(1) Every person carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed Rs. 1 crore in any previous year, get his accounts of such previous year audited by a Chartered 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 selling forth such particulars as may be prescribed.
Specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means the due date for furnishing the return of income under section 139(1) which shall be as under:
|(a) Where the assessee is required to furnish a report of a chartered accountant as referred to in section 92E relating to international transaction or specified domestic transaction||30th November of the relevant assessment year|
|(b) In any other case||30th September of the relevant assessment year|
|Amendment made by the Finance Act, 2020
Rationalization of provisions relating to Tax Audit in certain cases [Section 44AB] [W.e.f. A.Y. 2020-21]
1. Threshold limit of tax audit increased from Rs. 1 crore to Rs. 5 crore in case of person carrying on business subject to certain conditions being satisfied
(a) aggregate of all amounts received by him including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed 5% of the said amount; and
(b) aggregate of all payments made by him including amount incurred for expenditure, in cash, during the previous year does not exceed 5% of the said payment.
2. Due date of furnishing the tax audit report
However, there is no change in case the assessee who is required to furnish a report of a chartered accountant as referred to in section 92E relating to international transaction or specified domestic transaction which remains as 30th November of the relevant assessment year.
(2) In the case of a person carrying on profession, the provisions for compulsory audit are applicable if his gross receipts in profession exceed Rs. 50,00,00O in any previous year.
(3) In case of a person who is carrying on the business and covered under section 44AE, 44B8 or 44BBB and claims that his income from the said business is lower than the deemed profits and gains computed under the above relevant sections, he shall have to get his accounts of such previous year audited by a Chartered Accountant on or before the specified date.
(4) Where a person who is carrying on a profession referred to in section 44ADA and claims that:
(i) income from such profession is lower than 50% of the gross receipt of the profession: and
(ii) his income exceeds the maximum amount which is not chargeable to income tax in any previous year
he shall get his accounts of such previous year audited by a Chartered Accountant on or before the specified date.
(5) A person carrying on a business shall,—
— if the provisions of section 44AD(4) 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 a Chartered Accountant on or before the specified date.
However, this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of section 44AD(1) and his total sales, turnover or gross receipts, as the case may be, in business does not exceed Rs. 2 crore in such previous year.
Is Tax Audit under Section 44AB compulsory even if the accounts are Audited under any other Law or any other Provisions of Income-Tax Act.
(1) Where Accounts are Audited under any other Law:
As per proviso 2 to section 44AB, 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 a further report in the form prescribed (Form No. 3CA and 3CD) under this section.
(ii) Where Accounts are Audited and/or Report / Certificate of an Accountant are required under other provisions of Income-Tax Act:
Under the provisions of sections 12A, 33AB, 33ABA, 35D, 35E, 36(1)(xi), 80-IA, 80-IB. 80-IC, 80-ID, 80JJA, 80JJAA and 142(2A) audit has to be conducted by a chartered accountant and the assessee has to obtain a report / certificate from him and file the same along with the return of income.
In this case also, if the accounts of the assessee are audited by the chartered accountant under any other law, it will be a sufficient compliance but separate report / certificate will have to be obtained for the relevant sections.
however, if the accounts are audited only as per the above sections, a separate tax audit u/s 44AB shall be necessary. Conversely, if the audit is conducted u/s 44AB, a separate audit shall have to be conducted for the purpose of other sections.
Report of Audit of Accounts [Rule 6G]
1. The report of audit of the accounts of a person required to be furnished under section 44AB shall:
(a) 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 audited, be in Form No. 3CA;
(b) in the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB;
2. Further, the particulars which are required to be furnished under Section 44AB shall, in the case of a person carrying on business or profession, be in Form No. 3CD.