Tax Audit Form 3CD | Detailed Explanation & Applicability (2022 Updated)
Category: Income Tax, Posted on: 26/09/2022 , Posted By: Webtel
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Introduction to Tax Audit

The time period between July to September is of high priority for taxpayers as this is when the financial data is accumulated and the tax liabilities are calculated thereby.

Tax Auditing is the process where the assessee is required to get his books of accounts audited by a Chartered Accountant to fulfill the requirements under Section 44AB of the Income Tax Act, 1961. Hence, the observations and findings by the CA are required to be filled into the various fields of the various forms of the audit report at the e-filing portal of Income Tax.

 

Tax Audit Form 3CD

The tax audit form 3CD is one such form that is to be filled in by the taxpayer comprising of a detailed summary of the tax audit work and related annexures, applicable to the assessee.

Clause Wise Explanation of Form 3CD

Sl. No.

Particulars

Comments

1

Name of the assessee

The name of the auditor must be mentioned here. Note that the name mentioned in Form 3CD must match the name given in the income tax records.

2

Address

This clause mentions the address of the assessee as reported to the Income-Tax Department for assessment and the registration certificate allotted under various tax laws.

3

Permanent Account Number or Aadhaar Number

The Permanent Account Number (PAN) of the assessee allotted by the income tax department needs to be mentioned here. In case of the absence of PAN, the details of the Aadhar card are required to be mentioned in this clause.

4

Whether the assessee is liable to pay indirect tax like excise duty, service tax, sales tax, goods and services tax, customs duty, etc. If yes, please furnish the registration number, GST number, or any other identification number allotted for the same

This clause mentions the registration number of the assessee concerning the tax authorities.

5

Status

The status of the assessee needs to be mentioned under this clause, as given in the definition of “person” in Section 2(31) of the Act.

6

Previous year from ___ to ____

The period of tax audit for income tax purposes, uniform previous year of 12 months ended 31st March of each year needs to be mentioned in this clause.

7

Assessment Year

The details of the assessment year relevant to the previous year of accounting audit are required to be mentioned in this clause.

8

Indicate the relevant clause of section 44AB under which the audit has been conducted

The applicable clause of Section 44AB, under which the tax audit is being conducted has to be selected here.

9

(a)

If firm or association of persons, indicate name of partners/members and their profit sharing ratios

This clause mentions whether the assessee is a partnership firm, limited liability partnership (LLP), an associate of persons (AOP), or a body of individuals (BOI), along with the details of the certified copies of the deed or agreement, and notice of changes, etc.

 

(b)

If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change

In case of a change in partners or members and/or profit-sharing ratios since the last date of the preceding year, the details need to be mentioned under this clause.

10

(a)

Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession)

In this clause, the nature of each business, service, or profession carried on by the assessee needs to be mentioned by verifying the incorporation documents.

 

(b)

If there is any change in the nature of business or profession, the particulars of such change

Here, the auditor needs to mention any material change in the nature of business or profession during the previous year.

11

(a)

Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed.

In case the assessee is,

A Professional: Books prescribed under Section 44A read with Rule 6F should be mentioned.

A Business: No books are prescribed, and the same should be mentioned.

(b)

Lists of books of account maintained and the address at which the books of account are kept.

The auditor needs to mention the list of books of accounts and verify whether the same has been maintained.

In the case of,

Computerized Books: Mention that the books have been generated by a computer system.

Manufacturing/ Trading Business: Mention the quantitative records of stores, RM, and FG.

Company: Verify the form filed with ROC.

(c)

List of books of account and nature of relevant documents examined

Here, the books of accounts and relevant documents examined by the auditor are required to be mentioned.

12

Whether the profit or loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant section (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, Chapter XII-G, First Schedule, or any other relevant section)

Under this clause, the auditor is required to mention any profits and gains, as indicated in the profit and loss accounts, assessable on a presumptive basis under the relevant sections.

