[FAQs] Due Date & Process to File Tax Audit Report | A.Y. 2023-24
- Blog|Tax Audit Week|Account & Audit|
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- Last Updated on 13 September, 2023
FAQ 1. What are the due dates for filing the tax audit report?
For the Assessment Year 2023-24, the due date for furnishing of tax audit report would be as under:
Type of Assessee |
Assessment year | Due date for furnishing tax audit report |
Due date for furnishing ITR |
Company | 2023-24 | 30-09-2023 | 31-10-2023 |
Any other person who is obliged to furnish the tax audit report | 2023-24 | 30-09-2023 | 31-10-2023 |
Any person who is subject to the transfer pricing provisions | 2023-24 | 31-10-2023 | 30-11-2023 |
FAQ 2. How to furnish the tax audit report to Income-tax Dept.?
To furnish the report, the assessee has to authorise and appoint the Chartered Accountant from his e-filing account. The Chartered Accountant shall file the audit report in Form 3CA/3CB and particulars in Form 3CD in JSON format at https://www.incometax.gov.in using his digital signature. These forms shall be accompanied by the audited financial statements.
The assessee has to approve these forms from his e-filing account. The date of approval of the report by the taxpayer is considered the date of filing of the Audit Report. If the assessee does not accept/approve, the tax audit report will be considered pending as if it has not been filed.
FAQ 3. How many tax audit reports a Chartered accountant can Sign?
A Chartered Accountant in practice can conduct 60 tax audits relating to an assessment year.
The 2023 GN omits the following illustration on the limit on number of tax audit assignments that can be accepted by firm/LLP of CAs given in Para 9.31 of 2022 Guidance Note:
If there are 10 partners in a firm of Chartered Accountants in practice, then all the partners of the firm can collectively sign 600 tax audit reports. This maximum limit of 600 tax audit assignments may be distributed between the partners in any manner whatsoever. For instance, 1 partner can individually sign 600 tax audit reports in case the remaining 9 partners do not sign any tax audit report.
The above illustration gives a misleading impression that a CA could join as a partner in, say, 12 CA firms/LLPs and can get the benefit of 60*12=720 tax audits every year and 780 tax audits if, additionally, he has a proprietary firm. This is not the case. The illustration in the above case will apply only if:
(a) None of the 10 partners has a proprietary firm or is a partner in any other CA firm; and
(b) Other firms in which these partners are partners have not accepted any tax audit assignments against their quota of 60 each, and they have not accepted any tax audits in their proprietary practice.
The correct position is only a CA in full-time practice can do a tax audit under Section 44AB, and every CA in full-time practice can only do 60 tax audit assignments every financial year, whether through his proprietary firm or by joining CA firms/CA LLPs as partners. The CA firms or LLPs in which a CA is a partner will have to inter-se adjust his quota of tax audits such that total tax audits accepted by all the firms/LLPs in which he is a partner cannot exceed 60. For example, CA X is a partner in CA firms A&Co and B&Co. A&Co has accepted 25 tax audits in its quota. B&Co has accepted 15 tax audits against his quota. In his proprietary practice, he has accepted 9 tax audits. Now, he joins C LLP as a partner. C LLP can only accept 60-(25+15+9)=11 tax audits against his quota of 60.
The ICAI had clarified that an audit prescribed under any statute which requires the assessee to furnish an audit report in the form as prescribed under Section 44AB of the Income-tax Act shall not be considered for reckoning the specified number of tax audit assignments if the turnover of the auditee is below the turnover limit specified in Section 44AB of the Income-tax Act. The ICAI modified the guidelines on 23-08-2018 to provide that the audits conducted under Sections 44AD, 44ADA, and 44AE (Presumptive Taxation Schemes) shall not be considered for reckoning the ‘specified number of tax audit assignments.
FAQ 4. If there are 10 partners in a firm of Chartered Accountants, then how many tax audit reports can each partner sign in a financial year?
As per Chapter VI of Council General Guidelines, 2008 (Tax Audit Assignments under Section 44AB of the Income Tax Act, 1961), a chartered accountant, in practice, shall not accept more than the specified number of tax audit assignments in a financial year.
As per the guidelines, if there are 10 partners in a firm of Chartered Accountants in practice, then all the partners of the firm can collectively sign 600 tax audit reports. This maximum limit of 600 tax audit assignments may be distributed between the partners in any manner whatsoever. For instance, 1 partner can individually sign 600 tax audit reports. However, the remaining 9 partners are not eligible to sign any tax audit report.
FAQ 5. M/s ABC, a firm of Chartered Accountants, carries out the statutory audit of XYZ Private Limited. Is it permissible for the same CA firm to conduct the tax audit under Section 44AB, or should XYZ Private Limited engage a different auditor?
