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Home » Blog » Tax Audit: Detailed Analysis of Clause 42 to Clause 44 | As per ICAI’s Guidance Note

Tax Audit: Detailed Analysis of Clause 42 to Clause 44 | As per ICAI’s Guidance Note

  • Account & Audit|Blog|Tax Audit Week|
  • 9 Min Read
  • By Taxmann
  • |
  • Last Updated on 31 August, 2022

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Tax Audit; Clause 42 to 44

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.

Taxmann's Tax Practice Manual Book

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.

S. No.  Transaction

Value

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
12

 

 

 

 

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:

    1. The Central Government, the State Governments and the Consular Offices.
    2. 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

Reporting Person

1
    • Cash payment made for the

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.

    • Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to Rs.50 lakh or more in a financial year, in or from one or more current account of a person.

 

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.
    • Banks or banking institution to which the Banking Regulation Act, 1949 is applicable
    • Post office referred in Indian Post Office Act, 1898
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.
    • Banks or banking institution to which the Banking Regulation Act, 1949 is applicable
    • Post office referred in Indian Post Office Act, 1898
    • Non-banking financial company which holds a certificate to hold or accept deposit from public
    • Nidhi as in section 406 of the Companies Act, 2013.
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.
    • Banks or banking institutions to which the Banking Regulation Act, 1949 is applicable
    • any other company or institution issuing the credit card.
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 –

    • Rs.12,50,000 or more, in one or more current account of an individual, or
    • Rs.2,50,000 or more, in one or more account of an individual, other than a current account.

 

    • Banks or banking institutions to which the Banking Regulation Act, 1949 is applicable
    • Post office referred in Indian Post Office Act, 1898
13 Cash deposits during the period 1st of April, 2016 to 9th November, 2016 that are reportable in the serial number 12 above

 

    • Banks or banking institutions to which the Banking Regulation Act, 1949 is applicable
    • Post office referred in Indian Post Office Act, 1898

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.

Read More About Income Tax Rules Here

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.  

Tax Audit Book by Srinivasan Anand G.

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

Dive Deeper:
Detailed Analysis of Clause 9 to 12
Detailed Analysis of Clause 13 and Clause 14
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

Tags:Clause 42 Clause 42 to Clause 44 Clause 43 Clause 44

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

12 thoughts on “Tax Audit: Detailed Analysis of Clause 42 to Clause 44 | As per ICAI’s Guidance Note”

  1. JAGDISH D SHET says:
    January 16, 2022 at 3:08 pm

    Excellent write up. Detailed information and explanation provided. Covers all clauses in detail.

    Reply
  2. anand says:
    May 30, 2022 at 8:28 am

    Clause 44 data for F.Y. 2021-22 return or F.Y. 2020-21 return ?

    Reply
    1. Taxmann says:
      June 17, 2022 at 5:13 pm

      Clause 44 of Form No. 3CD (Tax Audit Report) requires a “Break-up of total expenditure of entities registered or not registered under the GST”. This clause has been kept in abeyance till 31st March 2022.

      Reply
      1. alok mishra says:
        June 22, 2022 at 1:20 pm

        kindly reply in simple terms whether clause 44 reporting in required in 3cd for FY 21-22 or not

        Reply
        1. Laxmikant Kabra says:
          July 7, 2022 at 12:35 pm

          Yes Applicable for FY 2021-22

          Reply
      2. hozefa says:
        June 22, 2022 at 6:04 pm

        please only clear reply .

        applicable in FY 2021-22 Audit Report or not ?

        Reply
  3. Neelakanta says:
    June 20, 2022 at 6:20 pm

    Hi all i requesting to u all i need one example for tax audit clause 44.

    Reply
  4. varsha says:
    June 23, 2022 at 4:42 pm

    whether applicability of clause 44 and 30c is deferred till 31.03.2022 or will applicable for f.y. 2021-22?

    Reply
    1. Zinobia Movdawala says:
      August 8, 2022 at 10:58 am

      Deferment was till 31.03.2022. Hence clause 44 reporting is applicable for all TAR certified after 01.04.2022 i.e. Ay 2022-23 onwards

      Reply
  5. CA Sanjonaa Shetty says:
    June 27, 2022 at 11:53 am

    Hi All,
    As per my view The CBDT Circular No. 5/2021 dated 25.03.2021 states that the reporting under clause 30C and clause 44 of the Tax. Audit Report shall be kept in abeyance till 31st March, 2022 .
    Hence from the above statement it appears that reporting was kept in abeyance if tax audit report filed by 31.03.22.
    Thus from 01st April 2022 onwards reporting of clause 30 c and clause 44 will be applicable for F.Y 21-22 ,subject to any further circular is issued on extending the above reporting requirement.
    Thank you.

    Reply
  6. shrikant jain says:
    June 29, 2022 at 1:45 pm

    sir is purchases of goods is also included in word expenditure ?

    Reply
  7. Maxine says:
    August 5, 2022 at 1:50 am

    Tһanks foг finally talking about > Tax AuԀіt: Detɑileԁ Analysis of Clause
    42 to Clause 44 | As per ICᎪI's Guidance Note havilland

    Reply

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied
View all posts by Taxmann

Author TaxmannPosted on January 12, 2022August 31, 2022Categories Account & Audit, Blog, Tax Audit WeekTags Clause 42, Clause 42 to Clause 44, Clause 43, Clause 44

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