13

(a)

Method of accounting employed in the previous year

The assessee is required to report the method of accounting (cash or mercantile basis of accounting) as per the provisions specified in the Companies Act 2013.

(b)

Whether there had been any change in the method of accounting employed vis-à-vis the method employed in the immediately preceding previous year.

In this clause, the auditor is required to mention the comparison of the method of accounting employed in the previous year with the preceding year to find out the change, if any, in the method of accounting.

(c)

If answer to (b) above is in affirmative, give details of such change, and the effect thereof on the profit or loss.

If the effect or change in method is provided, then such a change is need to be mentioned under this clause. In the absence of any such change, appropriate facts need to be disclosed.

(d)

Whether any adjustment is required to be made to the profits or loss for complying with the provisions of income computation and disclosure standards notified under section 145(2)

Under this clause, the auditor is required to report any adjustment in the profit and loss as per Income Computation and Disclosure Standards (ICDS) notified u/s 145(2).

(e)

If answer to (d) above is in the affirmative, give details of such adjustments

ICSS-wise reporting of the adjustments in profit or loss for ICDS compliances with a clear indication of increase or decrease in the profits as well as the overall net effect of such adjustments are required to be mentioned under this clause.

(f)

Disclosure as per ICDS

This clause mentions certain disclosure requirements, as mentioned in ICDS.

14

(a)

Method of valuation of closing stock employed in the previous year.

This clause includes the method of valuation of inventory and the actual cost of inventory.

(b)

In case of deviation from the method of valuation prescribed under section 145A, and the effect thereof on the profit and loss

In this clause, the auditor is supposed to ensure if there is any deviation from the method of valuation as prescribed under section 145A is appropriately disclosed. The effect on profit/loss is also indicated here.

15

Give the following particulars of the capital asset converted into stock-in-trade:

The details of capital assets converted into stock in trade are to be mentioned in this clause.

(a)

Description of capital asset;

Here, the description of capital assets such as land, building, plant, machinery, shares, securities, etc. shall be furnished.

(b)

Date of acquisition;

The period of acquisition needs to be verified in this sub-clause to ensure whether it is a long-term or short-term asset.

(c)

Cost of acquisition;

This sub-clause mentions the cost of acquisition of the asset as per the books of account while keeping in mind the principles given in AS 10/IND AS 16.

(d)

Amount at which the asset is converted into stock-in-trade.

The amount that has been recorded in the books of accounts relating to converted assets needs to be reported here.

16

Amounts not credited to the profit and loss account, being –

Here, the income that ordinarily wouldn’t be a business income but is deemed to be business income by the virtue of the Income Tax Act is supposed to be mentioned.

(a)

The items falling within the scope of section 28;

In this sub-clause, the auditor is supposed to ensure all the items falling under Section 28 of the Income Tax Act, 1961 that have not been credited to the profit and loss account.

(b)

The proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax where such credits, drawbacks, or refunds are admitted as due by the authorities concerned;

The proforma credits, drawbacks, refunds of duty of customs, excise or service tax, or refunds of sales tax or value-added tax or goods and services that have such credits, drawbacks, or refunds are mentioned.

(c)

Escalation claims accepted during the previous year;

This sub-clause mentions the escalation claims accepted during the previous year but not credited to the profit and loss accounts.

(d)

Any other item of income;

The items, the tax auditor considers as income, based on the verification of records and documents but not credited to the profit and loss account, other than those covered under Section 28 are required to be furnished.

(e)

Capital receipt, if any.

Here, the auditor is required to provide the details of capital receipts that have not been credited to the profit and loss account.

17

Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of the State Government referred to in section 43CA or 50C, please furnish details of property, consideration received or accrued and value adopted or assessed or assessable

Under this clause, any land and/or building whether held as a capital asset or business asset is transferred during the previous year for consideration, less than the value adopted or assessed or assessable by any authority of a State Government.

