Mistakes in filed income tax return of fy2016-17

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 October 2018 For F.Y.2016-17,in a proprietary concern, the balances reported to IT Dept of Debtors, Creditors & Bank as on 31-03-17 are wrong, also Tax Audit was conducted. Now, during finalization of Books for FY2017-18, mistakes were noticed. Now, what is solution(for income tax return and audit purpose)? Also, consider the consequences of solution on Previous Year Tax Audit Report and Prospective Scrutiny of FY2016-17 and risk on auditor of FY2017-18( New Auditor Appointed)

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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06 October 2018 File revised return with revised tax audit report. No scrutiny in case of revision.
No risk on new auditor as mistakes corrected during the year.

Querist : Anonymous

Querist : Anonymous (Querist)

08 October 2018 Thank you so much sir. But, what to do if previous auditor refuses to revise his tax audit report. Is it fair enough if ONLY assessee revises Income Tax Return? and the Next Income tax auditor considers the revised Books of accounts for Next Year Audit Purpose?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 If there are mistakes in the filed Income Tax Return (ITR) for FY 2016-17, and the Tax Audit Report (TAR) for that period is also incorrect, here's a detailed approach to address the situation and its consequences:

### **1. **Revising the Income Tax Return**

- **File a Revised Return:** If you’ve identified mistakes in the ITR for FY 2016-17, you should file a revised return using the correct figures. The revised return should be filed before the expiry of the assessment year or within the time frame allowed for revision.

**Steps to File a Revised Return:**
- Log in to the Income Tax e-filing portal.
- Go to the ‘e-File’ menu and select ‘Income Tax Return.’
- Choose the assessment year (2017-18 for FY 2016-17).
- Select ‘Revised Return’ as the type of return.
- Enter the correct details and submit the revised return.
- Ensure that the revised return contains the correct balances of debtors, creditors, and bank.

### **2. **Implications for Tax Audit Report**

- **Auditor’s Responsibility:** The Tax Audit Report for FY 2016-17 will reflect the financial statements as they were presented. If there are mistakes in the TAR, ideally, the previous auditor should revise it to reflect the corrected figures. However, if the previous auditor refuses, the revision of the ITR alone will not automatically amend the TAR.

- **Impact on New Auditor:** The new auditor for FY 2017-18 will rely on the revised financials for FY 2016-17, but they may not be able to amend the previous year's TAR. They will audit the current year’s books based on the corrected opening balances from the revised ITR.

### **3. **Consequences and Considerations**

- **For the Previous Year (FY 2016-17):**
- **Income Tax Department:** The revised return should be accepted by the Income Tax Department if filed correctly and within the permissible period.
- **Tax Audit Report:** If the previous auditor refuses to revise the TAR, you might need to provide an explanation in your current year’s audit report or during scrutiny if questioned about the discrepancies.

- **For the Current Year (FY 2017-18):**
- **Audit by New Auditor:** The new auditor should review the opening balances and accounting corrections based on the revised ITR. They should be informed about the previous year’s corrections and discrepancies.
- **Scrutiny Risk:** The Income Tax Department may scrutinize the revised figures and the reasons for the changes. Proper documentation and a clear explanation will be necessary to address any queries.

### **4. **Dealing with the Previous Auditor**

- **Document Communication:** Keep records of all communications with the previous auditor. If they refuse to revise the TAR, document your requests and their responses.

- **Report to ICAI:** If necessary, you can report the refusal to the Institute of Chartered Accountants of India (ICAI) if it affects the correctness of financial statements and tax compliance.

### **5. **Future Precautions**

- **Improve Processes:** Implement checks and controls to ensure accuracy in financial reporting and compliance in the future.
- **Early Review:** Conduct periodic reviews of financial statements and tax audits to catch and correct errors promptly.

### **Summary**

- **Revise the ITR** for FY 2016-17 to correct the errors.
- **Document the discrepancies** and the reasons for them.
- **Inform the new auditor** for FY 2017-18 about the revisions and corrections.
- **Seek resolution** from the previous auditor if necessary, and document all communications.
- **Prepare for potential scrutiny** by maintaining clear and accurate records.

Ensuring transparency and maintaining proper documentation will help mitigate risks and provide a clear trail of corrections and actions taken.