Presentation on theme: "Revised Tax Audit Report Form Nos. 3CA, 3CB, 3CD: Important Changes"— Presentation transcript:
1 Revised Tax Audit Report Form Nos. 3CA, 3CB, 3CD: Important Changes CA Anuj J. SharedalalAt Income Tax Bar Association, AhmedabadC.R. Sharedalal & Co.
2 C.R. Sharedalal & Co. www.crsharedalalco.com ContentsTax Audits – History and Brief BackgroundNotification No. 33/2014 datedNews on e-filing portal dated validityImportant changes in Tax Audit Report Forms:3CA3CB3CDImportant points for Tax AuditorsC.R. Sharedalal & Co.
3 Tax Audits – History and Brief Background C.R. Sharedalal & Co.
4 C.R. Sharedalal & Co. www.crsharedalalco.com Tax Audits – History1984 – Tax Audit provisions introducedMemorandum explaining the provisions of the Finance Bill, 1984:“the compulsory audit is intended to ensure proper maintenance of books of account and other records, in order to reflect the true income of the tax payer and to facilitate the administration of tax laws by a proper presentation of the accounts before the tax authorities. This would also save the time of the Assessing Officers considerably in carrying out the verification”C.R. Sharedalal & Co.
5 C.R. Sharedalal & Co. www.crsharedalalco.com Tax Audits – History1984 – Tax Audit provisions introduced1997 – Tax Audit provisions applicable to 44AD1999 – All Forms and Rule 6G revised. Form 3CC and 3CE done away withTax Audit provisions applicable to 44BB and 44BBB2004 – All Forms revised2006 – Form 3CD revised2008 – requirement to furnish report with return done away with2011 – cases of fake membership numbers2013 – e-filing of tax audit reports made mandatoryC.R. Sharedalal & Co.
7 Tax Audits – Brief Background Tax Audit Applicability(Broadly)Businesses u/s 44AD, AE, BB, BBBLimits exceededTax Audit(1 crore):Minimum Deemed Income or Tax AuditLimits not exceeded:Profession or Other businesses(1 crore/25 lakhs):No Tax AuditC.R. Sharedalal & Co.
8 Tax Audits – Brief Background Rule 6G of Income Tax Rules, 1962:6G(1) - Report of Audit – Form Nos. 3CA & 3CB6G(2) - Particulars to be furnished in Form No. 3CDTrue & Correct vs. True & FairAppendix – II contains the formsC.R. Sharedalal & Co.
10 Notification No. 33/2014 dated 25.7.2014 Notification published on website on (26th & 27th was weekend)Comes into force on the date of publication in the Official GazetteWhether this is applicable to tax audit reports of any previous AYs not filed till ?C.R. Sharedalal & Co.
12 News on e-filing portal dated 29.7.2014 - validity What about reports filed between & ?C.R. Sharedalal & Co.
13 Important changes in Tax Audit Report Forms C.R. Sharedalal & Co.
14 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CAApplicable in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts auditedC.R. Sharedalal & Co.
15 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CAOpen Period:1(a) the audited *profit and loss account / income and expenditure account for the period beginning from to ending on1(b) the audited balance sheet as at, _____; andPeriod instead of year31st March removed.New business or business discontinuedC.R. Sharedalal & Co.
16 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CASpace for Observations - Qualifications:3. In *my / our opinion and to the best of *my / our information and according to examination of books of account including other relevant documents and explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to the following observations/qualifications, if any:a.b.c.Space provided to mention observations/qualificationsC.R. Sharedalal & Co.
17 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CBApplicable in the case of a person who carries on business or profession, but not being a person who is required by or under any other law to get his accounts auditedC.R. Sharedalal & Co.
18 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CBOpen Period:1. *I / we have examined the balance sheet as on, ____, and the *profit and loss account / income and expenditure account for the period beginning from to ending on , attached herewith,Period instead of year31st March removed – new or discontinued business3(c)(i) in the case of the balance sheet, of the state of the affairs of the assessee as at 31st March, ;andNot removed in (c)(i) - Typing error?C.R. Sharedalal & Co.
