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The Income Tax Act 1961 defines the audits of taxpayers under Section 44AB, whereby the applicability of tax auditing for professionals and businesses is stated. A CA inspects and verifies these accounts and prepares the audit reports, which are filed in forms 3CA, 3CB, 3CD, and 3CE.
The applicability, process, and penalties associated with the tax audit forms 3CA, 3CB, 3CD, and 3CE have been discussed in this blog.
3CA (Audit Annexure Form) is required to be enclosed with 3CD (Main Tax Audit Report) if the books of accounts of the assessee are required to be audited under any other law, such as Companies Act, 2013, including tax audit under the Income Tax Act,1961. This Form is applicable in the case of tax audits applicable on companies since companies are also required to furnish the statutory tax audit report under the Companies Act, 2013. Hereby, the assessee is applicable for TAX audit u/s 44AB of the Income Tax Act as well as the Companies Act.
3CA includes a summarized overview of the assessee’s personal information (such as the personal information of the chartered accountant and the assessee including the PAN details, and address). The date of the audit report, CA membership number, date of the balance sheet used to perform the audit, and highlights of the qualifications/ audit observations are found in the details associated with the Form 3CD.
Form 3CB is required to be furnished by taxpayers carrying out business or professional activities, for whom, tax auditing is not mandated under any other law. As discussed above, only income tax audit is applicable under Section 44AB. Form 3CB is applicable for other than companies. Any individual/HUF, proprietorship entity, or partnership firm with an annual turnover exceeding from specified limit, and not mandated to get its accounts audited under any other law, is required to furnish form 3CB including the 3CD Report.
Besides Form 3CB, the taxpayer is required to form 3CD which contains a detailed overview of all the prescribed particulars regarding tax auditing.
The income tax audit Form 3CD is a detailed statement of particulars containing of 41 clauses, whereby all the details related to business and transactions, such as revenue, turnover, expenses, profits, asset-liability details, and so on are furnished by the taxpayer.
To get a detailed explanation of each clause of Form 3CD, visit Detailed Explanation & Applicability of Form 3CD
Form 3CE is required to be furnished along with an annexure of particulars, by foreign companies and non-residents that receive a royalty for technical services provided and are mandated to get their books of accounts audited.
Base of Applicability
Tax audit Applicable
Sales turnover or gross receipts of services
2 conditions are fulfilled as per specified
Receipts in cash do not exceed 5% of all receipts
Payment in cash does not exceed 5% of all payment
Professional gross receipts
Business Covered U/s 44AD
If such a person claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provision of Section U/s 44AD
Business Covered U/s 44ADA
Business Covered U/s 44AE
An income tax audit report is required to be obtained by a taxpayer before 30th September or One month Prior to the due date of furnishing the return of the Income Under section 139(1) for the given assessment year, unless the due date has been extended as per the government guidelines.
In case of non-compliance to the income tax auditing regulations and not furnishing the tax audit forms 3CA, 3CB, 3CD, and 3CE, a minimum penalty of 0.5% can be imposed over the total sales, turnover, or gross receipts, which can further be raised up to ₹ 1,50,000 as per Section 271B. However, no penalty will be imposed if the taxpayer provides a relevant reason for not furnishing the income tax audit reports and not filing the tax audit forms 3CA, 3CB, 3CD, and 3CE.