Tax Audit Report and Form 3CA, 3CB & 3CD

Table of Contents

1. What is a Tax Audit
2. What is Tax Audit Report?
3. Who has to get books of accounts audited?
4. Form for Filing of Tax Audit Report
5. Manner of Filing Tax Audit Report
6. Requirement for Audit under Other Law
7. Due date for Furnishing Tax Audit Report
8. Revision of Tax Audit Report
9. How to Furnish Tax Audit Report?
10. Penalty for Non-compliance of Audit Report

1. What is a Tax Audit?

A tax audit is a process to verify whether the books of accounts prepared by a taxpayer comply with the generally accepted accounting principles and the provisions of the Income-tax Act. It is intended to ensure that the books of account and other records are properly maintained and correctly compute the taxpayer’s actual income. The tax audit does not give the assessee immunity from scrutiny assessment or disallowance of expenses1. A tax audit can be conducted only by a Chartered Accountant in practice.

2. What is Tax Audit Report?

Under section 44AB of the Income-tax Act, 1961, persons falling in specified categories have to get their accounts audited compulsorily by a Chartered Accountant. The tax audit is conducted by the chartered accountant in practice. 

A tax audit report is a report prepared by a Chartered Accountant after conducting the tax audit under section 44AB. It is also required to be furnished before the Income-tax Dept. electronically in Form 3CA/3CB and 3CD.

In the case of a person, who carries on business or profession and who is required by or under any other law to get his accounts audited, the report shall be prepared and furnished in Form No. 3CA.

In the case of a person, who carries on business or profession but is not a person referred to above, it shall be prepared and furnished in Form No. 3CB.

Particulars, which are relevant from the angle of income-tax assessment, are required to be furnished under section 44AB in Form No. 3CD in cases of all types of assessees carrying on business or profession, whose accounts are to be audited under section 44AB. With Form Nos. 3CA and 3CB, the statement of particulars in Form No. 3CD is required to be annexed.

Form No. 3CD is an elaborate form containing as many as 44 heads, where various types of information concerning an assessee are to be given by the tax auditor. These heads indicate the comprehensiveness of the information required to be given in this form by the tax auditor, which, cannot be given unless the accounts and the other records and documents are looked into and checked by the tax auditor.

3. Who has to get books of accounts audited?

A taxpayer is required to maintain books of accounts and get them audited. The requirement to maintain the books of accounts is prescribed under Section 44AA and the requirement to get them audited is mentioned in Section 44AB.

An assessee shall get the books of accounts audited if its gross turnover or receipts during the relevant previous year exceeds the prescribed threshold limit. If the threshold limit, as specified in the below table, is not crossed, the assessee shall not be required to get the books of accounts audited by a Chartered Accountant.

Following persons are compulsorily required to get their books of account audited by a Chartered Accountant:

Note 1: Following conditions are need to be fulfilled:

(a) Cash receipts, including amount received for sales, turnover or gross receipts, does not exceed 5% of the aggregate amount received during the previous year; and

(b) Cash payments, including amount incurred for expenditure, does not exceed 5% of the aggregate amount paid during the previous year.

For the purpose of computing the limit of 5%, payment or receipt by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt in cash[2] .

The provisions for tax audit under Section 44AB is not applicable in case of assessees who come within the purview of Section 44B or Section 44BBA.

4. Form for Filing of Tax Audit Report:

 There are two types of forms under the tax audit report prepared and submitted – Form 3CA, Form 3CB, and Form 3CD. Only one of two will apply to the taxpayer.

(a) Form 3CA

Where the assessee is required to get his books of accounts audited under any other law, then the audit report shall be prepared and furnished in form 3CA along with From 3CD.

Under Form 3CA, the tax auditor provides a declaration that he has examined the financial statement of the assesses. The form seeks the following details of the assessee:

i. Details of the assessee;

ii. Date of Audit Report;

iii. Period of profit and loss account;

iv. Year ended of the balance sheet; and

v. Reporting of comments and observations, etc.

(b) Form 3CB

Where the assessee is not required to get his books of accounts audited under any other law, then the audit report shall be prepared and furnished in form 3CB along with From 3CD.

