Important Keyword: Form 3CA, Form 3CB, Form 3CD, Tax Audit, Tax Audit Report.
Table of Contents
What is a Tax Audit Report?
Tax Audit, as per Section 44AB of the Income Tax Act, is mandated for businesses or professions under certain circumstances. It involves a thorough examination of the books of accounts by a practicing Chartered Accountant to ensure accurate calculation of taxable income in compliance with tax laws.
For assesses subject to Tax Audit, the following steps are essential:
- Appointment of a Chartered Accountant: The taxpayer engages a practicing Chartered Accountant to conduct the audit of the books of accounts.
- Submission of Audit Report: The Chartered Accountant submits the Tax Audit Report in either Form 3CB-3CD or Form 3CA-3CD, depending on the nature of the audit.
- Filing of Income Tax Return: Subsequently, the taxpayer files the Income Tax Return using Form ITR 3, providing all necessary financial information and disclosures.
Tax Audit Report – Form 3CA, 3CB, 3CD, 3CE:
The Tax Audit Report comprises specific details as prescribed by the Income Tax Department. Form 3CA and 3CB contain information related to the auditor’s findings, while Form 3CD includes detailed particulars of the tax audit.
| Form Name | Description |
| Form 3CA-3CD | Tax Audit Report in the case of a taxpayer having business or profession income who is mandatorily required to get accounts audited under any other Act (other than Income Tax Act) |
| Form 3CB-3CD | Tax Audit Report in the case of a taxpayer having business or profession income who is not required to get accounts audited under any other Act (other than Income Tax Act) |
| Form 3CE | A Tax Audit Report in the case of a taxpayer who is a Non-Resident or Foreign Company receiving a royalty or fee for technical services |
Filing Tax Audit Reports has evolved over time, with changes in procedures and deadlines. Here’s how it’s done:
Up to FY 19-20:
- Taxpayer adds CA from their Income Tax Account.
- CA uploads Profit & Loss Statement, Balance Sheet, and Tax Audit Report from their income tax account.
- Taxpayer approves the Tax Audit Report.
- Taxpayer files ITR using Digital Signature Certificate (DSC).
FY 20-21 Onwards:
- Taxpayer adds CA from their Income Tax Account.
- Taxpayer uploads Profit & Loss Statement and Balance Sheet from their income tax account.
- CA reviews and approves the Profit & Loss Statement and Balance Sheet.
- CA files the Tax Audit Report.
- Taxpayer approves the Tax Audit Report.
- Taxpayer files ITR using Digital Signature Certificate (DSC).
Due Date to Upload Tax Audit Report: For FY 2020-21 (AY 2021-22), the due date to file the Tax Audit Report is 15th Feb 2022. Additionally, the due date to file the ITR when tax audit is applicable is 15th March 2022.
These steps ensure timely compliance with tax regulations and facilitate the smooth filing of Tax Audit Reports and Income Tax Returns.
he Tax Audit Report comprises two main parts: Form 3CA/3CB and Form 3CD. Let’s delve into what each part entails:
- Form 3CA/3CB:
- This part of the report contains details of the auditor.
- It serves as a statement with information regarding the auditor’s involvement in the audit process.
- Form 3CA is applicable when the audit is conducted under certain sections of the Income Tax Act, while Form 3CB is used when the audit is not required under any specific section.
- Form 3CD:
- Form 3CD is the crux of the Tax Audit Report, containing particulars required to be reported as per Sec 44AB of the Income Tax Act.
- It includes various details and disclosures pertaining to the audited entity’s financial affairs, transactions, and compliance with tax laws.
- This statement plays a crucial role in ensuring that the audit is conducted in accordance with the provisions of Sec 44AB and provides comprehensive insights into the audited entity’s financial position and tax compliance.
| Clause | Information |
| Point no.1 | Name, Address & PAN of taxpayer Name of Auditor Law under which accounts are audited Date of Audit Report Period of P&L Account Date of the Balance Sheet |
| Point no.2 | A declaration that the Audit Report Form 3CD is attached |
| Point no.3 | Audit Observations or Qualifications as per Form 3CD |
| Point no.4 | Name, Address, Membership Number of Auditor Place & Date of Sign Stamp & Seal of Auditor |
Form 3CB
| Clause | Information |
| Point no.1 | Date of Balance Sheet and P&L Statement |
| Name, Address, and PAN of Taxpayer | |
| Point no.2 | Address where books of accounts are kept |
| Address of branches (if books of accounts are kept at branches) | |
| Point no.3 | Observations, Comments, Discrepancies, and Inconsistencies reported by the auditor |
| Declaration by the auditor of: * Obtaining all information required for audit * Confirming that the business has maintained proper books of accounts * Reporting that Balance Sheet and P&L Account reflects a true and fair view of the business | |
| Point no.4 | Declaration of attaching Form 3CD along with the Audit Report Form 3CB |
| Point no.5 | Details of the Auditor – Name, Address, Membership Number, Firm Registration Number, Date, and Place |
Form 3CD
Form 3CD serves as a comprehensive statement filed by the auditor, containing 44 distinct clauses that report various information related to the business and its transactions for the relevant financial year. This form is meticulously crafted by the Income Tax Department to ensure standardized reporting and facilitate accurate assessment of tax liabilities.
Form 3CE
| Clause | Information |
| Point no.1 | Name, Address & PAN of Non-Resident |
| Financial Year | |
| Point no.2 | Declaration of obtaining all information and explanations for audit |
| Point no.3 | Certification on Permanent Establishment or Fixed Place of a profession in India |
| Point no.4 | Declaration of income from royalty or fees for technical services under Section 44DA |
| Point no.5 | Signature and Name of Auditor with stamp and seal |
In addition to Form 3CE, details of income from royalty or fees for technical services should be mentioned in an Annexure.
Penalty for not filing Form 3CD.
Failure to file Form 3CD as required under Section 44AB of the Income Tax Act may lead to the imposition of penalties by the Assessing Officer (A.O.) under Section 271B. The penalty amount is determined based on the following criteria:
- 0.5% of Total Sales/Turnover of the business or 0.5% of Gross Receipts of the profession, whichever is lower.
- INR 1,50,000.
The penalty imposed will be the lower of the two calculated amounts. However, if the assessee can provide reasonable cause for their failure to undergo a tax audit, the A.O. may choose not to impose the penalty.
This penalty provision underscores the importance of complying with tax audit requirements and filing Form 3CD in a timely and accurate manner. Failure to do so not only incurs financial penalties but also reflects negatively on the taxpayer’s compliance record with the tax authorities. Therefore, it is essential for taxpayers to ensure proper adherence to audit obligations to avoid any adverse consequences.
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Official Income Tax Return filing website: https://incometaxindia.gov.in/
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