Tax Audit: Detailed Analysis of Clause 42 to Clause 44 | As per ICAI’s Guidance Note
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- Last Updated on 16 March, 2022
Income-tax law requires the assessee to get his books of accounts audited in pursuance of the requirement under Section 44AB of The Income Tax Act, 1961. The Chartered Accountant conducting the tax audit is required to give his findings, observations, etc., in the form of an audit report at the e-filing portal of Income-tax in Form No. 3CA/3CB and 3CD. In this story, we would discuss the reporting requirement of clauses 42 to 44, which are contained in Part B of Form 3CD.
1. Clause 42
- Whether the assessee is required to furnish statement in Form No.61 or Form No. 61A or Form No. 61B? (Yes/No)
- If yes, please furnish:
|Income tax Department Reporting Entity Identification Number||Type of Form||Due date of furnishing||Date of furnishing, if furnished||Whether the form contains information about all details/transactions which are required to be reported. If not, please furnish the list of details/transactions which are not reported|
For reporting under this clause, an auditor shall:
- Verify the books of account to identify the transaction required to be reported under rules 114B, 114E, 114F, 114G and 114H of Income Tax Rules.
- Check the Form 61/61A/61B and match them with the information available at the portal
- Reconcile the transactions reported in such forms with the books of account and accordingly, provide the detail of transactions that are not reported in the prescribed form.
1.1 Form 61
When the assessee undertakes any of the below-mentioned transactions (as specified under Rule 114B of the Income-tax Rules) without obtaining the PAN of the person (not being a company or firm), then, the assesse is required to collect a declaration in Form 60 from that person and file Form 61 which contain particulars of declaration received in Form No. 60.
|1||Sale or purchase of Other than two-wheelers Motor vehicle||Any value|
|2||Opening other than time deposit bank accounts with a banking company.||Any Value|
|3||All transactions of application for credit card or debit card||Any Value|
|4||Demat account opening||Any Value|
|5||Payment to Hotel/restaurant is required if audited u/s 44AB is required||Amount in cash > 50,000.|
|6||Payment for foreign country travel or payment for foreign currency purchase, if audited u/s 44AB is required.||Amount in cash > 50,000.|
|7||Purchase of Mutual fund units||Amount > 50,000|
|8||Payment for acquiring debentures or bonds issued by a company or institution.||Amount > 50,000|
|9||Payment for purchase of RBI issued Bonds||Amount > 50,000|
|10||Cash deposit during any one day with a banking company or a co-operative bank or post office||Amount > 50,000 during any one day|
|11||Purchase of bank drafts or pay orders or banker’s cheques from a banking company or a co-operative bank||Amount > 50,000 during any one day|
|A time deposit||50000/-
each transaction or 5 Lacs in aggregate during FY
|(i) with a banking company or a co-operative bank|
|(ii) a Post Office|
|(iii) a Nidhi company|
|(iv) a non-banking financial company|
|13||Payment in cash or by way of a bank draft or pay order or banker’s cheque for one or more pre-paid payment instruments||Payment in cash or by way of a bank draft or pay order or banker’s cheque of an amount > 50,000 in aggregate during a financial year|
|14||Payment of life insurance premium to an insurer||Amount aggregating > 50,000 in a financial year|
|15||sale or purchase of securities (other than shares)||Amount > 1,00,000 per transaction|
|16||Sale or purchase of unlisted shares of a company||Amount > 1,00,000 per transaction|
|17||Sale or purchase of any immovable property||Amount exceeding ten lakh rupees or valued by stamp valuation authority referred to in section 50C of the Act at an amount exceeding ten lakh rupees|
|18||Sale/purchase of goods/services, by any person, of goods or services of any nature other than those specified at Sl. Nos. 1 to 17 of this Table, to be filed only by the assessee who is required to get his accounts audited u/s 44AB||Amount > 2,00,000 per transaction|
The provisions of Rule 114B does not apply to the following class or classes of persons:
- The Central Government, the State Governments and the Consular Offices.
- the non-residents referred to in clause (30) of section 2 of the Act in respect of the following transactions referred in the table above:
- Point 3- All transactions of application for a credit card or debit card
- Point 5- Payment to Hotel/restaurant is required if audited u/s 44AB is required
- Point 6- Payment for foreign country travel or payment for foreign currency purchase, if audited u/s 44AB is required
- Point 9- Payment for purchase of RBI issued Bonds
- Point 11- Purchase of bank drafts or pay orders or banker’s cheques from a banking company or a cooperative bank
- Point 13- Payment in cash or by way of a bank draft or pay order or banker’s cheque for one or more pre-paid payment instruments
- Point 18-Sale/purchase of goods/services, by any person, of goods or services of any nature other than those specified at Sl. Nos. 1 to 17 of this Table, to be filed only by the assessee who is required to get his accounts audited u/s 44AB
1.2 Form 61A
This form contains details of below mentioned specified financial transactions (SFT) (as mentioned in Rule 114E) undertaken during a particular financial.
|S. No||Value and Nature of transaction||
i. purchase of pay orders or bank drafts or banker’s cheque of an amount that aggregates to Rs.10 lakh or more in one financial year.
