Now is the peak period for Income Tax Audit season, with Chartered Accountants, Tax Advocates, Tax Practitioners, and Accountants being exceptionally busy with Tax Audit Report filings. The deadline for Tax Audit Report submission for Assessment Year 2023-24 is set for 30th September 2023, while the due date for Income Tax Return filings in audit cases is 31st October 2023.
In addition, the current state of the Income Tax Portal is notably stable and efficient, experiencing minimal glitches for users. However, despite this, several tax professionals are advocating for a 15-day extension of the Tax Audit Report due date for the fiscal year 2022-23 due to the prevailing work pressure. While the demand for an extension is high, the possibility of an extension remains slim.
Some professionals are advocating for an extension of the Tax Audit Due date, while others oppose any prolongation. Each individual has their own rationale, and it remains uncertain what course of action will be taken. If new technical issues arise with the recently implemented e-filing portal, it may compel the Central Board of Direct Taxes (CBDT) to grant an extension for the tax audit due date.
Section 44AB outlines the stipulations regarding taxpayers obligated to have their financial records examined by a chartered accountant. The objective of the audit, as per this section, is to validate compliance with various provisions of the Income-tax Law and ensure adherence to its requisites. The audit, performed by the chartered accountant on the taxpayer’s accounts in line with the stipulations of section 44AB, is denoted as a tax audit.
The chartered accountant undertaking the tax audit must present their observations, findings, and related information through an audit report. This tax audit report is to be submitted by the chartered accountant using Form Nos. 3CA/3CB and 3CD.
The final date for filing the Tax Audit Report for Assessment Year 2023-24 is currently set for 30th September 2023.
The tax audit serves a crucial objective of confirming, documenting, and fulfilling the requisites outlined in Form Nos. 3CA/3CB and 3CD. Beyond fulfilling the reporting obligations set by Form Nos. 3CA/3CB and 3CD, a thorough tax audit is essential to guarantee the accurate maintenance of financial records and compliance with taxation regulations. It verifies that the taxpayer’s income is accurately portrayed and that claims for deductions are appropriately substantiated.
Furthermore, this audit process plays a vital role in detecting and preventing fraudulent activities. It aids in streamlining the administration of tax laws by ensuring a precise and organized presentation of financial accounts to tax authorities. This, in turn, optimizes the efficiency of Assessing Officers by minimizing time spent on routine verifications, such as confirming totals and validating purchase and sale transactions. The time saved for Assessing Officers can be redirected towards addressing more critical investigative aspects of each case, enhancing overall efficiency.
According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB or furnish such report as required under section 44AB, the Assessing Officer may impose a penalty.
The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.
(b) Rs. 1,50,000.
However, according to section 271B, no penalty shall be imposed if reasonable cause for such failure is proved.
As per section 44AB, following persons are compulsorily required to get their accounts audited :
A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore. This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his total sales or turnover doesn’t exceed Rs. 2 crores.
Note: The threshold limit, for a person carrying on business, is increased from Rs. 1 Crore to Rs. 10 crores in case when cash receipt and payment made during the year do not exceed 5% of total receipt or payment, as the case may be. In other words, more than 95% of business transactions should be done through banking channels.
A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
An assessee who declare profit for any previous year in accordance with section 44AD and he decreases profit for any of one 5 assessment year relevant to the previous year succeeding such previous year lower than the profit computed as per section 44AD and his income exceeds the amount which is not chargeable to tax.
If an eligible assessee opts out of the presumptive taxation scheme, within the aforesaid period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter.
A person who is eligible to opt for the presumptive taxation scheme of section 44ADA but he claims the profits or gains for such a profession to be lower than the profit and gains computed as per the presumptive taxation scheme and his income exceeds the amount which is not chargeable to tax.
This provision does not apply to the person, who opts for presumptive taxation scheme under section 44AD/44ADA.
A person who is eligible to opt for the presumptive taxation scheme of sections 44AE but he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of sections 44AE.
A person who is eligible to opt for the taxation scheme prescribed under section 44BB or section 44BBB but he claims the profits or gains for such business to be lower than the profits and gains computed as per the taxation scheme of these sections.
Section 44BB is applicable to non-resident taxpayers engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire basis to be used in exploration of mineral oils. section 44BBB is applicable to foreign companies engaged in the business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project.
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