19 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CBSpace for qualifications/observations:5. In *my/our opinion and to the best of *my / our information and according to explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to following observations/qualifications, if any:a.b.c.Space provided to mention observations/qualificationsC.R. Sharedalal & Co.
20 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CDParticulars which are required to be furnished under section 44AB shall be in Form No. 3CDC.R. Sharedalal & Co.
21 Form 3CD - Clause 4 – Registration Nos. Whether the assessee is liable to pay indirect tax like excise duty, service tax, sales tax, customs duty,etc. if yes, please furnish the registration number or any other identification number allotted for the sameAny Registration number or identification number under indirect tax laws like Excise, Service Tax, Customs, Sales Tax etc. to be givenC.R. Sharedalal & Co.
22 Form 3CD – Clause 8 – Relevant clause of 44AB Indicate the relevant clause of section 44AB under which the audit has been conductedRelevant clause of 44AB:(a) business(b) profession(c) 44AE, 44BB, 44BBB(d) 44ADC.R. Sharedalal & Co.
23 Form 3CD – Clause 11(b) – address – books List of books of account maintained and the address at which the books of accounts are kept. (If the books of accounts are not kept at one location, please furnish the addresses of locations along with the details of books of accounts maintained at each location. )C.R. Sharedalal & Co.
24 Form 3CD – Clause 11(b) – address – books Books defined u/s 2(12A) – includes ledgers, day-books, cash books, account-books and other books whether kept in written form or …..Books are maintained in Cloud based softwareLocation of data entry and location of storage are different. – e.g. cloud based softwareName and address of cloud service providerInvoicing at depot = document and not books of accountC.R. Sharedalal & Co.
25 Form 3CD – Clause 11(c) – Relevant documents List of books of account and nature of relevant documents examined.Documents – 2(22AA) read with 2(1)(t) of the IT Act, 2000 (amended in 2008) – scope very wide – electronic records covers even sound, digital media, film etc.Nature of documents vs. exact documentsDeeds, Agreements, Registrations, Returns, Challans, Invoices, BRS, Bank Statements, Salary Register, CENVAT Register etc.All documents relied upon in giving the reportC.R. Sharedalal & Co.
26 Form 3CD – Clause 13(c) – Change in method Whether there had been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year.If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.Data to be given in Tabular Format now – Sr. No., Particulars, Increase in profit, Decrease in profitE.g. Change in method of depreciation, stock valuation etc.C.R. Sharedalal & Co.
27 Form 3CD – Clause 17 – Sale of imm. property Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of a State Government referred to in section 43CA or 50C, please furnish: 1. Details of property 2. Consideration received or accrued 3. Value adopted or assessed or assessableC.R. Sharedalal & Co.
28 Form 3CD – Clause 17 – Sale of imm. property 43CA:Transfer - Ashaland Corporation 133 ITR 55 (Guj) – Income accrues in the year in which title passes i.e. execution of registered sale deed – even though advance may be received earlierAS – 9 to be considered for time of transferDate of agreement is relevant (43CA(3))Leasehold Rights – Not ‘land’ or ‘building’ in terms of Section 43CA and 50C.Form 1 - stamp duty, details of property, consideration received.C.R. Sharedalal & Co.
29 Form 3CD – Clause 17 – Sale of imm. property Section 2(47)(v) – transfer – deemed accrual on possession in part performanceLeasehold right – not ‘land’ or ‘building’(iii) “Though FSI and TDR is “immovable property” as held in Chedda Housing Development vs. Babijan Shekh Farid 2007 (3) MLJ 402 (Bom), it is not “land or building” and so cannot be the subject matter of s. 50C.” - ITO .v. Prem Rattan Gupta (Mum.) (Trib.)(iv) Form 1 – Stamp duty, consideration received, description of property.C.R. Sharedalal & Co.
