Instances of Non-compliance with Reporting Requirements Under Clause 21 & 31 of Form 3CD

XXI(a)

Details of Expenses in the nature of capital, personal, and advertisement expenditure

The auditor shall furnish the following details of the amount debited to the profit and loss account in the nature of capital, personal, and advertisement expenditure in the columnar form:

a) Capital Expenditure

b) Personal Expenditure

c) Advertisement expenditure in any souvenir, brochure, tract, pamphlet, or the like published by a political party

d) Expenditure incurred at clubs being entrance fees and subscriptions

e) Expenditure incurred at clubs being cost for club services and facilities used

f) Expenditure by way of penalty or fine for violation of any law for the time being force

g) Expenditure by way of any other penalty or fine not covered above

h) Expenditure incurred for any purpose which is an offence or which is prohibited by law

a) The expenditure incurred at clubs being “entrance fees and subscriptions” is clubbed with “expenditure incurred at clubs being cost for club services and facilities used” and reported together under this sub-clause.

(Note- These two expenses are to be separately reported as per the requirement of the “Guidance Note” on tax audit under section 44AB of the Income Tax Act.)

b) The “Penalty or fine for violation of any law for the time being force”, and “any other penalty or fine” are reported under this sub-clause.

c) The late filing fee of TDS return, paid during the year, is reported under this sub-clause, under the sub-heading “as any other penalty or fine not covered above”

(Note – The late filing fee under section 234E i.e. “Rs.200 per day” is not a penalty but is a late filing fee. Thus, the same is not required to be reported under this sub-clause.)

XXI(b)

Amount admissible under section 40(a)

The amount inadmissible under section 40(a):

i. as payment to non-resident referred to in sub-clause (i)

A. Details of payment on which tax is not deducted

I. date of payment

II. amount of payment

III. nature of payment

IV. name and address of the payee

B. Details of payment on which tax has been deducted but has not been paid during the previous year or in the subsequent year before the expiry of time prescribed under section 200(1)

I. date of payment

II. amount of payment

III. nature of payment

IV. name and address of the payee

V. amount of tax deducted

ii. as payment referred to in sub-clause (ia)

A. Details of payment on which tax is not deducted

I. date of payment

II. amount of payment

III. nature of payment

IV. name and address of the payee

B. Details of payment on which tax has been deducted but has not been paid on or before the due date specified in sub-section (1) of section 139

I. date of payment

II. amount of payment

III. nature of payment

IV. name and address of the payer

V. amount of tax deducted

VI. amount of (v) deposited, if any

iii. Under sub-clause (ic) (wherever applicable)

iv. Under sub-clause (iia)

v. Under sub-clause (iib)

vi. Under sub-clause (iii)

A. date of payment

B. amount of payment

C. name and address of the payee

vii. Under sub-clause (iv)

viii. Under sub-clause (v)

a) A consolidated sum in respect of “provision for various expenses” of “sundry parties” is reported. Instead of the date of crediting the amount of provision in the books of account, a random/dummy date is reported in many cases.

b) The reporting under this clause is required separately for each of the individual payee. However, the consolidated reporting for the heads under which tax is not deducted is done in certain instances.

c) The reporting of inadmissible amount on account of non-deduction of taxes for ‘resident’ (30%) as well as ‘non-resident payee’ (100%) are not appropriately reported under respective sub-clauses.

d) In various instances, it is seen that instead of reporting the details of “resident payee” the reporting details of “non-resident payee” are reported under 21(b)(ii)(A). Likewise, instead of reporting details of ‘non-resident payee’, details of ‘resident payee’ were reported under clause 21(b)(i)(A).

e) The complete address of the payee is not reported in many cases.

XXI(d)

Disallowance/deemed income under section 40A(3)

Disallowance/deemed income under section 40A(3):

A. On the basis of the examination of books of account and other relevant documents/evidence, whether the expenditure covered under section 40A (3) read with rule 6DD was made by account payee cheque drawn on a bank or account payee bank draft. If not furnish the following details in the columnar form:

a) Date of payment

b) Nature of payment

c) Amount

d) Name and Permanent Account Number or Aadhaar Number of the payee, if available

B. On the basis of the examination of books of account and other relevant documents/evidence, whether the payment referred to in section 40A(3) read with rule 6DD was made by account payee cheque drawn on a bank or account payee bank draft If not, please furnish the following details of the amount deemed to be the profits and gains of business or profession under section 40A(3A) in the columnar form:

a) Date of payment

b) Nature of payment

c) Amount

d) Name and Permanent Account Number or Aadhaar Number of the payee, if available

a) Where the reporting is done on the basis of certificate from the assessee, the fact is not reported as an observation in clause (3) of Form No. 3CA and clause (5) of Form No.3CB, as the case may be as required by the “Guidance Note”.

b) The observation/qualification under this clause is provided in the notes attached to Form No. 3CA. However, the same should be reported under clause (3) of Form No. 3CA and/or clause (5) of Form No.3CB, as the case may be as required by the Guidance Note.

XXI(g)

Particulars of Liability of Contingent nature

In various instances, it is seen that the reporting under this clause is done for the “provision” created in the Books of accounts while the Guidance Note requires only the liability of a contingent nature debited to the “profit and loss account” to be reported.

(Note – The contingent liabilities mentioned in the notes to account are not to be reported under this clause as they are not debited to the profit and loss account)

XXXI(a)

Details of Loan or deposit exceeding the limit specified in section 269SS

Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year:

i. name, address and permanent account number or Aadhaar Number (if available with the assessee) of the lender or depositor

ii. amount of loan or deposit taken or accepted

iii. whether the loan or deposit was squared up during the previous year

iv. maximum amount outstanding in the account at any time during the previous year

v. whether the loan or deposit was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account

vi. in case the loan or deposit was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank draft

a) The name of the person form whom the loan is taken is not mentioned in various instances.

b) The consolidated figures are reported mentioning “various parties” under this clause instead of details of loan received person-wise.

c) The language used in observation/qualification is seen to be copied from the Guidance Note. However, the same should be reframed as per the cirumstances.

XXXI(b)

Details of specified sum exceeding the limit specified in section 269SS

a) Particulars of each specified sum in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year:

i. name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the person from whom specified sum is received

ii. amount of specified sum taken or accepted

iii. whether the specified sum was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account

iv. in case the specified sum was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank draft

a) In various instances, the name of the person/concerns from whom loan is taken is not mentioned. However, the consolidated figures are reported mentioning ‘various parties’ under this clause instead of details of loan received person-wise.

b) The language used in observation/qualification is seen to be copied from the Guidance Note. However, the same should be reframed as per the circumstances.

XXXI(c)

Details of repayment of loan or deposit exceeding the limit specified in section 269T

a) Particulars of each repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T made during the previous year:

i. name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payee

ii. amount of the repayment

iii. maximum amount outstanding in the account at any time during the previous year

iv. whether the repayment was made by cheque or bank draft or use of electronic clearing system through a bank account

v. in case the repayment was made by cheque or bank draft, whether the same was repaid by an account payee cheque or an account payee bank draft.

a) The repayment of time deposits sich as fixed deposits/term loans reflecting in annual report are not reported under this clause.

b) The language used in observation/qualification is seen to be copied from the Guidance Note. However, the same should be reframed as per the circumstances.