18

Particulars of depreciation allowable as per the Income Tax Act, 1961 in respect of each asset or block of asset, as the case may be, in the following form:-

In this clause, the auditor is required to provide the particulars of depreciation allowable as per the Income-tax Act, 1962 in respect of each asset or block of assets, whichever is applicable.

 

(a)

Depreciation of assets/block of assets

Classification of assets for a block made by the assessee for the block of asset is supposed to be verified in this sub-clause.

(b)

Rate of depreciation

Under this sub-clause, the auditor needs to verify that the rate applied on each block of asset complies with the rate prescribed in Appendix I of the Income Tax Rules, 1962.

(c)

Actual cost of written down value, as the case may be

Here, the auditor needs to verify the actual cost of assets as per the provisions of 43(1) of the Income Tax Act, 1961 and check the compliance with the provisions of the AS 10 and IND AS 16.

(d)

Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustment on account of (i) Central Value Added Tax credits claimed and allowed under the Central Excise Rules, 1944, in respect of assets acquired on or after 1st March 1994, (ii) change in rate of currency, and (iii) subsidy or grant or reimbursement, by whatever name called.

In this sub-clause, it is necessary to provide details of an asset, and the date put to use; including adjustments, and additions or deletions made during the year.

(e)

Depreciation allowable

Mention the depreciation claimed by the assessee in compliance with relevant provisions of the Income Tax Act, 1961 under this sub-clause.

(f)

Written down value at the end of the year

 

Under this sub-clause, the numerical calculations under the Income Tax Act, 1961 are required to be mentioned.

19

Amounts admissible under sections: 32AC, 32AD, 33AB, 33ABA, 35(1)(i), 35(1)(ii), 35(1)(iia), 35(1)(iii), 35(1)(iv), 35(2AA), 35(2AB), 35ABB, 35AC, 35AD, 35CCA, 35CCB, 35CCC, 35CCD, 35D, 35DD, 35DDA, 35E;

The amount debited to the profit and loss account and the amount admissible following the said section are required to be mentioned here along with the amount not debited to the profit and loss account but admissible under any section mentioned in the clause.

20

(a)

Any sum paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or dividend

The assessee would be allowed a deduction in respect of a payment made to an employee in the nature of a bonus or commission only in such a bonus or commission was available exclusively to such an employee for the services rendered by him

(b)

Details of contribution received from employees for various funds as referred to in section 36(1)(va)

In case the contribution is credited by the assessee to the account of the employees in the relevant statutory fund on or before the due date, the deductions are hence permitted in this sub-clause.

21

(a)

Please furnish the details of amounts debited to profit and loss account, being in the nature of capital, personal, advertisement, expenditure, etc.

Under this sub-clause, the nature of expenses that are such that they may either be fully disallowed or only allowed subject to certain conditions, in case they form a part of the profit and loss account, are supposed to be furnished.

(b)

Amounts inadmissible under section 40(a)(i), 40(a)(ia), 40(a)(ic), 40(a)(iia), 40(a)(iib), 40(a)(iii), 40(a)(iv), 40(a)(v)

These sections are related to the disallowance made concerning the expenditure or a part of expenditure where tax was required to be deducted at the source but the assessee failed to do so.

(c)

Amounts debited to profit and loss account being, interest, salary, bonus, commission, or remuneration inadmissible under section 40(b)/40(ba) and computation thereof;

This sub-clause applies to the firm, AOP, or BOI assessee where the payments are made to the partners/members as salary, remunerations, interests, etc.

(d)

Disallowance/deemed income under section 40A(3)

This sub-clause puts a disallowance on any expenditure incurred by any mode other than an account payee cheque/bank draft or through a bank account using the ECS if it exceeds Rs 10,000 in a day, subject to expectations.

(e)

Provision for payment of gratuity not allowable under section 40A(7);

Here, the deductions concerning a provision created for the payment of contribution to an approved gratuity fund are provided only if the sum is payable during the year.