Under Form 3CB, the tax auditor provides a declaration that he has examined the financial statement of the assesses. The form seeks the following details of the assessee:

i. Details of assessee;

ii. Date of Audit Report;

iii. Period of profit and loss account;

iv. Year ended of balance sheet; and

v. Reporting of comments and observations, etc.

(c) Form 3CD

Particulars, which are relevant from the angle of income-tax assessment, are required to be furnished under section 44AB in Form No. 3CD in cases of all types of assessees carrying on business or profession, whose accounts are to be audited under section 44AB. With Form Nos. 3CA and 3CB, the statement of particulars in Form No. 3CD is required to be annexed.

Form No. 3CD is an elaborate form containing as many as 44 heads, where various types of information concerning an assessee are to be given by the tax auditor. These heads indicate the comprehensiveness of the information required to be given in this form by the tax auditor, which, cannot be given unless the accounts and the other records and documents are looked into and checked by the tax auditor.

5. Manner of Filling Audit Report

1. Chartered Accountant conducting tax audit has to present the tax audit report online, using his/her official login credentials.

2. The assessee is required to mention relevant information about their Chartered Accountant in their login portal.

3. Once the tax auditor uploads the audit report, the same should either be accepted/rejected by the assessee in their login portal. If rejected for any reason, all the procedures need to be followed again till the audit report is accepted by the assessee.

4. Taxauditreport must be filed on or before the due date of filing the return of income. It is 31st October of the subsequent year in case the assessee has entered into an international transaction and 30th September of the subsequent year for other assessees.

6. Requirement for Audit under Other Law

Where assessee is required to get his books of accounts audited under any other law, it is sufficient for him to get his accounts audited under that law and furnish a report of such audit and a report in form 3CA and 3CD by chartered accountant by the prescribed due date.

7. Due date for Filing Tax Audit Report

It is mandatory to file the tax audit report before one month prior to the due date of furnishing return of income under section 139(1)[3] i.e. by the following dates:-

8. Revision of Tax Audit Report

The audit report may be revised by getting revised report of audit from an accountant, if any payment is made after furnishing of report which necessitates recalculation of disallowance under Section 40 or Section 43B. Revised audit report must be signed and verified by such accountant and it should be furnished before the end of the relevant assessment year for which the report pertains.

9. How to Furnish Tax Audit Report?

The audit conducted by the chartered accountant of the accounts of taxpayers in pursuance of the requirement of section 44AB is called ‘Tax Audit’. The tax audit season for the Assessment Year 2022-23 is in full swing and the due date to furnish the tax audit report is 30th September 2022.

(a) Steps to file an Tax audit report?

The audit report is required to be filed online through the e-Filing portal in the following three steps:

• • • Assessee to authorize a Chartered Accountant to file the audit report
    • Chartered Accountant shall fill and upload the audit report
    • Assessee shall approve the submission of the audit report

(b) Who can furnish the Tax Audit Report?

A tax audit can be conducted only by a Chartered Accountant in practice. A CA who is registered in the e-Filing portal and one who has been assigned by the taxpayer to audit Form 3CA/3CB-3CD is entitled to access this form.

(c) How form 3CA/3CB-3CD can be submitted?

The audit report shall be filed electronically by the Chartered Accountant to the Income-tax Dept. The report shall be uploaded directly by the tax auditor at www.incometax.gov.in.

The following are the prerequisites for filing of Audit Report.

• • • Taxpayer and CA are registered on the e-Filing portal with valid user ID and password
    • Status of PAN of the taxpayer and CA is active
    • The taxpayer has assigned CA for form 3CA-CD
    • CA and Taxpayer have a valid and active Digital Signature Certificate

The form can be submitted on the portal by using the JSON generated from the offline utility. The form has to be uploaded by a CA using his Digital Signature Certificate.

(d) Is the mandatory for CA to submit UDIN at the e-filing portal for Tax Audit Report?

While issuing the tax audit report under section 44AB of the Income-tax Act, 1961, the Auditor should generate an appropriate UDIN, and the same is also required to be updated at the e-filing portal. The Chartered Accountant has to generate and update the UDIN within 60 calendar days from the date of form submission in the income tax e-filing portal. If the UDIN for any audit report/certificate is not updated within the 60 days provided for the same, the department will treat such audit report/certificate as invalid submission.