Section 44AB stipulates that only Chartered Accountants should perform the tax audit. This section does not stipulate that only the statutory auditor appointed under the Companies Act or other similar Statutes should perform the tax audit. Thus, the tax audit can be conducted by the statutory auditor or any other chartered accountant in full-time practice. Hence, the decision rests with XYZ Private Limited regarding whether to engage M/s ABC or appoint a different auditor to conduct the tax audit.
The Guidance Note on Tax Audit issued by the ICAI suggests that if the statutory auditor of a person is also appointed to undertake a tax audit, it is advisable to carry out both audits concurrently.
Form 3CA report refers to the fact that the statutory audit of the assessee was conducted by a chartered accountant or any other auditor in pursuance of the provisions of the relevant Act. The copy of the audit report, along with the audited profit and loss account and balance sheet and the documents declared by the relevant Act to be part of or annexed to the profit and loss account and balance sheet, are annexed to the report in Form No. 3CA. In a case where the tax auditor carrying out the audit under section 44AB is different from the statutory auditor, a reference should be made to the name of such statutory auditor. In case the statutory auditor is carrying out the audit under section 44AB, the fact that he has carried out the statutory audit under the relevant Act should be stated.
FAQ 6. Does the tax auditor need to generate UDIN for the tax audit report?
Chartered Accountants with a full-time Certificate of Practice can register on the UDIN Portal www.udin.icai.org and generate UDIN by registering the certificates attested/certified by them. UDIN is an 18-digit system-generated unique number for every document certified/attested by practising Chartered Accountants. UDIN has been made mandatory on all Corporate/Non-Corporate Audit, Attest, and Assurance Functions.
While issuing the tax audit report under Section 44AB, the auditor should generate an appropriate UDIN and the same is also required to be updated at the e-filing portal. The Chartered Accountant has to generate and update the UDIN within 60 calendar days from the date of form submission on the income tax e-filing portal.
Para 9.38 of the 2022 GN stated,
“If the UDIN for any audit report/certificate is not updated within the 60 days provided for the same, the department will treat such audit report/certificate as invalid submission”.
The 2023 GN omits this sentence. No provision in the Income-tax Act treats audit reports or certificates as invalid on not updating UDIN. This might be the reason for omitting the relevant sentence.
The 2023 GN also omits another sentence from Para 9.38 of 2022 GN, stating,
“The verification of UDIN is in line with the ongoing initiatives of the Income Tax Department (ITD) for integrating with other government agencies and bodies”.
Read More How to Generate UDIN?
FAQ 7. Whether a tax audit report can be revised?
‘2022 GN’ issued by the ICAI provides that the audit report under Section 44AB should not normally be revised. However, sometimes a member may be required to revise his tax audit report on grounds such as:
(a) Revision of accounts of a company after its adoption in the annual general meeting.
(b) Change of law, e.g., retrospective amendment.
(c) Change in interpretation, e.g., CBDT Circular, Judgments, etc.
Thus, once filed, a tax audit report can be revised on the grounds mentioned above.
Further, sub-rule (3) of Rule 6G provides that the tax audit report furnished under this Rule may be revised by the person by getting the revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains if there is payment by such person after furnishing of report under sub-rules (1) and (2) which necessitates recalculation of disallowance under Section 40 or Section 43B.
Thus, it may happen that after issuing the tax audit report, but before the due date for filing the return under section 139(1), the assessee may make payment of tax deducted at the source referred to in sub-clauses (i) or (ia) of clause (a) of Section 40 or of tax, duty, cess, fee or other payments referred to in Section 43B deduction of which is allowed only on actual payment basis. In such a case, sub-rule (3) of Rule 6G provides for the revision of the tax audit report by the tax auditor.
Para 15.13 of 2022 GN stated,
“However, it is not mandatory to revise tax audit report in the circumstances mentioned in Rule 6G(3). If the tax audit report is revised, while revising the tax audit report, prescriptions in ‘Guidance Note on Revision of the Audit Report’ should be considered.”
The 2023 GN omits theis provision. The CBDT has also notified1 that if there is a payment by a person after furnishing the original report which necessitates a recalculation of disallowance under Section 40 or Section 43B, a revised audit report can be obtained from an accountant and furnished before the end of the relevant assessment year for which the report pertains.
Therefore, in the circumstances covered by Rule 6G(3), issuing a revised tax audit report is mandatory, and a revised tax audit report is to be issued regardless of prescriptions of the ‘Guidance Note on Revision of the Audit Report’.
It is to be noted that as per Section 143(1)(a)(iv), a return filed under Section 139 or in response to notice under Section 142(1), is processed to disallow expenditure or increase the income indicated in the audit report but not taken into account in computing the total income in the return. Thus, the tax audit report revision is also mandatory to avoid such disallowances or additions.
