FAQs On Tax Audit Report

Q. No.

Relevant ITR Types

Description

Response

1

ITR-3, 5 & 6 -PFA/Defective

How much of the sum received from employees and not credited to the employees account on or before the due date as per the section 36(1) (va) is required to be disallowed?

Taxpayers are required to deposit the contributions received from employees for various funds within the due date as per section 36(1) (va). Further the details of the due date as per the respective Acts need to be reported correctly by the Auditor in clause 20(b) of Form 3CD. Any payment made

beyond the due date as per the Act and reported in the Audit report is required to be disallowed u/s 36(1) (va).

2

ITR-3, 5 & 6 -PFA/Defective

How to disclose the Dividend income received u/s. 2(22)(e)?

Details of dividend income received u/s. 2(22)(e) with in the financial year is required to be disclosed in the clause 36A of form 3CD. Further the same needs to be offered in Schedule OS of ITR at appropriate places.

3

ITR-3, 5 & 6 -PFA/Defective

How to disclose the effect on profit due to ICDS & the method of valuation of stock specified under section 145A?

In the audit report, auditor is required to report the "increase in profit", "decrease in profit", and "net effect" separately in the columns provided at Sl. No. 13(e) and 14(b). In the return of income at schedule ICDS, the "net impact" on profit due to ICDS adjustments shall be shown separately against each line item. In addition, at schedule OI, Sl. No. 3a the sum of all the positive items of 13(e) and 14(b) shall be shown and at Sl. No. 3b the sum of all the negative items of 13(e) and 14(b) shall be shown. The net difference of 3(a) minus 3(b) is not expected to be less than the difference of all the positive and negative items of 13(e) and 14(b). It is seen that some of the adjustment items of schedule BP are a repeat item in ICDS adjustments also and are separately identifiable. Example. "Adjustments due to depreciation". The impact of such adjustments having dual/multiple impact may be reported using other appropriate columns of schedule BP, so as to nullify the impact of dual/ multiple adjustment.

4

ITR-3, 5 & 6 -PFA/Defective

How to disclose "Amount debited to profit and loss account and disallowable u/s. 37" in income tax return?

In the audit report, auditor is required to report the amount disallowable u/s. 37 at the clause 21(a) and 21(g) of form 3CD. Taxpayer is required to report at least the same amount disallowable u/s. 37 in Sl. No. 7j of Part A - OI of ITR which is reported at the clause 21(a) and 21(g) of form 3CD. In case, the amount reported in ITR in Sl.No. 7j of PART A - OI of ITR is less than the amount disallowable u/s. 37 at the clause 21(a) and 21(g) of form 3CD then the difference will be added to the total income of the taxpayer.

5

ITR-3, 5 & 6 -PFA/Defective

How to disclose "Amount disallowed u/s. 43B in preceding previous year but allowable during previous year" in return of income?

In the audit report, auditor is required to report the amount disallowed u/s. 43B in preceding previous year but allowable during previous year at the clause 26(A)(a) of form 3CD. Taxpayer is required to report the same amount disallowed u/s. 43B in the preceding previous year but allowable during previous year in Sl. No. 10i of Part A - OI of ITR which is reported at the clause 26(A)(a) of form 3CD. In case the amount reported in ITR in Sl.No. 10i of PART A - OI of ITR is more than the amount disallowed u/s. 43B in preceding previous year but allowable during previous year at the clause 26(A)(a) of form 3CD then the difference will be added to the total income of the taxpayer.

6

ITR-3, 5 & 6 -PFA/Defective

How to disclose "Amount debited to profit and loss account and disallowed u/s. 43B" in return of income?

In the audit report, auditor is required to report the amount disallowed u/s. 43B at the clause 26(B)(b) of form 3CD. Taxpayer is required to report at least the same amount disallowed u/s. 43B in Sl. No. 11i of Part A - OI of ITR which is reported at the clause 26(B)(b) of form 3CD. In case, the amount reported in ITR in Sl.No. 11i of PART A - OI of ITR is less than the amount disallowed u/s. 43B at the clause 26(B)(b) of form 3CD then the difference will be added to the total income of the taxpayer.

7

ITR-3, 5 & 6 -PFA/Defective

How to disclose "Amount not credited to profit and loss account" in return of income?

In the audit report, auditor is required to report the amount not credited to profit & loss account at the clause 16(a) to 16(d)of form 3CD. Taxpayer is required to report at least the same amount not credited to profit & loss accounting Sl. No. 5(a) to 5(d) of Part A - OI of ITR which is reported at the clause 16(a) to 16(d) of form 3CD. In case, the amount reported in ITR in Sl.No. 5(a) to 5(d) of PART A - OI of ITR is less than the amount not credited to profit & loss account at the clause 16(a) to 16(d) of form 3CD then the difference will be added to the total income of the taxpayer.