What is a Tax Audit Report?
As per the Income Tax Act, Tax Audit as per Sec 44AB of the Income Tax Act is applicable to a business or profession in certain specified situations. Tax Audit Report is the report prepared by a Chartered Accountant in practice after auditing the books of accounts of a business. Under Tax Audit, the CA ensures whether the books of accounts are correctly prepared and the taxable income is accurately calculated as per the provisions of the Income Tax Act.
In the case of an assessee to whom Tax Audit as per Section 44AB of the Income Tax Act is applicable, here are the next steps:
- Appoint a Chartered Accountant in practice to audit the books of accounts
- Chartered Accountant files Audit Report in Form 3CB-3CD or Form 3CA-3CD
- Taxpayer files Income Tax Return in Form ITR 3
Tax Audit Report – Form 3CA, 3CB, 3CD, 3CE
The format of the Audit Report is specified by the Income Tax Department with specified particulars. Form 3CA and 3CB is the statement with auditors’ information while form 3CD is the statement with details of the tax audit.
|Form 3CA-3CD||Tax Audit Report in the case of a taxpayer having business or profession income who is mandatorily required to get accounts audited under any other Act (other than Income Tax Act)|
|Form 3CB-3CD||Tax Audit Report in the case of a taxpayer having business or profession income who is not required to get accounts audited under any other Act (other than Income Tax Act)|
|Form 3CE||A Tax Audit Report in the case of a taxpayer who is a Non-Resident or Foreign Company receiving a royalty or fee for technical services|
Due Date to Upload Tax Audit Report
Guidance Note on Tax Audit
The Tax Audit Report has 2 parts – Form 3CA/3CB and Form 3CD. While Form 3CA/3CB is the statement with details of auditor, Form 3CD is the Statement with particulars required to be reported as per Sec 44AB of the Income Tax Act.
|Point no.1||Name, Address & PAN of taxpayer
Name of Auditor
Law under which accounts are audited
Date of Audit Report
Period of P&L Account
Date of the Balance Sheet
|Point no.2||A declaration that the Audit Report Form 3CD is attached|
|Point no.3||Audit Observations or Qualifications as per Form 3CD|
Name, Address, Membership Number of Auditor
|Point no.1||Date of Balance Sheet and P&L Statement|
|Name, Address, and PAN of Taxpayer|
|Point no.2||Address where books of accounts are kept|
|Address of branches (if books of accounts are kept at branches)|
|Point no.3||Observations, Comments, Discrepancies, and Inconsistencies reported by the auditor|
|Declaration by the auditor of:
* Obtaining all information required for audit
* Confirming that the business has maintained proper books of accounts
* Reporting that Balance Sheet and P&L Account reflects a true and fair view of the business
|Point no.4||Declaration of attaching Form 3CD along with the Audit Report Form 3CB|
|Point no.5||Details of the Auditor – Name, Address, Membership Number, Firm Registration Number, Date, and Place|
It is a detailed statement with 44 different clauses filed by the auditor reporting information related to the business and its transactions for the relevant financial year. The IT Department has prescribed Form 3CD format and utility that a CA can use for filing the audit report.
|Point no.1||Name, Address & PAN of Non-Resident|
|Point no.2||Declaration of obtaining all information and explanations for audit|
|Point no.3||Certification on Permanent Establishment or Fixed Place of a profession in India|
|Point no.4||Declaration of income from royalty or fees for technical services under Section 44DA|
|Point no.5||Signature and Name of Auditor with stamp and seal|
In addition to Form 3CE, details of income from royalty or fees for technical services should be mentioned in an Annexure.
Penalty for not filing Form 3CD
An assessee who is liable to get books of accounts audited as per Section 44AB fails to do so, the Assessing Officer i.e. A.O. may impose a penalty under Section 271B. The penalty shall be lower of the following:
- 0.5% of Total Sales / Turnover of business or 0.5% of Gross Receipts of profession
- INR 1,50,000
However, if the assessee can prove a reasonable cause for failure to get a tax audit done, the A.O. may not impose the penalty.
Taxpayers like Company or Cooperative Society are required to do audits under their respective laws. The audit conducted under any other law may not provide a confirmation that the requirements of the Income Tax Act have been complied with. In such cases, if Tax Audit as per Section 44AB is mandatory, the audit report should be filed by the Chartered Accountant in prescribed form i.e. Form 3CA-3CD.
Yes. Tax Audit Report already filed can be revised. However, a valid reason for revising the audit report must be specified by the auditor. It must have a reference to the old Audit Report and must be signed in the current date. Generally, an audit report can be revised due to the following reasons:
1. Revision of accounts of the taxpayer
2. Change of law with a retrospective amendment
3. Change in the interpretation of provisions, CBDT circular, CBDT judgment, etc
4. Technical change in system or software