Income Tax Audit under Section 44AB – Criteria, Audit Report, Penalty

Before understanding what a tax audit is, let’s talk about the meaning of the term “audit“. The term “audit” means an official examination of the institution’s accounts and the production of the report, usually by an independent body/review or systematic evaluation of something.

Objectives of the tax audit

Tax audits are carried out to:

Ensure proper maintenance and correctness of the books of accounts and certificates by the tax auditor

Report the observations/inconsistencies noted by the tax auditor after systematic examination of the books of account

Reporting specific information such as tax depreciation, compliance with various provisions of the Income Tax Law and others. This, in turn, can also provide tax authorities time to verify the income tax return provided by the taxpayer such as gross income and claim. For deductions etc

Who is subject to tax review?

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What is the audit report?

The tax assessor must submit his report in a specific form which can be either Form 3CA or Form 3CB where:

Form 3CA is eligible when a person engaged in a business or profession has already been charged with auditing his accounts under any other law.

Form 3CB is submitted when the person conducting a profession or profession is not required to audit under any other law

In the case of any of the above audit report, the tax auditor is also required to provide the details specified in Form 3CD which forms part of the audit report.

How and when is the tax audit report submitted?

The tax assessor must submit an online tax audit report using his / her login details as a “Chartered Accountant”. The taxpayer must add CA details in their login portal. Once the audit report is downloaded by the tax assessor, the same amount must be accepted or rejected by the taxpayers in their login portal. If it is rejected for any reason, all procedures must be followed again until the audit report is accepted by the taxpayer.

A tax audit report must be submitted on or before the due date of the income return on November 30 of the following year if the taxpayer enters into an international transaction and 30 September of the following year in the case of other taxpayers.

Consequences of non-compliance

If any taxpayer is required to perform a tax audit but fails to do so, 0.5% of total sales, turnover, total receipts, or 150,000 rupees may be imposed as a fine. However, if a reasonable reason for non-compliance is established, no penalty will be imposed.

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Books of Accounts and Audit Requirements

The Income Tax Law sets out the books of accounts to be kept for income tax purposes. It has been described under Article 44AA and Rule 6F.

Required to keep the books of accounts?

The following professions must maintain accounting records if their total revenue is greater than Rs. 150,000 in the previous 3 years for a career list. This also applies to a newly established profession whose total revenue is expected to exceed Rs 10,000. 1,50,000.

The accounting records to be booked in Rule 6F were identified:

legal
Medical
Engineering
The architect
Accounting
Technical Consultancy
Interior decoration

Authorized representative – a person who represents a person for remuneration before a body or other authority under the law. It does not include an employee of the person represented or the person who performs the accounting profession.
A filmmaker – includes a producer, an editor, a representative, a director, a music director, a technical director, a director, a photographer, a singer, a songwriter, a storyteller, a screenwriter, And fashion designers.
Secretary Company

If you are a freelance entrepreneur pursuing any of these professions, your total receipts are more than Rs. 150000, these rules apply to you.

If the total income of the above professions does not exceed Rs.150,000 in one or more of the previous three years of an existing occupation or a newly established occupation whose total revenue is expected to be less than Rs 1, 50,000 – the professional must keep books of accounts. Unless all books or records are not kept, they are not exactly selected. The only requirement is that AO is able to calculate taxable income from professional ones.

From 18-18 years, the maximum rupee. 150,000 to Rs. 250000.

Accounting books defined by Rule 6F
Cash book
Record cash and cash payments daily that show the cash balance at the end of the day or at best at the end of each month and not thereafter.
Magazine in accordance with the Commercial Accounting System
The newspaper is a record of all daily transactions. It is a record, in terms of accounting, where the total credits equal the total debt, when we follow the double-entry accounting system, that is, each opponent has a balance against and vice versa.
The ledger in which all entries from the magazine flow contains details of all accounts, and this can be used to prepare financial statements.
A copy of the invoices or receipts issued by them which are more than 25 rupees
Bills of original expenses incurred which are more than 50 rupees
The following are additional requirements in the case of a person with a medical profession – doctors, surgeons, dentists, pathologists, radiologists, etc.

Record daily cash with patient details, services provided, fees received and date of receipt
Details of stock of medicines, medicines and other consumables used
These books must be kept at the head office or in each office.

How long should these books be preserved?

Records must be kept each year for 6 years from the end of this year.

Not keeping the books of accounts?

If you fail to maintain account records as stated, you may be fined 25,000 rupees or in some cases where you may have international transactions and failed to retain the information and documentation for such transactions – 2% of the value of each international transaction.

It will be hard to keep your books and track all your expenses and income in a systematic way.