Tax audit u/s 44ab simplified

CA Pallav Singhania (IT System Auditor) (33362 Points)

01 November 2013  

Is 44AB Audit Mandatory for all?

44AB Audit is not mandatory for all. You need to get your accounts audited, only if you satisfy any one of the following conditions:

  1. If the total sales, turnover or gross receipts of your Business exceeds Rs.1 Crore for the financial year ending 31.03.2013 (Rs.60 Lakhs for the financial year ending 31.03.2012 and Rs.40 Lakhs for any other financial year ending before 31.03.2012), or
  2. gross receipts of your profession, (e.g. Doctors, Engineers etc.) exceeds Rs.25 Lakhs for the financial year ending 31.03.2013 (Rs.15 Lakhs for the financial year ending 31.03.2012 and Rs.10 Lakhs for any other financial year ending before 31.03.2012), or
  3. if you carry on a business & claim lower profits and gains under any of the sections 44AD, 44AE, 44BB, 44BBB.

 

44AB Audit Due date

The due date for getting your accounts audited by an accountant for the previous year is, 30th September of the assessment year.

For Example if your Business Income exceeds 60 Lakhs, for the previous year 2012-13 (i.e. from 01.04.12 to 31.03.2013, then the due date for tax audit is 30.09.2013.{increased to 31th Oct}

 

Who can perform 44AB Audit?

Only a Chartered Accountant registered with the Institute of Chartered Accountants of India as full time practicioner is eligible to conduct 44AB Audit.

 

Let's get ready for Tax Audit

If you know what your auditor is about to look in to your books of accounts, then it will be easy for you to be prepared. The Tax Auditor has to cover 32 points during the Audit.

Let's quickly go through the 32 points here!

 

S.No

Fact

1

Name of the assessee

2

Address

3

Permanent Account Number

4

Status

5

Previous year ended

6

Assessment year

7

Partners & their Capital, change in the partners or members(if any)

8

Nature of Business, & change details (if any)

9

Books of accounts maintained?.

10

(44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB Details)

11

Method of accounting employed

12

Method of valuation of closing stock & Capital asset converted into stock-in-trade

13

Amounts not credited to P/L A/C

14

Particulars of depreciation

15

Deduction allowable u/s 33AB & 35 etc.,

16

Details about, Bonus/Commission paid & Contribution received from employees.

17

Amounts debited to the profit and loss account

18

Payments made to specified persons

19

Amounts deemed to be profits and gains under section 33AB or 33ABA or 33AC

20

Any amount of profit chargeable to tax under section 41

21

Any sum referred to in clause (a), (b), (c), (d), (e) or (f) of section 43B.

22

Value Added Tax credits

23

Amount borrowed otherwise than through an account payee cheque.

24

Loans or Deposits exceeding the limit specified.

25

Details of brought forward loss or depreciation allowance

26

Chapter VI-A Deduction Details

27

Complied to Chapter XVII-B - TDS

28

Stock Details

29

Details of tax on distributed profits ( in case of Domestic Co.,)

30

Cost Audit Report(if any)

31

Audit Report under Central Excise Act (if any)

32

Accounting ratios

 

Overwhelming? Don't be. Based on the common problems arising during the 44AB Audit, the six points given below needs to be taken care by you.

  1. Accounting, Depreciation and Stock valuation Methods/Policies.
  2. List of Payments made to Related Parties.
  3. Transaction (Payment in a sum exceeding rupees twenty thousand) only through "A/C Payee" cheques.
  4. Compliance of TDS Provisions.
  5. EPF & ESI due date & Compliance.
  6. Transactions related to Loans/Advances.

 

Books of Accounts to be Maintained

  1. a cash book;
  2. a journal, if the accounts are maintained according to the mercantile system of accounting;
  3. a ledger;
  4. carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him;
  5. original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person;
  6. In addition, medical professionals need to maintain, a daily case register in Form No. 3C & an inventory of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

Note: You shall keep the "Books of Account" including, ledgers, day-books, cash books, account-books and other books,

  1. in the written form or
  2. as print-outs of data stored in a floppy, disc, tape or
  3. any other form of electro-magnetic data storage device.

 

How long should I keep the Books of Accounts?

You have to keep the books of account and other documents specified, for a period of six years from the end of the relevant assessment year.

 

Where should I keep the Books of Accounts?

You have to keep the books of account and other documents specified, at the place where you are carrying on the Business or Profession.

In case if the Business or Profession is carried on in more than one place, then at the principal place of your profession or Business.

 

What if I don't maintain the books of account?

You may have to pay the penalty of Rs.25,000.

 

What will happen if I don't get my books of account audited?

Penalty u/s 271B is imposed under two situations:

  1. If you don't get your books of account audited within the due date, or
  2. if you don't furnish the 44AB Audit report within the return filing due date.

The assessing Officer may ask you to pay, a sum equal to,

  • one-half per cent of the total sales, turnover in case of Business, or
  • one-half per cent of the gross receipts in case of profession, or
  • Rs.1,50,000,

 

 

Courtesy: ICAI Mat, Journals, Newspapers

 

Aryan Singhania {Pallav}