Who and what is required to be audit in form 3CD (Tax Audit)
Notification no 33/2018:
With the season of tax audit compilation in at your door step the income tax department thrown a major reform in tax audit forms (commonly known as form 3CD) by shifting majority of work of assessing officer to an auditor. Here our endeavor is pre prepare assessee for extra audit requirements with the changes made in tax audit forms.
Effective date of implementation of revised 3CD forms:
Amendments to Form No. 3CD (other than clauses 30C and 44) are effective from 20th August 2018, these amendments would not apply to tax audits which have already been signed and uploaded before the amendments come into effect. In such cases, the revised particulars need not be given.
Thus, all audits concluded and uploaded on portal upto 20th August 2018 need not to be uploaded again on the portal with revised particulars.
Whether incomes other then business and / or professional incomes are to be consider in revised 3CD forms:
The audit is required to be compiled for the books and accounts maintained in respect of the business or profession carried on by the assessee.
So far as the reporting requirements under clauses relating to heads of income other than “Profits and Gains of Business or Profession” are concerned, these can only be only in relation to entries made in such books of account, and does not extend to transactions not recorded in such books of account.
Meaning of business and profession for the purposes of tax audit:
The expression “profession” involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an operation which is substantially the production or sale or arrangement for the production or sale of commodities.
Whether tax audit is required in case of incomes outside the preview of income tax law and exempt under the income tax law:
Neither the section 44AB nor any other provisions of the Act stipulate exemption from the compulsory tax audit to any person whose income is exempt from tax. This section makes it mandatory for every person carrying on any business or profession to get his accounts audited where conditions laid down in the section are satisfied and to furnish the report of such audit in the prescribed form.
Case 1: A trust/association/institution carrying on business may enjoy exemptions as the case may be under sections 10(21), 10(23A), 10(23B) or section 10(23BB) or section 10(23C) or section 11. Such institutions/associations of persons will have to get their accounts audited and to furnish such audit report for purposes of section 44AB if their turnover in business exceeds the prescribed limit
Case 2: A co-operative society carrying on business may enjoy deduction under section 80P. Such co-operative society will have to get their accounts audited and to furnish such audit report for purposes of section 44AB if their turnover in business exceeds the prescribed limit.
Case 3: An agriculturist, who does not have any income under the head “Profits and gains of business or profession” chargeable to tax under the Act and who is not required to file any return under the said Act, need not get his accounts audited for purposes of section 44AB even though his total sales of agricultural products may exceed the prescribed limit.
Case 4: A non-resident assessee is also required to get his accounts audited and to furnish such report under section 44AB if his turnover/sales/gross receipts exceed the prescribed limits. This audit, however, would be confined only to the Indian operations carried out by the non-resident assessee since he is chargeable to income-tax in India only in respect of income accruing or arising or received in India.
It may be appreciated that the object of audit under section 44AB is only to assist the Assessing Officer in computing the total income of an assessee in accordance with different provisions of the Act.
Therefore, even if the income of a person is below the taxable limit laid down in the relevant Finance Act of a particular year, he will have to get his accounts audited and to furnish such report under section 44AB, if his turnover in business exceed the prescribed limit.