Here are four things you must check after the income tax audit report has been submitted by your tax auditor.
Correct forms used for income tax audit
According to Shalu Kedia, Director, Audit & Assurance, Nangia & Co LLP, an audit and business consultancy company, “Individuals mandatorily required to get tax audit done should ensure that their auditor has submitted correct forms as required by law. An auditor is required to give report in Form 3CB along with a detailed particulars mentioning 44 clauses in Form 3CD. These forms are used if income tax audit is mandatory for income tax purposes. However, if the individual is required to get books audited for any other law (like Companies Act, 2013), then the auditor will give report in Form 3CA along with detailed particulars in Form 3CD. So, in essence, Form 3CD is a common form for all individuals who are required to comply with income tax audit. The requirement of Form 3CA and Form 3CB will depend upon the category of the individual.”Hence, an individual should check whether the tax auditor has furnished the correct audit forms or not.
“In the audit report, the chartered accountant who has conducted the audit will sign it using digital signature certificate (DSC), give in the name of the audit firm, its registration number, his/her PAN and UDIN number. UDIN number is a unique number which has to be generated from the Institute of Chartered Accountants of India (ICAI) website and then inputted inside the audit report. The UDIN number enables an individual to check the genuineness and validity of the CA who has conducted the tax audit. This helps eliminate misrepresentation by third parties posing as CA who forge signatures on documents to mislead authorities,” says Kedia.
Date for uploading tax audit report
The tax auditor has to upload the audit report by September 30. A penalty will be levied if the tax audit report is not uploaded by the auditor on or before September 30. A penalty of 0.5% of total sales, turnover or gross receipts, as the case may be or Rs 1,50,000, whichever is lower will be levied on the individual who was liable for conducting the tax audit. The income tax auditor will upload the audit report via his/her account on the ITR portal against the PAN of the individual who had to get the audit done.
To do this, an individual should first add the tax auditor to their ITR profile as their CA on the tax department’s e-filing portal. Once added, only then the tax auditor will be able to upload the audit report. Once uploaded, the individual will have a choice to accept the report or reject it. The tax audit must be accepted by an individual on or before September 30, i.e., before the expiry of the due date.”The tax audit report once uploaded will be available for preview on the individual’s ITR portal account. An individual will generally receive SMS and email intimating them about such tax audit report being filed,” says Dr. Suresh Surana, founder, RSM India, a business consulting group.
The individual should frequently login to the e-filing ITR portal or at least check his SMS/email inbox for intimation about the audit report being uploaded against his/her PAN.
Proper document verification and disclosures
An individual can check the indicative aspects of the tax audit report. This information tells an individual if any red flag has been raised by the auditor in the operations of business and incomes earned.
Surana laid lists out a few of the indicative aspects of the tax audit report that an individual can check:
a) Check whether the auditor has provided an opinion on the fairness of the financial statements and listed his/her observations (if any),
b) check whether the auditor has reviewed all the relevant documents and books of accounts such as vouchers, cash ledgers, purchase and sales ledgers etc,
c) see whether the auditor has provided disclosures with respect to all relevant particulars such as related party transactions, depreciation, prior period income and expenditure etc.,
d) Further, look into whether the auditor has provided clear rationales or explanations for any significant findings, discrepancies, or exceptions, and others.
Correct information in audit report
“Furnishing of correct information in the tax audit report is the prime responsibility of the tax auditor. There would be no impact on the individual if the tax auditor furnishes any incorrect information in the tax audit report. However, an individual is responsible for proper maintenance of their books of accounts and in case any false entry or omission of entry is discovered by revenue authorities, such individual may be subjected to proceedings such as rejection of books of account, assessment / reassessment of income, penalty, interest, etc,” says Surana.
A penalty will be levied on the tax auditor if any incorrect information has been furnished in the reports or certificates as per income tax laws. “A penalty of Rs 10,000 will be levied under Section 271J for each report or certificate where incorrect information has been discovered. However, the onus of proving mistake of auditor is on the individual. If one is unable to prove the mistake of auditor, then penalty will be applicable on the individual,” adds Surana.