Income Tax audit under section 44AB

The word significance of the expression “audit” is check, review, examination, and so on. There are different sorts of audit mentioned under various laws like company law requires an company audit, cost accounting law requires an cost audit, and so forth. The Income-Tax Law requires the citizen to get the audit of the records of his business/calling from the viewpoint of Income-Tax Law.

Section 44AB states the provisions identifying with the class of citizens who are needed to get their accounts audited from a contracted bookkeeper. The audit under Section 44AB intends to determine the consistency of different provisions of the Income-Tax Law and the satisfaction of different prerequisites of the Income-Tax Law. The audit led by the sanctioned bookkeeper of the accounts of the citizen in compatibility of the necessity of Section 44AB​  is called Tax Audit.

What is Tax Audit?

As the actual name suggests, tax audit is an assessment or survey of records of any business or profession completed by citizens from a income tax perspective. It makes the course of income calculation for documenting of return of income simpler.

Assessment and examination of books of accounts of an association conveying business or profession are called Tax Audit. Tax audit helps in the review of transactions identified with pay, costs, allowances, and tax of the company. It backs out the most common way of filing income tax return for taxation purposes. A tax audit is performed by a sanctioned bookkeeper and answered to the income tax department division in a prescribed format.

A citizen is needed to have a tax audit completed if the business, turnover or gross receipts of a business surpass Rs 1 crore and Profession surpasses Rs. 50 Lakhs in the financial year. Section 44AB of the Income Tax Act, 1961 sets out specific conditions for relevance of tax audit in the arrangements of Section 44AB(a); Sec 44AB(b); Sec 44AB( c) and Sec44AB(d).

Objective of Tax Audit

The significant objectives for tax audit are:

• Legitimate upkeep of books of the accounts without fraud exercises and confirmation of the same by an auditor.
• For revealing disparities that are noted by legitimate assessment of the books of accounts.
• For revealing different data, for example, tax deduction, consistency with compliance to the provisions of Income Tax law, etc.
• Calculation of tax and deductions turns out to be simple with the auditing.
• The significant task is to check the data recorded in the income tax report with respect to pay, tax, and deductions by the citizen.

Income tax audit under Section 44 AB of Income Tax Act, 1961

The provisions identified with tax audit are expressed under Section 44AB in the Income Tax Act 1961. This segment mirrors the standards to keep up with books of accounts and other monetary records by the citizen appropriately. This aids in keeping up with complete data in regards to tax, pay, and deductions of the citizen. The purpose of finishing a tax audit is to check the precision of the data given by the assessee in regards to his tax and income. This part helps in the decrease of fraud cases. The audit is led by relevant authorities or by a practicing sanctioned bookkeeper. The audit report is accounted for by the income tax division alongside the annual income tax return.

The report that shows the final product of the whole audit strategy is called a audit report. The audit report mentioned under Rule 6G of the Income Tax Rules. The audit report is ready and electronically recorded by a contracted bookkeeper. The tax auditor furnishes the audit report as indicated by the points of interest in Form 3CD.

The assessment reviewer will outfit the report in an appropriate way either in Form 3CA or Form 3CB in after cases:

• Form 3CA is arranged when it is obligatory to get books of accounts inspected under some other law for an assessee who is carrying on a business or profession.
• Form 3CB is arranged when it isn’t obligatory to get books of accounts inspected under some other law for an assessee who is carrying on a business or profession.

Who is eligible under Section 44AB to audit Tax?

​​​According to Section 44AB, following people are obligatorily needed to get their accounts audited:

• An individual carrying on business, if his absolute sales, turnover or gross receipts (all things considered) in business for the year surpass or surpasses Rs. 1 crore. This provision is not applicable to the individual, who settles on presumptive tax scheme under Section 44AD​ and his all out sales or turnover doesn’t surpasses Rs. 2 crores.

Note: as far as possible, for an individual carrying on business, is expanded from Rs. 1 Crore to Rs. 10 crore on the off chance that when cash receipt and payment made during the year doesn’t surpass 5% of complete receipt or payment, by and large. As such, over 95% of the deals ought to be done through banking channels.

• An individual carrying on profession, on the off chance that his gross receipts in profession for the year surpass Rs. 50 lakhs.
• An assessee who pronounce benefit for any earlier year as per Section 44AD​ and he diminishes benefit for any of one 5 evaluation year pertinent to the earlier year succeeding such earlier year lower than the profit figured according to Section 44AD​ ​ and his income surpasses the sum which isn’t chargeable to tax.
• Assuming a qualified assessee quits the possible tax scheme, inside the previously mentioned period, he can’t decide to return to the presumptive tax scheme conspire for a time of five evaluation years from there on.

Forms to be submitted for income tax audit under section 44AB

Under Section 44AB, the accompanying forms are needed to be utilized by the individual or individual being referred to when an audit is led on their accounts. These forms are explicitly referenced in Rule 6G of the Income Tax Act concerning income tax audit led according to Section 44AB.

For people carrying on a business or a profession, and whose accounts are to be audited according to the provisions expressed under any sort of law, then, at that point, the forms referenced beneath are needed to be utilized:

• Form Number 3CA – Audit Form
• Form Number 3CD – Statement showing important particulars

For people or people whose records are not needed to be audited according to the provisions expressed under any sort of law, except for income tax laws, then, at that point, the forms referenced underneath are needed to be utilized:

• Form Number 3CB – Audit Form
• Form Number 3CD – Statement showing important particulars.

Non-Compliance of Section 44 AB

​As indicated by Section 271B, if any individual who is needed to consent to Section 44AB neglects to get his accounts audited in regard of any year or a long time as needed under Section 44AB  such report as needed under Section 44AB​, the Assessing Officer might force a penalty. The penalty will be lower of the accompanying sums:

• 0.5% of the absolute sales, turnover or gross receipts, all things considered, in business, or of the gross receipts in calling, in such year or a long time.
• Rs.1,50,000.

Nonetheless, as per Section 271 B, no penalty will be forced assuming sensible reason for such disappointment is stated.

Up until this point, the reasonable causes that are acknowledged by Tribunals/Courts are:

• Normal Calamities
• Resignation of the Tax Auditor and Consequent Delay
• Work issues like strikes, lock-outs for a lengthy period
• Loss of Accounts due to circumstances outside the ability to control of the Assesses
• Actual failure or passing of the partner responsible for the accounts.

Final Word

In the event that you are a taxpayer, you need to conform to the provisions of Section 44AB of the Income Tax Act 1961. This section expresses that every one of the taxpayers needs to get audit report outfitted subsequent to directing an audit for your books of accounts. This is to really mirror the income-related exercises, deductions and taxes of the citizens.