(f)

Any sum paid by the assessee as an employer not allowable under section 40A(9);

Any payment incurred by an employer towards setting up of any fund, trust, Company, AOP, BOI, Society, etc will not be allowed as a deduction subject to certain exceptions.

(g)

Particulars of any liability of a contingent nature;

A liability that is related to an ongoing legal dispute where it is not certain that the liability will arise for the assessee is to be mentioned here.

(h)

Amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of total income;

This sub-clause prescribes the method of calculation of an amount of expenditure that will be disallowed as it is deemed to be incurred towards earning-exempt income.

(i)

Amount inadmissible under the proviso to section 36(1)(iii)

In case the assessee borrows a loan for business activities, the interest on such a loan would be normally allowed as a deduction. Note, that if such a loan was used to acquire an asset, the interest will not be allowed for the period between the dates of such borrowing.

22

Amount of interest inadmissible under section 23 of the Micro, Small, and Medium Enterprises Development Act, 2006.

As prescribed under the MSME act, an amount of interest that is not allowed as a deduction in the computation of taxable income of the assessee is to be provided here.

23

Particulars of payments made to persons specified under section 40A(2)(b)

This sub-clause disallows the expenditure incurred for payment to a specified person if the assessing officer finds them to be excessive in nature.

24

Amounts deemed to be profits and gains under section 32AC or 32AD or 33AB or 33ABA or 33AC.

This section allows special deductions to certain assessees, subject to certain conditions. If there is a breach of the given conditions, the whole or part of these deductions would be included as deemed income.

25

Any amount of profit chargeable to tax under section 41 and computation thereof.

This section relates to deemed profits arising out of:

Section 41(1): Recovery against any Deduction Allowed earlier

Section 41(2): Balancing Charge on Assets of an undertaking engaged in Generation or Generation and Distribution of Power

Section 41(3): Profit on Sale of Capital Assets used for Scientific Research

Section 41(4): Recovery out of Bad Debts Allowed as a Deduction

Section 41(4A): Amount withdrawn from Special Reserve Created and Maintained by certain Financial Institutions

Section 41(5): Adjustment of Loss

26

In respect of any sum referred to in clauses (a), (b), (c), (d), (e), (f) or (g) of section 43B, the liability for which:-

This section allows certain expenditures like cesses, taxes, duties, interest to the bank, etc. to be claimed only on actual payment of the same if it is made before the due date of filing the return for the respective assessment year.

 

(a)

Pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was (a) paid during the previous year; (b) not paid during the previous year;

Under section 43B, specified expenses are allowed based on actual payments. If the specified expenses for the liabilities incurred during the previous year are paid on or before the due date of filing ITR, then the deductions will be allowed in the previous year only.

The auditor is required to furnish the report of the payment status of the liabilities that already exist on the first day of the previous year and were not allowed in the assessment of any previous years under clause 26(i)(A)

In clause 26(i)(B) the auditor needs to provide details of the payment status of the liabilities that were incurred only in the previous year.

The auditor shall distinguish the payment made during the previous year that was not allowed during the previous years and those that were allowed in the previous year.

 

 

(b)

Was incurred during the previous year and was (a) paid on or before the due date for furnishing the return of income of the previous year under section 139(1); (b) not paid on or before the aforesaid date (State whether sales tax, customs duty, excise duty, or any other indirect tax, levy, cess, impost, etc., is passed through the profit and loss account.)

27

(a)

Amount of Central Value Added Tax credits availed of or utilized during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the accounts.

In this sub-clause, the CENVAT credit carried forward from the previous year, its utilization, and the balance left need to be provided along with the treatment of the same in the accounts of the assessee.

(b)

Particulars of income or expenditure of prior period credited or debited to the profit and loss account.

This clause needs to be furnished by the auditor only if the assessee is following the mercantile system of accounting.

