What is a Tax Audit?
Under Section 44 AB of the Income Tax Act, 1961, provision of Income Tax Audit is covered. Income Tax Audit is a way to examine an individual’s organization tax returns by any outside agency. Income Tax Audit done to verify all income, get the deduction information or about expenditures incurred. To do tax audit is mandated as per the provisions of the Income Tax Act. This act states that all the taxpayers are required to do an audit of all the accounts of their business or organization.
As per Section 44AB, the audit aim is to ascertain the factual veracity of the returns filed and the accomplishment of other requirements as per applicable rules.
The Chartered Accountant performing the tax audit is required to do the submission of all its findings and observations in the form of an audit report. The audit report is given as per format available in the form numbers 3CA/3CB and 3CD.
Section 44 AB concerned with those classes of taxpayers who are liable to get their audit done from Chartered Accountant.
What is the objective of the Tax Audit?
Who all are covered under the Tax Audit?
Tax Audit is applicable for all those classes of individuals that are mentioned under Section 44B of the Income Tax Act. According to the regulations of Section 44B of the Income Tax Act, 1961, the list is mentioned below that states class of people who are mandated to get Income Tax Audit done.
What are the forms under 3CA, 3CB and 3CD?
Tax Audit reports that are conducted by a Registered Chartered Accountant are to be presented in a prescribed format. As per Section 44AB of the Income Tax Act, form which is prescribed for the audit report is known as Form No. 3CB and prescribed are reported in Form no. 3CD.
In some cases, when a person who wishes to get an account audited under any law other than 44AB, then, in that case, the form used for the audit report is Form no. 3CA and prescribed are reported in Form No. 3CD.
What is the due date for doing Income Tax Audit?
Any individual or persons covered under Section 44AB get their account audited and should also obtain audit reports on or before 30th September for financial year 2020-21.
For instance, the Tax audit report for Financial Year 2020-21 corresponding to the assessment year 2021-22 should be obtained before 30th September 2021.
Tax Audit Report to be filed Electronically by the chartered Accountant to the Income Tax Department. After filing the Income Tax report by the Chartered Accountant, the taxpayer needs to approve the submitted reports using an E-filing account with the Income Tax Department.
What is the Penalty for not getting Accounts Audited?
As per Section 271B, if a person who is required to comply with the Section 44AB is not able to get their accounts audited, then the penalty will be imposed on that person:
However, according to section 273B, no penalty would be imposed on the person if a valid reason for such failure is proved.
Thus, tax audit mandates for individuals. Failure to comply with the income tax rules would attract the penalty and individuals wishing to avoid any penalty should ensure full compliance with all the rules of the income tax audit.