Tax Audit under Section 44AB of Income Tax Act - Latest Significant Points

Folks,

Herewith I have given few pointers significant for Tax Audit. Your suggestions are welcome to gkr@icai.org

Tax Audit Report should be filed with the Return of Income before due date for filing of Return of Income.

However, due to electronic filing mechanism coming into existence, the Returns which are filed before due date of filing of Return containing details about Tax Audit date, Auditors’ name and address and their PANo are considered as tax audit compliant returns and penalty under section 271B can be avoided. If the Return is filed a day late and still it contains the date of audit report prior to due date still it will amount to non filing of tax audit return in time. As a precautionary measure, it is advisable to file tax audit report in such case with a covering letter with the concerned Assessing Officer in case of extraneous circumstances beyond the control of the management.

Period to be covered by the Auditor:

In many cases the companies adopt accounting year different from the uniform accounting year (financial year) as suggested under Income tax Act for various convenience factors. In such case tax audit should be conducted for the previous year relevant to the assessment year. Hence, tax auditors have to carry out tax

audit on the basis of the split information procured from two accounting period as per Companies Act and file Form No. 3CA as required in prescribed rule. [Circular No. 561 dtd 22.5.1990]

Incomplete Audit Reports - effect

The Government has decided that all cases where the information provided in the audit report is incomplete or such non committal replies are furnished so as to render the remarks or the report meaningless, should be reported by the Assessing Officer to the CIT. The matter thereafter, be taken up by the CIT to see if the

case reflects any professional negligence on the part of the accountants signing the audit report. Action for initiation of disciplinary proceedings in terms of section 288 of the I T Act should be immediately taken by the commissioner of Income tax with the approval of the Chief CIT, as the case may be.

The CBDT has issued instructions with immediate effect to the field officers to report any professional negligence on the part of the chartered accountants in preparing the tax audit report to the ICAI in terms of section 288, as the ICAI is entitled to institute proceedings against its member chartered accountants who

submit faulty tax audit reports. [Press release, New Delhi dated 10th Dec, 1999].

 

Happy Reading.

 

GKR