The Institute of Chartered Accountants of India (ICAI) has released the Exposure Draft Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 for the Assessment Year 2023-24. The Exposure Draft was released on 22nd July 2023 and the last date for submitting comments is August 6th 2023.
The Exposure Draft covers a wide range of topics, including
- The scope of tax audit under Section 44AB
- The qualifications of the auditor
- The procedures to be followed by the auditor
- The contents of the audit report
The Exposure Draft also includes a number of new and revised provisions, such as
- A new requirement for the auditor to verify the existence of a system of internal controls
- A revised requirement for the auditor to report on the adequacy of the taxpayer's books of account
- A new requirement for the auditor to report on the taxpayer's compliance with the provisions of the Benami Transactions (Prohibition) Act, 1988
Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961- AY 2023-24
(Effective for the AY 2023-24 and subject to amendments made by law, judiciary or administration, for the subsequent assessment years)
1. Introduction
What is audit?
1.1 The dictionary meaning of the term "audit" is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc.
Tax Audit
1.2 The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law. Section 44AB entails the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB is called tax audit.
1.3 The chartered accountant conducting the tax audit is required to give his findings, observation, . in form 3CA and 3CB, of audit report. The report of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and statement of particulars in Form 3CD.
What is the objective of tax audit?
1.4 One of the objectives of tax audit is to ascertain/derive the requirement of Form No. 3CD and report in Form Nos. 3CA/3CB. Apart from reporting requirements of Form Nos. 3CA/3CB, an audit for tax purposes would assure that the books of account and other records are properly maintained, that they reflect the true and correct particulars in Form No. 3CD. It can also facilitate the administration of tax laws by a proper presentation of accounts before the tax authorities and considerably save the time of Assessing Officers in carrying out routine verifications, like checking correctness of totals and verifying whether purchases and sales are properly vouched for or not. The time of the Assessing Officers saved could be utilised for attending to more important and
investigational aspects of a case.
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