28

Whether during the previous year the assessee has received any property, being share of a company not being a company in which the public are substantially interested, without consideration or for inadequate consideration as referred to in section 56(2)(viia), if yes, please furnish details of the same.

This is based on section 56(2)(viia), which is applicable on or after the 1st day of June 2010 but before the 1st day of April 2017 so not relevant from A.Y 2018-19 therefore we shall mention No under this clause.

Based on Section 56(2)(viia), that is applicable on or after the 1st day of June 2010 and before 1st April 2017 and not relevant from the assessment year 2018-19 therefore we mention no under this clause.

29

Whether during the previous year the assessee received any consideration for the issue of shares which exceeds the fair market value of the shares as referred to in section 56(2)(viib), if yes, please furnish details of the same.

If during the previous year the assessee received any consideration for the issue of shares that exceeds the fair market value of the shares as referred to in section 56(2)(viib) details of the same shall be provided under this clause.

29A

(a)

Whether any amount is to be including in income chargeable under the head ‘income from other sources’ as referred to in clause (ix) of sub-section (2) of section 56? (Yes/No)

Under this clause, the income from other sources is to be mentioned by the auditor, only to the extent entries about such income are made in the books of business or profession.

The auditor needs to obtain the certificate of all such advances received towards a capital asset that has been forfeited during the year from the assessee, along with the agreement and review the forfeiture clause by which the advances received on such capital asset are forfeited and obtain a balance confirmation of person whose advance has been forfeited.

(b)

If yes, please furnish the following details: (i) Nature of income (ii) Amount thereof

Under this clause, the income from other sources in the form of gifts/deemed gifts received, that is taxable under Section 56(2)(x).

30

Details of any amount borrowed on hundi or any amount due thereon (including interest on the amount borrowed) repaid, otherwise than through an account payee cheque [Section 69D]

This clause requires the assessee to give the following details of borrowings on Hundi or repayment thereof, otherwise, than through an account payee cheque, it also requires to comply with provisions of section 69 D of the income tax act.

30A

(a)

Whether primary adjustment to transfer price, as referred to in sub-section (1) of 92CE, has been made during the previous year? (Yes/No)

In this clause, the transfer pricing provisions under the Income Tax Act are captured to give out details of the values of transactions with associated enterprises.

(b)

If yes, please furnish the following details:- (i) Under which clause of sub-section (1) of 92CE primary adjustment is made? (ii) Amount (in Rs.) of primary adjustment (iii) Whether the excess money available with the associated enterprise is to be repatriated to India as per the provisions of sub-section (2) of section 92CE? (Yes/No) (iv) If yes, whether the excess money has been repatriated within the prescribed time (Yes/No) (v) If no, the amount (in Rs.) of imputed interest income on such excess money which has not been repatriated within the prescribed time.

30B

(a)

Whether the assessee has incurred expenditure during the previous year by way of interest or of similar nature exceeding one crore rupees as referred to in sub-section (1) of section 94B? (Yes/No)

Under this clause, the deduction related to the interest payable on any borrowings by an Indian company under the Income-Tax Act shall be restricted to 30% of earnings before interest, tax, dividend, and amortization. Hence, the interest over the 30% bracket shall be allowed to be set off in the subsequent year.

(b)

If yes, please furnish the following details:- (i) Amount (in Rs.) of expenditure by way of interest or of similar nature incurred: (ii) Earnings before interest, tax, depreciation and amortization (EBITDA) during the previous year (in Rs.): (iii) Amount (in Rs.) of expenditure by way of interest or of similar nature as per (i) above which exceeds 30% of EBITDA as per (ii) above: (iv) Details of interest expenditure brought forward as per sub-section (4) of section 94B (v) Details of interest expenditure carried forward as per sub-section (4) of section 94B

30C

(a)

Whether the assessee has entered into an impermissible avoidance arrangement, as referred to in section 96, during the previous year? (Yes/No)

Under this clause, an impermissible avoidance arrangement, that is, an agreement where the main purpose is to obtain tax benefits results in tax evasion, lacks commercial substance, or is carried out in a manner that does not otherwise occur if the arrangement was for bona fide purposes.