30 Form 3CD – Clause 19 – Deductions Deductions allowable under sections 32AC, 35AD, 35CCC etc. are required to be reportedConditions have been fulfilled or not to be checked – Amounts debited vis-à-vis Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specifiedChecklist – Working paperSection wise chart to be givenC.R. Sharedalal & Co.
31 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(a):Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etcShould be debited to Profit & Loss Account - only for 21(a)Unlike preceding 3CD where it was for entire Clause 17C.R. Sharedalal & Co.
32 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(a):37(1) – Personal or Capital ExpenditureExpl to 37(1) – offense or prohibited by law –344 ITR 476 – Kap Scan, 322 ITR 401 Millennia, 254 ITR 495 Tarini Tarpaulin Prod. – against assessee37(2B) - advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political partyContractual damages covered - Expenditure by way of any other penalty or fine not covered aboveC.R. Sharedalal & Co.
33 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(b):Amounts inadmissible under section 40(a):-as payment to non-resident referred to in sub-clause (i)(A) Details of payment on which tax is not deducted:(B) Details of payment on which tax has been deducted but has not been paid during the previous year or in the subsequent year before the expiry of time prescribed under section 200(1)Date, amount, nature of payment, name & address of payee, amount of tax deductedC.R. Sharedalal & Co.
34 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(b):Amounts inadmissible under section 40(a):-(ii) as payment referred to in sub-clause (ia)(A) Details of payment on which tax is not deducted:(B) Details of payment on which tax has been deducted but has not been paid on or before the due date specified in sub-section (1) of section 139.Date, amount, nature of payment, name & address of payee, amount of tax deductedC.R. Sharedalal & Co.
35 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(b): Inadmissible if tax not deducted40(a)(i) read with 200(1) (139(1) from AY ) : Non-resident40(a)(ia) read with 139(1) (Salary from AY ) : Resident40(a)(iii) : Salary paid to Non-resident or outside IndiaEven if not be debited to Profit & Loss Account – Typing Error or Intentional? – OLD vs. NEW – Fixed AssetsC.R. Sharedalal & Co.
36 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(d):Disallowance/deemed income under section 40A(3):Details:Serial No.,Date, Nature, Amount of paymentName & PAN of the payee, if availableC.R. Sharedalal & Co.
37 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(d):Rule 6DD(d) – JV adjustment with same party vs. adjustment with third partyDrawn on a bank (40A(3)/(3A) vs. drawn in the name of the person who has made the loan (269T)Section 40A(3A) – allowance made in past year and payment made in PY – deemed incomeEven if not be debited to Profit & Loss Account – Typing Error or Intentional? – OLD vs. NEW – Fixed AssetsC.R. Sharedalal & Co.
38 Form 3CD – Clause 21 – Inadmissible amounts Clause 21(g):particulars of any liability of a contingent nature;Details of contingent liabilities not debited to profit and loss accountAS 29 - Unless the possibility of any outflow in settlement is remote, an enterprise should disclose for each class of contingent liability at the balance sheet date a brief description of the nature of the contingent liability and, where practicable:(a) an estimate of its financial effect, (b) an indication of the uncertainties relating to any outflow; and (c) the possibility of any reimbursement.C.R. Sharedalal & Co.
39 Form 3CD – Clause 24 – sale of asset u/s 32AC Amounts deemed to be profits and gains under section 32AC or 33AB or 33ABA or 33AC.“32AC” addeddeemed income which results from sale or transfer of new asset, (deduction claimed u/s 32AC) within a period of five years from the date of its installationAmalgamation or demerger is not sale or transfer.Above income is in addition to Capital Gains, if any.C.R. Sharedalal & Co.
40 Form 3CD – Clause 27(a) – CENVAT Amount of Central Value Added Tax credits availed of or utilised during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the accounts.MODVAT replaced by CENVATOpening, Closing balance of CENVAT CreditAvailed value and utilized value of CENVATC.R. Sharedalal & Co.