(e) Steps to assign a form to CA

The following steps are to be followed by the assessee to assign a form to CA.

Step 1: Log in to the e-Filing portal using your user ID and password.

Step 2: On your Dashboard, click e-File > Income Tax Forms > File Income Tax Forms.

Step 3: On the File Income Tax Forms page, click Form 3CA-3CD/3CB-3CD. Alternatively, enter the form name in the search box to file the form.

Step 4: On the Form 3CA-3CD/3CB-3CD page, select the Filing Type and Assessment Year (A.Y.), assign Chartered Accountant , and attach any Supporting documents. Click Continue to proceed. If no CAs added, you can add a CA by clicking Dashboard > Authorized Partners > My CA > Add new CA.

After the form is assigned to the CA, a success message is displayed along with a Transaction ID. Please keep a note of the Transaction ID for future reference.

(f) Steps to file Form by CA

The Chartered Accountant needs to follow the following steps to file a form at the portal.

Step 1: Log in to the e-Filing portal using your user ID and password.

Step 2:  On your Dashboard, click Pending Actions > Worklist, where the list of pending items is displayed. 

Step 3: Under the For your Action tab, click Accept, against the form 3CA-CD assigned to you.  If you reject the request, you will have to provide the reason for rejecting the service request. 

Step 4: On successful acceptance of the request, a success message is displayed along with a Transaction ID. Please keep a note of the Transaction ID for future reference. Click Back to Worklist to file the Form.

Step 5: On your Worklist, under the Pending for Filing tab, click File Form against the form 3CA-3CD accepted by you.

Step 6: On the Form 3CA-3CD page, click Continue to proceed. 

Step 7: Download the Offline Utility (Also available under the downloads section on your homepage) and file the form using the utility. Upload the JSON file created using the Offline Utility on the Form 3CA-3CD page. Attach necessary supporting documents and click Submit.

Step 8: On the Unique Identification Number page, click Proceed.

Step 9: If you select Proceed, you will be taken to the e-Verify page, where you can verify using Digital Signature Certificate. 

After successful e-Verification, a success message is displayed along with a Transaction ID. Please keep a note of the Transaction ID for future reference. The taxpayer will also receive a confirmation message on the email ID and mobile number registered with the e-Filing portal.

(g) Steps to verify Audit Report by Taxpayers

The following steps are to be followed by the taxpayer to verify the audit report.

Step 1: Log in to the e-Filing portal using your user ID and password.

Step 2: On your Dashboard, click Pending Actions > Worklist.

Step 3: On your Worklist, under the Pending for Acceptance, click Accept against the Form 3CA-3CD submitted by your CA. If you reject the request, you will have to provide the reason for rejecting the service request.

Step 4: On accepting the request, you will be taken to the e-Verify page, where you can verify using Digital Signature Certificate. 

After successful e-Verification, a success message is displayed along with a Transaction ID and Acknowledgement Receipt Number. Please keep a note of the Transaction ID and Acknowledgement Receipt Number for future reference. You will also receive a confirmation message on your email ID and mobile number registered with the e-Filing portal.

10. Penalty for Non-compliance of Audit Report

If any person fails to get his accounts audited or fails to furnish a report of tax audit as required under this provision, the penalty may be imposed under Section 271B.

References

1. 1. Section 13 of the Finance Act, 2021 has increased the turnover limit from 5 crores to 10 crores with effect from Assessment Year 2021-2022.
   2. Inserted by Section 13 of the Finance Act, 2021, with effect from Assessment Year 2021-2022
   3. Amended by Section 23 of the Finance Act, 2020, with effect from assessment year 2020-21. Earlier such report was required to be filed before the due date of filing of return of income.
   4. The due date to furnish audit report for the previous year 2020-21 has been extended.

Dive Deeper:
[FAQs] Introduction & Applicability of Tax Audit | A.Y. 2022-23
[FAQs] Due Date & Process to file Tax Audit Report | A.Y. 2022-23
[FAQs] Disclosures & Reporting in Form 3CD | Tax Audit | A.Y. 2022-23