Tax Audit | Tax Mate

However, according to the section 273B, no penalty would be imposed on the person if valid reason for such failure is proved.

Failure to get accounts audited.271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or furnish a report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.

Penalty According to the section 271B, if a person who is expected to comply with the section 44AB fails to get their records audited in any given year, the following penalties are imposed on that person:• 0.5% of the total sales in case of a trade organisation or 0.5% of the total receipts in case of service of the current financial year.• The business may be fined with an amount of Rs.1,50,000.

Penalty not to be imposed in certain cases.273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271GB, section 271H, section 271-I, section 271J, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.

Art Title

Tax audit Section 44AB?

The audited accounts must be reported by a Chartered Accountant in the prescribed forms. The audit report should be inclusive of the findings, observations etc.
Audit report in respect of audit conducted under Section 44AB must be prepared in Form No. 3CB and the particulars of the audit must be reported in Form 3CD.
Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited by a chartered accountant.
The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law.
The tax audit limit under section 44AB is INR 1 Crores.

Important: 44AB limit is still 1 Crore (except specified below), and 44AD has limit of Rs. 2 Crores. Also, in Section – 44AD, which deals with Special provision for computing profits and gains of business on presumptive basis.

Applicability under section 44AB

Any person pursuing business and whose total turnover or gross receipts exceed a sum of 2 Crore rupees in any previous year (However, this provision is not applicable to the persons who opts for presumptive taxation scheme).
Any person pursuing a profession and whose gross profits exceed fifty Lakh rupees in any previous year.
A person who is considered eligible for the presumptive taxation scheme, and who claims that the profits and gains for the respective business is lower than what is computed in accordance with the presumptive taxation scheme and his/her income exceeds the amount that is taxable. This provision is applicable to the taxpayers who opt for presumptive taxation scheme other than the one who choose the scheme under Section 44AD and whose sale or turnover is limited to Rs 2 Crores.

Forms to be filed for Tax audit under section 44AB

These are the forms needed for use by individuals or people when an audit is done on their accounts as per section 44AB.

A) For persons or individuals conducting enterprises where accounts are to be audited as per these provisions

Form Number 3CA – Audit Form
Form Number 3CD – Statement showing relevant particulars

B) Individuals with accounts which are not required to be audited as per the provisions stated under any law, with the exception of income tax laws, then the forms mentioned below are applicable

Form Number 3CB – Audit Form
Form Number 3CD – Statement showing relevant particulars

Due date for Tax Audit under section 44AB

A person covered by section 44AB should get his accounts audited and should obtain the audit report on or before 30th September of the relevant assessment year, e.g a Tax audit report for the financial year 2019-20 corresponding to the assessment year 2020-21 should be obtained on or before 30th September, 2020. The due date for filing Tax Audit Report for AY 2020-21 has been extended from 30th September, 2020 to 31.10.2020. The same has been further extended till 31.12.2020.

The tax audit report is to be electronically filed by the chartered accountant to the Income-tax Department. After filing of report by the chartered accountant, the taxpayer has to approve the report from his e-fling account with Income-tax Department (i.e. at www.incometaxindiaefiling.gov.in).

Penalty for non filing of Audit Report under Section 44AB

If any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB or furnish such report as required under section 44AB, the Assessing Officer may impose a penalty.

0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the Gross receipts in profession, in such years or years or,
Rs. 1,50,000.

Whichever is lower of the above shall be levied as penalty on non filing of audit report under section 44AB.
However, no penalty shall be imposed if a reasonable cause for such failure is proved.

Reasons accepted in case of failure of income tax audit under Section 44AB

Delay of the income tax audit due to the authorized chartered accountant or auditor resigning from duty.
Failure of income tax audit due to the unforeseen death of CA or auditor.
Failure of income tax audit due to the authorized CA or auditor not having access to the individual’s accounts. Including scenarios of theft, strikes etc.
Delay of income tax audit happens because of natural disaster.

If you are a taxpayer, you have to comply with the provisions of the section 44AB of the income tax act 1961. This section states that all the taxpayers have to get an audit report furnished after conducting an audit for your books of accounts by a practicing chartered accountant.

It has been provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.

Section 44AB(b)
carrying on profession shall,
> if his gross receipts in profession
> Exceed fifty lacs rupees
> in any previous year; or
Section 44AB(c)
carrying on the business shall,
> if the profits and gains from the business are deemed to be the profits and gains of such person
> under section 44AE or section 44BB or section 44BBB,
> as the case may be,
> and he has claimed his income to be lower than the profits or gains
> so deemed to be the profits and gains of his business,
> as the case may be,
> in any previous year; or
Section 44AB(d)
carrying on the profession shall,
> if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and
> he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and
> his income exceeds the maximum amount
> which is not chargeable to income-tax in any previous year; or
Section 44AB(e)
carrying on the business shall,
> if the provisions of sub-section (4) of section 44AD are applicable in his case and
> his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,
> get his accounts of such previous year audited by an accountant before the specified date and
> furnish by that date the report of such audit
> in the prescribed form duly signed and
> verified by such accountant and
> setting forth such particulars as may be prescribed :
Provided that this section shall not apply to the person,
> who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and
> his total sales, turnover or gross receipts,
> as the case may be,
> in business does not exceed two crore rupees in such previous year:
> Provided further that this section shall not apply to the person,
> who derives income of the nature referred to in section 44B or section 44BBA,
> on and from the 1st day of April, 1985 or,
> as the case may be,
> the date on which the relevant section came into force,
> whichever is later :
Provided also that in a case,
> where such person is required by or under any other law to get his accounts audited,
> it shall be sufficient compliance with the provisions of this section
> if such person gets the accounts of such business or profession audited under such law
> before the specified date and
> furnishes by that date the report of the audit as required under such other law and
> further report by an accountant in the form prescribed under this section.
Amendment in Tax Audit Provisions
Finance Act, 2020 has introduced a proviso to sec 44AB(a) to encourage less-cash economy and to encourage digital transactions. If the turnover of the assessee is up to Rs.5 crores and his cash receipts are up to 5% of total receipts and the cash payments are up to 5 % of total payments, then the assessee would not be required to get his books of accounts audited.