41 Form 3CD – Clause 28 – 56(2)(viia) Whether during the previous year the assessee has received any property, being share of a company not being a company in which the public are substantially interested, without consideration or for inadequate consideration as referred to in section 56(2)(viia), if yes, please furnish the details of the same.C.R. Sharedalal & Co.
42 Form 3CD – Clause 28 – 56(2)(viia) 56(2)(viia) Inserted by the Finance Act, 2010 w.e.fReceiver - Firm / company not being a company in which public are substantially interested (CNCPSI)Property - shares of CNCPSI (from anyone)Without Consideration – Entire taxableWith Consideration –FMV - Consideration = TaxableFMV = Rule 11U and 11UAShall not apply to – Section 47(via) / (vic) / (vicb) / (vid) / (vii) , 50000C.R. Sharedalal & Co.
43 Form 3CD – Clause 29 – 56(2)(viib) Whether during the previous year the assessee received any consideration for issue of shares which exceeds the fair market value of the shares as referred to in section 56(2)(viib), if yes, please furnish the details of the same.C.R. Sharedalal & Co.
44 Form 3CD – Clause 29 – 56(2)(viib) 56(2)(viib) Inserted by the Finance Act, 2012 w.e.fRecevier - Company not being a company in which public are substantially interested (CNCPSI)Consideration received - for issue of shares that exceeds face value (from Resident person only)Consideration received – FMV = Taxable i.e. excess share premiumFMV = Rule 11U/UA or as substantiated to the satisfaction of the officer w.e. higherShall not apply to – VCU from VCC/VCF, C.G. notified class of personsC.R. Sharedalal & Co.
45 Form 3CD – Clause 28/29 – 56(2)(viia)/(viib) 56(2)(viia) & (viib) – Caution points:Particulars56(2)(viia)56(2)(viib)AccountantExpl to 288(2)FCA other than Tax Auditor or Statutory AuditorBalance SheetAudited Balance Sheet as on Valuation dateLast Audited Balance Sheet approved at AGMValuation DateReceipt of SharesReceipt of Consideration for issue of sharesC.R. Sharedalal & Co.
46 Form 3CD – Clause 28/29 – 56(2)(viia)/(viib) 56(2)(viia) & (viib) – Caution points:Report of Valuer to be obtainedRough calculation should be done on ones own as a check – Excel workingParticulars56(2)(viia)56(2)(viib)Valuation MethodBreakup Valueor DCFC.R. Sharedalal & Co.
47 Form 3CD – Clause 32(c) – Speculation Loss Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year, If yes, please furnish the details of the same.Section 73 - Speculation Loss – Explanation - Units are not shares (SC)Speculative transaction – Section 43(5) – trading in commodity derivatives excluded if on recognised association – AYFinance Act 2014 – AY – CTT should be paid + Recognised associationC.R. Sharedalal & Co.
48 Form 3CD – Clause 32(d) – loss in specified busi. whether the assessee has incurred any loss referred to in section 73A in respect of any specified business during the previous year, if yes, please furnish details of the same.35AD – specified businesses – loss to be reportedC.R. Sharedalal & Co.
49 Form 3CD – Clause 33 – Chaper III deductions Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA)Amounts admissible as per the provisions of the Income-tax Act, 1961 and fulfils the conditions, if any, specified under the relevant provisions of Income-tax Act, 1961Auditor to verify the conditions of Chap. III - 10A/10AA – whether they are fulfilled or not?Various sub-sections – prepare checklistC.R. Sharedalal & Co.
50 Form 3CD – Clause 34(a) – TDS/TCS Chart Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish:Tabular information of TDS/TCS(i) TAN(ii) Sections under which TDS or TCS deducted or collected(iii) Nature of Payment(iv) Total Amount of payment (including non-tax deductible or collectible portion)(v) Total amount on which tax was to be deducted or collectedC.R. Sharedalal & Co.