(b)

If yes, please specify:- (i) Nature of the impermissible avoidance arrangement: (ii) Amount (in Rs.) of tax benefit in the previous year arising, in aggregate, to all the parties to the arrangement”;

31

(a)

Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year: Name, address and PAN of the lender or depositor, Amount of loan or deposit taken or accepted, whether the same was squared up during the year, maximum amount outstanding at any time during the previous year, whether the same was taken or accepted by cheque or bank draft (specify if account payee) or use of ECS through a bank account

Under this clause, the auditor needs to make scrutiny of books of accounts specifically loans that the assessee has taken throughout the year and deposits that the assessee has accepted throughout the year.

(b)

Particulars of each specified sum in an amount exceeding the limits specified in section 269SS taken or accepted during the previous year: Name, address and PAN (if available) of the person from whom specified sum is received, amount of specified sum taken or accepted, whether the specified sum was taken or accepted by cheque or bank draft (specify if account payee) or use of ECS through a bank account

Here, the auditor needs to make scrutiny the books of accounts, specifically the specified sum that the assessee has taken or accepted throughout the year, along with the agreements through which the transfer is affected or proposed to be affected.

(ba)

Particulars of each specified sum in an amount exceeding the limits specified in section 269ST taken or accepted during the previous year: Name, address and PAN (if available) of the person from whom specified sum is received, amount of specified sum taken or accepted, whether the specified sum was taken or accepted by cheque or bank draft (specify if account payee) or use of ECS through a bank account

As per Section 269ST, a person is not allowed to receive more than Rs. 2 lakh from either:

(i)                  From a person, in a day

(ii)                In respect of a single transaction

(iii)               In respect of transactions relating to a single event/occasion

If such amount is paid through any mode other than an account payee cheque/bank draft or use of ECS through a bank account. The reporting of non-compliance with this section will be made under this clause

(bb)

Particulars of each receipt in an amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, received by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year:- (i) Name, address and Permanent Account Number (if available) of the payer; (ii) Amount of receipt (in Rs.)

(bc)

Particulars of each payment made in an amount exceeding the limit specified in section 269ST, in aggregate to a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion to a person, otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year:- (i) Name, address and PAN (if available) of the payee; (ii) Nature of transaction; (iii) Amount of payment (in Rs.); (iv) Date of payment;

(bd)

Particulars of each payment in an amount exceeding the limit specified in section 269ST, in aggregate to a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion to a person, made by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year:- (i) Name, address and PAN (if available) of the payee; (ii) Amount of payment (in Rs.)

(c)

Particulars of each repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T made during the previous year: Name, address, PAN (if available) of payee, amount of repayment, maximum amount outstanding at any time during the previous year, whether the repayment was made by cheque or bank draft (specify if account payee) or use of ECS through a bank account

Here the auditor is supposed to ensure that if the assessee is a company then those loans/deposits that are repayable on demand will not be considered loan deposits in this section.

The auditor also needs to scrutinize the loans, deposits, and advances against any immovable property during the report and all repayments made to any person where the deposit along with interest.

(d)

Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T received otherwise than by a cheque or bank draft or use of ECS through a bank account during the previous year: Name, address, PAN (if available) of the payer, amount of loan or deposit or any specified advance received otherwise than by a cheque or bank draft or use of ECS through a bank account during the previous year.

In case the loan or deposit or specified advance given is received back otherwise than by cheque or bank draft or ECS, the same is to be mentioned in this clause.

(e)

Particulars of repayment of loan or deposit or any specified advance in amount exceeding the limit specified in section 269T received by a cheque or bank draft which is not an account payee cheque or account payee bank draft during the previous year: Name, address, PAN (if available), of the payer, amount of loan or deposit or any specified advance received by a cheque or a bank draft which is not an account payee bank cheque or bank draft during the previous year.

Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269 T received by a cheque or bank draft which is not an account payee cheque or account payee bank draft during the previous year is required to be reported under this clause.

Under this sub-clause, the particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified under section 269 T received by cheque or bank draft that is not an account payee cheque or account payee bank draft during the previous year.

32

(a)

Details of brought forward loss or depreciation allowance to the extent available

The amounts need to be revised for any change arising out of rectification orders, assessment orders, etc.

 

(b)

Whether a change in the shareholding of the company has taken place during the previous year due to which the losses incurred prior to the previous year cannot be allowed to be carried forward in terms of section 79.

This sub-clause applies to a private limited company with the following exceptions:

  • The voting power of less than 51% has changed.
  • There is a change due to the death of the shareholder.
  • Change in the shareholdings due to shares gifted by a relative of a shareholder.
  • In case the holding company is a foreign company and the shareholdings are due to amalgamation/demerger and less than 51% of the shares have changed.

(c)

Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year. If yes, please furnish details of the same.

Here, the details related to speculation loss referred to in Section 73 of the previous year are to be disclosed.

(d)

Whether the assessee has incurred any loss referred to in section 73A in respect of any specified business during the previous year, if yes, please furnish details of the same.

Under this sub-clause, the details in regards= to loss referred to in Section 73A concerning business during the previous year are to be disclosed.

(e)

In case of a company, please state that whether the company is deemed to be carrying on a speculation business as referred in explanation to section 73, if yes, provide details of speculation loss if any incurred during the previous year.

Where the company details of whether the company is deemed to be carrying on a speculation business as referred to in explanation in Section 73 is to be provided.

33

Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, 10AA).

The auditor is supposed to obtain and check all the details of the deduction claimed under chapter III and chapter VI-A.

34

(a)

Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes, please furnish details

Under these sub-sections, compliance with resconcerningable on certain expenses is to be covered. The tax auditor is to cover the expenditure on which the tax is required to be deducted. In the case of failure to comply on time, the details of penalties in respect of such late payments will also be covered,

(b)

Whether the assessee is required to furnish the statement of tax deducted or tax collected. If yes, please furnish the details

(c)

Whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). If yes, please furnish details.

35

(a)

In the case of a trading concern, give quantitative details of principal items of goods traded: (i) Opening Stock; (ii) purchases during the previous year; (iii) sales during the previous year; (iv) closing stock; (v) shortage/excess, if any

The auditor is supposed to be obtained from the assessee TDS/TCS returns filed, TDS/TCS concession certificate provided by the party to the client if any, and the party-wise TDS detail sheet with necessary details and should verify the same with the books of accounts.

(b)

In the case of a manufacturing concern, give quantitative details of the principal items of raw materials, finished products and by-products: A. Raw Materials: (i) opening stock; (ii) purchases during the previous year; (iii) consumption during the previous year; (iv) sales during the previous year; (v) closing stock; (vi) yield of finished products; (vii) percentage of yield; (viii) shortage/excess, if any. B. Finished products/by-products: (i) opening stock (ii) purchases during the previous year; (iii) quantity manufactured during the previous year; (iv) sales during the previous year; (v) closing stock; (vi) shortage/excess, if any.

Here, the auditor should obtain the receipt/acknowleagment TDS/TCS statement filed by the assessee during the year.

In case the TDS/TCS has been deducted or collected and deposited but not reported in the statement, the auditor, after proper audit procedures and verifications, shall obtain suitable management representation in this regard.

36

In the case of a domestic company, details of tax on distributed profits under section 115-O in the following form:- (a) total amount of distributed profits; (b) amount of reduction as referred to in section 115-O (1A)(i); (c) amount of reduction as referred to in section 115-O (1A)(ii); (d) total tax paid thereon; (e) dates of payments with amounts.

