Income Tax Audit

Tax audit is an examination/review of accounts of any business /profession carried out by the taxpayer from an income tax viewpoint. A Tax audit makes the process of income computation for filing of return of income, much easier.


Objectives of tax audit

Tax audit is conducted to achieve the following objectives:

  1. Ensure proper maintenance and correctness of books of accounts and certification of the same by tax auditor
  2. Reporting of observations/discrepancies noted by tax auditor after a methodical examination of books of account
  3. Reporting prescribed information such as tax depreciation, compliance of various provisions of income tax law etc. This in turn enables and also saves time of tax authorities in verifying the correctness of income tax return filed by the taxpayer such as total income, claim for deductions etc.


Due Date for Filing Income Tax Return

The Due date for filing the Return of Income for persons liable to Tax Audit is 30th September of the year succeeding the relevant financial year.


Tax Audit report Submission

If the assessee gets his account audited u/s 44AB and furnish the said report as required, than penalty u/s 271B shall not be levied even if the return of income is filed after the due date specified u/s 139(1).


Signature on Auditors’ report

  1. Tax Audit Report should be signed by the CA in Practice with following details mentioned
  2. Name of firm
  3. Name of the member signing
  4. Membership No
  5. Registration Number


Penalty in case of Non Compliance

If any person fails to get his accounts audited as required under the provisions of section 44AB before the due date u/s 139(1), the AO may impose penalty which may be a sum equal to one-half percent of the total sales, turnover or gross receipts subject to a maximum of Rs. 1.5 Lakh.


Auditors Responsibility

It is the professional duty of the CA to ensure that the audit accepted by him gets completed on or before the due date. If there is any unreasonable delay on his part, he is answerable to ICAI, if the complaint is made by the client. However, if the delay in the completion of audit is attributable to his client, the tax auditor cannot be held responsible.


Communication with Previous Auditor

A CA in practice shall be deemed to be guilty of professional misconduct, if he accepts a position as auditor previously held by another CA without first communicating with him in writing.


Applicability of Tax Audit

  1. Carrying on business (not opting for presumptive taxation scheme) - Total sales, turnover or gross receipts exceeds Rs 1 crore
  2. Carrying on business (opting presumptive taxation scheme under section 44AD) - Total sales, turnover or gross receipts exceeds Rs 2 crore
  3. A person carrying on profession should get his accounts audited before the specified date if his gross receipts in the profession for the previous year or years exceeds or exceed Rs 50,00,000