number should be given below the name.

    A LLP of CAs/CAs who are appointed as tax consultants may be appointed as a tax auditor

    WHO IS EXEMPTED?

    The first and second provisos to section 44AB exempt the following persons from the tax audit:

    • The first proviso to section 44AB states: person who declared profits and gains of the previous year in accordance with the provisions of section 44AD of the Act and whose total sales, gross receipts and turnover in the previous year do not exceed Rs. 2 crores.
    • The second proviso to section 44AB states: person who derives income of the nature referred to in section 44B or section 44BBA of the Act.

    *Section 44B: any non-resident engaged in the business of operations of ships.

    * Section 44BBA: special provision for computing profits and gains of the business operation of aircraft in case of non-residents.

    OBJECTIVE

    As everything is done with a decided objective in mind. Similarly, tax audit is done for various objectives, namely:-

    • First and foremost, an important objective for conducting a tax audit is to ensure proper books of accounts are maintained without any mistakes and are duly certified by the professional.
    • In case of any error or incomplete books of accounts, reporting discrepancies noticed by the auditor after proper examining of books of accounts is the second objective of the tax audit.
    • Third, for reporting various information such as tax depreciation, compliance with the provision as mentioned in the law.
    • Fourth objective states that tax audit makes it easy to compute the tax and its deduction under it.
    • And last but not the least, the main purpose to be highlighted is to verify the information mentioned in the income tax returns regarding income, tax, and deductions by the taxpayer.

    NON COMPLIANCE

    All the persons falling under the requirement of Tax Audit are required to get their accounts audited, and if not audited then, the penalty will be attracted. The penalty for non-compliance of tax audit is 0.5% of the turnover or gross receipts subject to a maximum of Rs. 1,50,000.

    DUE DATE

    The due date for filing the tax audit report under Section 44AB of the Income Tax Act is 30th September of the assessment year.

    However, the Central Board of Direct Taxes (CBDT) has extended the date of furnishing of tax audit reports and income tax returns to February 15, 2022.

    WHO CANNOT?

    Following are the persons

    • Chartered Accountants in part-time practice cannot be appointed as a tax auditor.
    • Tax audit of a firm of CAs cannot be conducted by any partner or employee of the firm.
    • CA should not accept the tax audit assignment under section 44AB in respect of a concern in which he or his relatives are substantially interested.
    • An employee of the assessee or an employee of a concern under the same management cannot conduct the tax audit under Section 44AB.
    • A CA who is responsible for maintaining books of the assessee/ any partner of such CA/ the firm in which such CA is a partner should not accept tax audit assignment under section 44AB in respect of such assessee.

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    Frequent Asked Questions

    Income Tax Audit

    Section 44AB deals with Tax Audit which is compulsory compliance under the Income Tax Act. It is a process of reviewing a company’s account.

    The Tax Audit is done by preparing a report that is filed on the online portal by a professional concerned who is known as Chartered Accountant. Consult EAdvisors for the easy processing of tax audit.

    A tax audit is done with the purpose to validate the income tax computation made by the taxpayer and making sure all the laws made under the Act are being complied with.

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