FAQ on “Tax Auditing”

 

What is the purpose of Tax Audit?
Ensure that books of Accounts have been maintained in accordance with the provisions of the Income Tax Act.

• Ensure that audit has effectively curbed Tax Evasion and ensures Tax Compliance;
• It increases the confidence of stakeholders
• Helps in better tax planning

When does Tax Audit becomes mandatory in case of individuals/ partnership?
The following persons are required to get their accounts compulsorily audited:

1. Person carrying on business if his total sales, turnover or gross receipts exceeds Rs.60 lacs in the previous year relevant to the assessment  year;
2. Person carrying on profession, if his gross receipts in profession exceeds Rs.15 lacs in the previous year relevant to the assessment  year;
3. Person covered under section 44AE, 44BB or 44BBB, if such person claims that the profits from the business is lower than the profits computed under these sections;
4. Person covered under section 44AD, if such person claims that the profits from the business is lower than the profits computed under this section and his income exceeds the maximum exemption limit.

What is the due date of getting accounts audited?
The due date of getting the books of accounts audited and submission with the IT department is 30^th September of the assessment year. Thus for the FY 2010 – 11, the due date of audit is 30^th September 2011. Tax Audit Report u/s 44AB  is required to be submitted in Form No. 3CD.
Is it mandatory to file return using digital signature if one is eligible for compulsory Tax Audit?
As per the Finance Act, all individuals and firms, if they are eligible for compulsory tax audit are required to file their IT Return,  ITR – 4 and ITR – 5 respectively, online with digital signature.
Whether Tax Audit Report is to be submitted while filling returns online?
The report of audit under section 44AB is neither required to be attached with the new scheme of online filing of tax returns nor to be furnished separately before or after the due date. Previously, it was required to be submitted along with the tax returns in hard copy before the due date. The assessee should get the report and retain it, for furnishing at the time of assessment proceeding in original.
Is an assessee required to get separate tax audit reports for different businesses, if he has more than one business?
As per the provisions of section 44AB, one audit report for all the businesses is required. However in case different branches are audited by different auditor, the main auditor has to prepare a consolidated report considering the reports of all the branch auditors.
What are the consequences for failure to get the accounts audited?
If any person fails to get his accounts audited in respect of any previous year or fails to furnish a tax audit report to the tax officer, then such person shall be directed to pay a penalty of a sum equal to one-half per cent of total sales / gross turnover or Rs. 1,50,000, which ever is less.
Whether a non – resident is required to get accounts audited u/s 44AB?

This section does not make any distinction between resident and non – resident. Therefore if the turnover or the gross receipts exceeds the prescribed limit, then he is required to get his accounts audited.