ii. purchase of prepaid instruments that has been issued by the Reserve Bank of India that aggregate to Rs.10 lakh or more during a financial year.
|Banks or banking institution to which the Banking Regulation Act, 1949 is applicable|
|2||Cash deposits aggregating over Rs.10 lakh in one financial year, and in one or more accounts (other than a current account and time deposit) of a person.||
|3||One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.||
|4||Payments made by any person of an aggregate amount of Rs.1 lakh rupees or higher in cash, or Rs.10 lakh by other modes against bills raised through one or more credit cards, in one financial year.||
|5||receipt of an amount aggregating to Rs. 10 lakh or more from any person in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal).||A company or institution issuing bonds or debentures.|
|6||receipt of an amount aggregating to Rs. 10 lakh or more from any person in a financial year for acquiring shares (including share application money) issued by the company.||A company issuing shares.|
|7||buyback of shares from any person (other than the shares bought in the open market) for an amount aggregating to Rs.10 lakh or more in a financial year.||A company listed on a recognized stock exchange making buyback|
|8||Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).||A trustee of Mutual Funds or such other person managing the affairs of the mutual fund as may be duly authorized by the trustee.|
|9||receipt from the sale of foreign currency or expense in such currency through a debit or credit card or through the issue of travellers cheque or draft or any other instrument of an amount aggregating to Rs. 10 lakh or more during a financial year.||Authorized Dealer|
|10||Sale or purchase of immovable property by an individual for an amount of Rs.30 lakh or more or valued by the stamp valuation authority referred to in section 50C of the Act at Rs. 30 lakh or more.||Inspector-General or Registrar or Sub-Registrar appointed under the act.|
|11||receipt of cash exceeding Rs.2 lakh for sale, by an individual, of services or goods of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)||any person who is liable for audit under section 44AB of the Act.|
|12||Cash deposits during the period November 9, 2016 to December 30, 2016 that aggregates to –
|13||Cash deposits during the period 1st of April, 2016 to 9th November, 2016 that are reportable in the serial number 12 above
1.3 Form 61B
Reporting entity or person is required to furnish a statement of reportable account in accordance with FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) for a calendar year (in Form 61B) with the Income tax Department as per the provisions of section 285BA of the Income-tax Act 1961. The auditor should be aware of provisions of Rule 114F to 114H for the same.
2. Clause 43
- Whether the assessee or its parent entity or alternate reporting entity is liable to furnish the report as referred to in sub section 2 of section 286? (Yes/No)
- If yes, please furnish the following details:
- Whether report has been furnished by the assessee or its parent entity or an alternate reporting entity
- Name of parent entity
- Name of the alternate reporting entity(if Applicable)
- Date of Furnishing the Report
For reporting under this clause, the auditor should check the applicability of section 286 and related notifications and circulars and where the same is applicable then, reports are to be furnished in Forms 3CEAC to Form 3CEAE.
Also, obtain a necessary certificate from the assessee in respect of the constitution of the international group, entities that are resident in India and not resident in India and entity if appointed as the alternate reporting entity.
Here, the auditor is not required to comment upon the completeness or correctness of the report filed under section 286(2).
This clause requires reporting of the following details regarding sub-section 2 of section 286 where the same is applicable.
|Whether report has been furnished by the assessee or its parent entity or an alternate reporting entity||Name of parent entity||Name of the Alternate reporting entity(if Applicable)||Date of Furnishing the Report||Expected Date||Remarks if any:|
2.1 Sub-section 2 of section 286
Furnishing of the report in respect of international group
Every parent entity or the alternate reporting entity, resident in India, shall, for every reporting accounting year, in respect of the international group of which it is a constituent, furnish a report, to the prescribed authority [within a period of twelve months from the end of the said reporting accounting year], in the form and manner as may be prescribed.
3. Clause 44
Break-up of total expenditure of entities registered or not registered under the GST (This Clause is kept in abeyance till 31st March, 2022).
This clause requires reporting of the following details regarding Break-up of total expenditure of entities registered or not registered under the GST (This Clause is kept in abeyance till 31st March 2022 vide CBDT Circular No. 5/2021 dated 25.03.2021).
Total Amount of expenditure incurred during the year
|Expenditure in respect of entities registered under the GST||Expenditure relating to entities not registered under GST
|Relating to the goods or services exempt from GST||Relating to the entities falling under the composition scheme||Relating to the other registered entities||
Total Payment to Registered entities
Detailed Analysis of Clause 9 to 12
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Detailed Analysis of Clause 15 and Clause 16
Detailed Analysis of Clause 17 to Clause 19
Detailed Analysis of Clause 20 and Clause 21
Detailed Analysis of Clause 22 to Clause 25
Detailed Analysis of Clause 26 to Clause 29
Detailed Analysis of Clause 30 to Clause 30C
Detailed Analysis of Clause 31
Detailed Analysis of Clause 32 to Clause 34
Detailed analysis of Clause 35 to Clause 38
Detailed Analysis of Clause 39 to Clause 41
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