It may be advisable for tax auditors to make it clear to clients in the letter of engagement that:
(a) Client shall deposit dues covered by Section 40(a)(i)/(ia) or Section 43B before signing the tax audit report so that details of payment can be mentioned in the tax audit report; and
Furnishing a revised tax audit report covering payments of such dues between the date of the tax audit report and the date of deposit of such dues will entail the specified amount of additional audit fees.
FAQ 8. Is there any penalty for the late filing of the audit report?
As per Section 271B, if any person fails to get his accounts audited or fails to furnish the report of the audit, the Assessing Officer may direct such person to pay a penalty of a sum equal to lower of the following:
- 0.5% of the total sale, turnover, or gross receipts; or
- Rs. 1,50,000.
However, no penalty shall be imposed if such failure is due to a reasonable cause.
FAQ 9. What should be considered as reasonable cause for not levying penalty under Section 271B?
The penalty may be imposed under Section 271B only if the assessee failed to get his accounts audited under Section 44AB without a reasonable cause. The word ‘reasonable cause’ has not been defined under the Income-tax Act. The initial burden is on the assessee to show that reasonable cause existed for the failure referred to in the concerned provision. Thereafter, the officer dealing with the matter has to consider whether the explanation offered by the assessee was on account of reasonable cause.
Reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence from acting under normal circumstances, without negligence or inaction or want of bona fides. [Azadi Bachao Andolan v. Union of India [2001] 116 Taxman 249 (Delhi)]
‘Reasonable cause’ as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinary prudent and cautious man placed in the position of the person concerned to come to the conclusion that the same was the right thing to do. [Woodward Governors India (P.) Ltd. v. CIT [2001] 118 Taxman 433 (Delhi)]
Some of the instances where penalty under Section 271B was deleted considering it as a “reasonable cause”:
- Books of account got damaged due to flood [2017] 85 taxmann.com 274 (Mumbai – Trib.)
- The delay in filing the audit report was attributable to the illness of the assessee’s auditor [2013] 35 taxmann.com 235 (Madras)
- Bona fide interpretation of the term `turnover’ based on expert advice [2009] 223 CTR 152 (Gujarat)
- Non-availability of accounts on account of the seizure by the customs department [2003] 126 Taxman 28 (Rajkot)(MAG)
- Turnover of derivative computed as per ICAI Guidance Note does not exceed the threshold limit [2022] 143 taxmann.com 318 (Rajkot – Trib.)
- Turnover of future and option computed per ICAI Guidance Note [2023] 147 taxmann.com 221 (Mumbai – Trib.)
- There was a delay on the part of the auditor even though the assessee had submitted books on time [CIT v. U.P. Rajya Sahkari Evam Bhoomi Vikas Bank Ltd., (2013) 35 taxmann.com 471 (All)]
FAQ 10. Can a tax auditor be held responsible if he does not complete the audit within the specified date?
The Guidance Note on Tax Audit issued by the ICAI clarifies that the responsibility of the tax auditor will depend on the facts and circumstances of the case. Normally, it is the professional duty of the Chartered Accountant to ensure that the audit accepted by him is completed before the due date. If there is any unreasonable delay on his part, he is answerable to the Institute if the client makes a complaint. However, if the delay in the completion of the audit is attributable to the client, the tax auditor cannot be held responsible. It is, therefore, necessary that no Chartered Accountant should accept audit assignments that he cannot complete within the prescribed time frame.
FAQ 11. Whether Tax Auditor has authority to call for and access books of account, information, documents, explanations, etc.?
Para 13.2 of 2022 GN provided that
“13.2 Section 143 of the Companies Act 2013 gives certain powers to the auditors to call for the books of account, information, documents, explanations, etc. and to have access to all books and records. No such powers are given to the tax auditor appointed under section 44AB.”
The 2023 GN omits the sentence “No such powers are given to the tax auditor appointed under section 44AB” from Para 13.2.
It is indeed true that there is no provision in the Act along the lines of section 143(1) of the Companies Act, 2013 that gives powers to the tax auditors to call for the books of account, information, documents, explanations, etc. and to have access to all books and records. Thus, it is not clear why the sentence has been omitted.
FAQ 12. Can a tax auditor be held responsible for not completing & uploading the tax audit report before the due date?
A question arises as to whether a tax auditor can be held responsible for not completing the tax audit and uploading the tax audit report before the specified date. In this regard, Para 7.2 of the 2022 GN opined as under:
- Answer to this question will depend on the facts and circumstances of the case.
- If there is any unreasonable delay on the part of the tax auditor, he is answerable to the Institute if the client makes a complaint.
- However, if the delay in the completion of the audit is attributable to his client, the tax auditor cannot be held responsible.
- Therefore, no chartered accountant should accept audit assignments which he cannot complete within the prescribed time frame.
The 2023 GN omits the above opinion.
- Notification No. G.S.R. 246(E) [NO. 28/2021/F. NO 370142/9/2018-TPL], dated 1-4-2021
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Please correct the penalty as 0.5% of total t/o