The audit explains to you the compliance of several provisions under section 44AB. It is concerned with the income tax legislation and how to comply with the income tax law’s obligations. The chartered accountant is supposed to conduct the audit. A tax audit occurs when a taxpayer’s finances are managed by accountants under section 44AB. It is regarded as the formal examination of production and organization reports. It is a systematic study or assessment of a certain organization that is undertaken by an individual body. In this case, the income tax law conducts a tax audit. It simplifies the income tax return filing process.
AUDIT OF INCOME TAXES
It is defined as a private agency’s inspection of an individual organization’s tax returns for the purpose of verifying that the income, expenditure, and deduction information reported is correct.
The tax audit is expected to be handled by Income Tax Audit, which stipulates that all taxpayers are required to register an account of their business or organisation to be audited in accordance with the act’s provisions.
The audit strives to determine the factual accuracy of returns filed and the fulfilment of other obligations, according to the applicable rules, under section 44AB.
The provisions of section 44AB apply to a class of taxpayers who are required to have their accounts corrected by a chartered accountant.
INCOME TAX AUDIT GOALS
There are specific objectives that must be met. The following are some of the objectives of a tax audit:
- The tax auditor’s job is to check the books of account in a methodical manner and report any observations or irregularities.
- Tax audits may be used to impose restrictions on fraudulent behaviour.
- It facilitates the administration of tax laws by properly preparing documents for inspection by tax authorities and evaluating personnel to carry out the verification process.
- The tax auditor’s job is to make sure that the books of account are kept up to date and that proper certification is done.
- Compliance with various sections of income tax legislation, tax depreciation, and other details should be submitted.
AUDIT REPORT CONSTITUTION
The tax auditor must submit his report in a stipulated form, either Form 3CA or Form 3CB:
- The text of Form No.3CA illustrates the situation in which a person conducting business or practising a profession is already required by law to have his account audited.
- The text of Form No.3CB discusses the situation in which a person carrying on a business or profession is not compelled to have his accounts audited under other laws.
WAY TO PRESENT TAX AUDIT
A ‘Chartered Accountant’ can present the tax audit in the form of a tax report utilising the tax auditor’s login data. CA’s login information must also be included in the login portal. The taxpayer is supposed to accept or reject the tax report after the tax auditor uploads it to their login account.
On or before the due date, the tax report must be submitted.
INCOME TAX AUDIT SUBJECT
If a business’s turnover, sales, or gross receipts surpass Rs 1 crore in a financial year, the taxpayer is required to keep track of the tax audit. Taxpayers are compelled to have their accounts audited under specific conditions.
PENALTY FOR FAILURE TO FILE AN INCOME TAX AUDIT REPORT ON TIME
If an individual fails to have their accounts audited in a particular year, they are subject to a penalty under section 271B. If a taxpayer who is required to file a tax return fails to do so within or on time, the following penalties may be imposed:
- The business magnets are subject to a fine of Rs 1,50,000.
- 5% of the entire revenue, gross receipts, or turnover
CHECKING THE INCOME TAX AUDIT PROCESS
According to the audited profit and loss statement, an individual is responsible for ensuring that the total amount of earnings distributed and the tax paid by the individual are accurate. Verify and receive a copy of the challan, containing the payment date, for tax payment.
INCOME TAX AUDIT COVERAGE
A tax audit is imposed on a certain group of people under section 44A of the IT Act. As a result, the list below represents the class of individuals who must follow the income tax audit procedures and have their accounts audited, as per the rules of section 44AB of the Income Tax Act, 1961:
- Individuals that run a business with a revenue of Rs. 1 crore or more on a yearly basis.
- The professional can bring in a total of 50 lakhs each year.
Suggested Read: Income Tax Advisory Services