In case the dividend has been paid to the shareholders by a domestic company, the liability to pay dividend distribution tax thereon, lies on the company itself. This dividend will also include deemed dividends, with respect to certain conditions.

36A

a) Whether the assessee has received any amount in the nature of dividend as referred to in sub-clause (e) of clause (22) of section 2? (Yes/No) (b) If yes, please furnish the following details:- (i) Amount received (in Rs.): (ii) Date of receipt

Here, the auditor needs to report the details of the amount received by the assessee, that falls under the nature of dividends, as referred to in clause  (22)(e) of Section 2 of the Income Tax Act, 1961

37

Whether any cost audit was carried out, if yes, give the details, if any, of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the cost auditor.

Under this clause, the auditor is required to mention any disqualified disagreements on any matter/item/value/quantity, whichever may be reported/identified by the cost auditor.

In case the cost audit is not complete, the auditor is required to mention in the reports that the cost audit was not completed and the cost audit report is not available.

38

Whether any audit was conducted under the Central Excise Act, 1944, if yes, give the details, if any, of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor.

Any disqualification or disagreement on the matter/item/quantity whichever may be reported/identified by the excise auditor under the Central Excise Act, 1944.

This clause is applicable only to the assessees who are manufacturers and are central excise assessees.

39

Whether any audit was conducted under section 72A of the Finance Act, 1994 in relation to valuation of taxable services, if yes, give the details, if any, of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor.

Under this clause, the disclosure of any disqualification or disagreement on any matter/item/value/quantity may be reported/identified if the audit was conducted under Section 72A of the Finance Act, 1994 for valuation of taxable services.

Where the audit under Section 72A was not completed, the tax auditor is required to state the same in the report that such audit was not completed and the audit report is unavailable.

40

Details regarding turnover, gross profit, etc. for the previous year and preceding previous year: 1. Total turnover 2. Gross profit/turnover 3. Net profit/turnover 4. Stock-in-trade/turnover 5. Material consumed/finished goods produced

Under this clause, the given ratios are required to be furnished for the businesses as a whole, and not a product-wise bifurcation of the assessee engaged in manufacturing or trading activities.

For the preceding year, the tax audit figure of the year might be used. In case no tax audit was applicable in the preceding year, then nothing is required to be filled into this column.

41

Please furnish details of demand raised or refund issued during the previous year under any tax laws other than Income-tax Act, 1961 and Wealth Tax Act, 1957 along with details of relevant proceedings

Other legislations like indirect tax, profession tax, and so on, that the assessee might be subject to. Such acts or orders of such authorities need to be mentioned under this clause.

42

(a)

Whether the assessee is required to furnish statement in Form No. 61 or Form No. 61A or Form No. 61B? (Yes/No)

The forms mentioned under this clause are related to specified financial transactions, wherein reporting is required to be done with respect to certain prescribed transactions when entered here by such assessees, as prescribed in Section 286BA.

(b)

If yes, please furnish Income-tax Department Reporting Entity Identification Number, Type of form, Due date for furnishing, Date of furnishing (if furnished), Whether the form contains information about all details/ transactions which are required to be reported. If not, please furnish list of the details/ transactions which are not reported

43

(a)

Whether the assessee or its parent entity or alternate reporting entity is liable to furnish the report as referred to in sub-section (2) of section 286 (Yes/No)

Under this clause, there are reports mentioned, relating to the provision of information of the international group of entities of which the assessee is a part and the parent entity is a non-resident.

(b)

If yes, please furnish the following details: (i) Whether report has been furnished by the assessee or its parent entity or an alternate reporting entity (ii) Name of parent entity (iii) Name of alternate reporting entity (if applicable) (iv) Date of furnishing of report

44

Break-up of total expenditure of entities registered or not registered under the GST

Under this clause, the reporting of details regarding the break-up of the total expenditure of entities, registered or non-registered under GST is to be provided.



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