What is Income Tax Audit Process & Procedure Under Section 44AB?

Under section 44AB, the audit explains to you about certain compliance of various provisions. It deals with the income tax law and to fulfill the requirements of the income tax law. The audit is supposed to be conducted by the chartered accountant. Under section 44AB the taxpayer pursuance is accounts are managed by accountants is known as a tax audit. It is considered to be the official inspection of reports of the production and organization. It is conducted by the individual body and known to be a systematic review or assessment of a particular organization. Here the income tax law conducts an audit known as a tax audit. It makes the process easier for filing of income.

INCOME TAX AUDIT

It is known to be the examination of an individual organization’s tax returns by a private agency for the verification of the income, expenditure, and deduction information that is filed correctly.

The tax audit is supposed to be managed by Income Tax Audit which states all the taxpayers are required to register an account of their business or organization audited as per the provision of the act.

As per the applicable rules, under section 44AB, the audit aims to ascertain the factual veracity of returns filed and the fulfillment of other requirements.

SECTION 44AB

Under section 44AB, the provisions concerned to the class of taxpayers who are supposed to get their accounts corrected from a chartered accountant.

GOALS OF INCOME TAX AUDIT

There are certain objectives that are supposed to be achieved. Tax audit includes certain goals such are described below:

  • The tax auditor is supposed to examine by the methodical means by reporting the observation and discrepancies noted in the books of account.
  • Tax audits are eligible for making a restriction on fraudulent practices.
  • It facilitates the administration of tax laws by proper arrangements of the documents before the inspection of the tax authorities and by assessing the officers to carry on the process of verification.
  • The tax auditor is supposed to ensure the proper maintenance and correct books of account and proper certification.
  • The particular information should be reported like compliance of various provisions of income tax law, tax depreciation, etc.

CONSTITUTES OF AUDIT REPORT

Either from the form No.3CA or Form 3CB, the tax auditor shall furnish his report in a prescribed form:

  • Form No.3CA is furnished with the content which explains to you about the scenario where a person carrying on business or profession is already mandated to get his account audited under any other law.
  • Form No.3CB is furnished with the content which explains to you about the scenario where a person carrying on business or profession is not required to get his accounts audited under other law.

WAY TO PRESENT TAX AUDIT

The tax audit can be presented in the form of a tax report by the tax auditor by using his login details by a ‘Chartered Accountant’. The login portal must also contain the login details of CA. After uploading the tax report by the tax auditor, it is supposed to be accepted or rejected by the taxpayer in their login portal.

NOTE: In case of rejection of the audit report, the procedures need to be followed again until the audit report is accepted by the taxpayer.

The tax report must be submitted on or before the due date.

SUBJECT OF INCOME TAX AUDIT

A taxpayer is supposed to maintain the tax audit carried out if the turnover, sales, or gross receipt of the business exceed Rs 1 crore in the financial year. Under certain circumstances, the taxpayers are required to get the account audited.

PENALTY ON DELAY IN FILING OF INCOME TAX AUDIT REPORT

Under section 271B, if an individual fails to get the accounts audited in a given year, then the penalty is imposed on them. In-case any taxpayer who is supposed to submit the tax report fails to submit it within or on time, the list of the following mentioned below may be levied as a penalty:

  • Rs 1,50,000 is imposed on the business magnets.
  • 5% of the total sales, gross receipt, or turnover.

There is an assumption under section 273B, it explains that if a person fails to pay tax for a valid reason and prove it then no penalty is imposed on him.

LIMIT OF THE TAX AUDIT

According to the tax audit limit for A.Y. 2019-2020 is Rs. 50 lakhs.

PROCESS OF CHECKING INCOME TAX AUDIT

An individual is supposed to ensure that the total amount of profits distributed and the tax paid by the person based upon the audited profit and loss account. For payment of tax, verify and obtain a copy of the challan including the date of payment.

COVERAGE OF INCOME TAX AUDIT

Under section 44A of the IT Act, a tax audit is imposed to a certain class of individuals. Therefore, as per the regulations of section 44AB of the Income Tax Act, 1961, the list mentioned below is the class of individuals who have to follow the income tax audit procedures and get their account audited:

  • The individuals who are engaged in business and an annual turnover of Rs. 1 crore and above
  • The professional who can aggregate the amount of 50 Lakhs per annum.