51 Form 3CD – Clause 34(a) – TDS/TCS Chart Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish:Tabular information of TDS/TCS(vi) Total amount on which tax actually deducted or collected(vii) Total amount of tax actually deducted or collected on above(viii) Total amount on which tax actually deducted or collected at less than specified rate(ix) Total amount of tax actually deducted or collected at less than specified rate(x) Amount of tax deducted or collected but not depositedC.R. Sharedalal & Co.
52 Form 3CD – Clause 34(b) – Late filing of return whether the assessee has furnished the statement of tax deducted or tax collected within the prescribed time. If not, please furnish the detailsIf TDS/TCS return is filed lateEntire late filed return will have to be verified: Whether the statement of tax deducted or collected contains information about all transactions which are required to be reportedC.R. Sharedalal & Co.
53 Form 3CD – Clause 34(c) – Interest - TDS/TCS whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). If yes, please furnish:TANAmount of interest payableAmount paidDate of paymentAuditor to recheck calculationC.R. Sharedalal & Co.
54 C.R. Sharedalal & Co. www.crsharedalalco.com Form 3CD – Clause 36 – 115O – DDTDividend Tax u/s 115O:Reductions:115O(1A)(i) - Dividend received by domestic company or foreign company from its subsidiaryDomestic Subsidiary should have paid tax u/s 115OTax should be payable u/s 115BBD on foreign subsidiary’s dividend receivedC.R. Sharedalal & Co.
55 Form 3CD – Clause 37 – Cost audit Whether any cost audit was carried out, if yes, give the details, if any, of disqualification or disagreement on any matter /item/ value/ quantity as may be reported/ identified by the cost auditor.C.R. Sharedalal & Co.
56 Form 3CD – Clause 38 – Excise Audit Whether any audit was conducted under the Central Excise Act, 1944, if yes, give the details, if any, of disqualification or disagreement on any matter /item /value /quantity as may be reported/identified by the auditor.C.R. Sharedalal & Co.
57 Form 3CD – Clause 39 – Service Tax Audit Whether any audit was conducted under section 72A of the Finance Act, 1994 in relation to valuation of taxable services, if yes, give the details, if any, of disqualification or disagreement on any matter/ item/ value/ quantity as may be reported/identified by the auditor.72A(i) deals with valuation aspect.72A(ii) & (iii) deal with credits and accounts.C.R. Sharedalal & Co.
58 Form 3CD – Clause 40 – Ratios Details regarding turnover, gross profit, etc., for the previous year and preceding previous year:Total turnover is to be reported for the previous year as well as for preceding financial yearOther ratios to be reported for preceding FY(the details required to be furnished for principal items of goods traded or manufactured or services rendered) - Whether item-wise or consolidated?C.R. Sharedalal & Co.
59 Form 3CD – Clause 41 – Any Tax Laws Please furnish the details of demand raised or refund issued during the previous year under any tax laws other than Income tax Act, 1961 and Wealth tax Act, 1957 along with details of relevant proceedings.VAT, Excise, Service Tax, Customs, Municipal Tax, Luxury Tax, STT, CTT, Central Sales Tax, Octroi, Stamp Duty, Toll Tax, RTO/Road Tax, Electricity Duty, Professional Tax.Can you think of more taxes?Details of proceedings to be givenC.R. Sharedalal & Co.
60 Form 3CD – Removal of Annexure I Welcome change:Annexure I removed.C.R. Sharedalal & Co.
61 Important points for Tax Auditors C.R. Sharedalal & Co.
62 Important Points for Tax Auditors Maintain detailed working papers (SA 230):Work Sheets / Time SheetsQuery Sheets /Explanatory Notes /ChecklistsMateriality factor calculationRelevant Standards on AuditingJudicial Pronouncements relied uponCertificates – 269SS/T, 40A(3), 40A(2)(b)Management Representation LetterC.R. Sharedalal & Co.
63 Fees need to be increased in line with work: C.R. Sharedalal & Co.
64 C.R. Sharedalal & Co. www.crsharedalalco.com Old vs. NewFalls on the FloorFalls on the FloorBreaks Floor- simple & ruggedBreaks Screen- complex and expensiveC.R. Sharedalal & Co.