There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the viewpoint of Income-tax Law.
The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB is called Tax Audit. Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited from a Chartered Accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The chartered accountant conducting the tax audit is required to give his findings, observation, etc., in the form of an audit report. The report of the tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and 3CD.
Apart from reporting requirements of Form Nos. 3CA/3CB and 3CD, a proper audit for tax purposes would ensure that the books of account and other records are properly maintained, that they truly reflect the income of the taxpayer and claims for deduction are correctly made by him. Form 3CA/3CB is an audit report whereas 3CB is a statement of particulars. Such an audit would also help in checking fraudulent practices.
As per section 44AB, the following persons are compulsorily required to get their accounts audited :
• A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.
• A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
• If a person is enrolled under the presumptive taxation scheme under section 44AD and total sales or turnover is more than Rs. 2 crores, then tax audit would be required.
•Any person enrolled under the presumptive taxation scheme who claims that the profits of the business are lower than the profits calculated in accordance with the presumptive taxation scheme would be required to obtain a tax audit report.
The due date for completing and filing a tax audit report under section 44AB of the Income Tax Act is 30th September of the assessment year. Hence, if a taxpayer is required to obtain a tax audit, then he or she would be required to file an income tax return on or before 30th September along with the tax audit report. In case the taxpayer is also liable for the transfer pricing audit, then the due date for filing a tax audit is 30th November of the assessment year.
The responsibility of appointing tax auditors in a company is vested with the Board of Directors. The Board may also delegate this responsibility to any other officer like CEO or CFO. Auditors in a firm or proprietorship can be appointed by a partner, proprietor or a person authorized by the assessee. Moreover, a taxpayer can also appoint two or more chartered accountants as joint auditors for performing the tax audit. In this case, the audit report must be signed by all the joint auditors, if all of them concur with the report. In case of any differences in opinion, the auditors must express their opinion separately through another report.
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 or furnish such report as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in the profession, in such year or years.
(b) Rs. 1,50,000.
However, according to section 271B, no penalty shall be imposed if reasonable cause for such failure is proved.