×

New to site? Create an Account


Login

Lost password? (close)

Already have an account? Login


Signup

(close)

Revised Guidance Note on Tax Audit under Section 44AB

|

July 7, 2022

|

44 mins read

The Direct Tax Committee of the Institute of Chartered Accountants of India has issued an Exposure Draft of Revised Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 .

Under  Section 44AB Income Tax Act,  a taxpayer is required to have a tax audit , if the  gross turnover or receipts of the assessee , during the relevant previous year exceeds the prescribed threshold limit
Contact us

Latest Guidance Note On Tax Audit Issued By ICAI

The Exposure draft contains the following clauses . You can download the Exposure Draft of Revised Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 

The detailed headings of the Exposure Draft of Revised Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961  are as under

1. Terms, abbreviations used in this Guidance Note
2. Introduction
3. Provisions of section 44AB
4. ‘Profession’ and ‘business’ explained
5. Sales, turnover, gross receipts
6. Liability to tax audit – Special cases
7. Specified date and tax audit
8. Penalty
9. Tax auditor
10. Form of Financial Statements
11. Accounting Standards
12. Accounts and Income-tax law
13. Audit Procedures
14. Professional misconduct
15. Audit Report
16. Issuing Audit Report
17. Form No. 3CA
18. Form No. 3CB
19. Form No. 3CD
20. Particulars to be furnished in Form No. 3CD.
21. (a) If firm or Association of Persons, indicate names of partners/members and their profit sharing ratios.
(b) If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change
22. (a) Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession)
(b) If there is any change in the nature of business or profession, the particulars of such change
23. (a) Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed.
(b) List of books of account maintained and the address at which the books of account are kept. (In case books of account are maintained in a computer system, mention the books of account generated by such computer system. 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) List of books of account and nature of relevant documents examined.
24. Whether the profit and loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant sections (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB Chapter XII-G, First Schedule or any other relevant section).
25. (a) Method of accounting employed in the previous year.
(b) Whether there had been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year.
(c) If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.

Serial number Particulars Increase   in profit (Rs.) Decrease in profit (Rs.)

(d) Whether any adjustment is required to be made to the profits or loss for complying with the provisions of income computation and disclosure standards notified under section 145(2).
(e) If answer to (d) above is in the affirmative, give details of such adjustments:

Increase     in profit (Rs.) Decrease in profit (Rs.) Net Effect (Rs.)
ICDS I Accounting Policies
ICDS II Valuation of Inventories
ICDS III Construction Contracts
ICDS IV Revenue Recognition
ICDS V Tangible Fixed Assets
ICDS VI Changes in Foreign Exchange Rates
ICDS VII Governments Grants
ICDS VIII Securities
ICDS IX Borrowing Costs
ICDS X Provisions, Contingent Liabilities and Contingent
Assets
Total
(f) Disclosure as per ICDS:
(i) ICDS I-Accounting Policies
(ii) ICDS II-Valuation of Inventories
(iii) ICDS III-Construction Contracts
(iv) ICDS IV-Revenue Recognition
(v) ICDS V-Tangible Fixed Assets
(vi) ICDS VII-Governments Grants
(vii) ICDS IX Borrowing Costs
(viii) ICDS X-Provisions, Contingent Liabilities and Contingent Assets”.
26. (a) Method of valuation of closing stock employed in the previous year.
(b) Details of deviation, if any, from the method of valuation prescribed under section 145A, and the effect thereof on the profit or loss, please furnish:
Serial number Particulars Increase     in profit (Rs.) Decrease in profit (Rs.)

International Taxation Services

27. Give the following particulars of the capital asset converted into stock-in-trade:-
(a) Description of capital asset;
(b) Date of acquisition;
(c) Cost of acquisition;
(d) Amount at which the asset is converted into stock-in-trade.
28. Amounts not credited to the profit and loss account, being,-
(a) the items falling within the scope of section 28;
(b) the proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax, where such credits, drawbacks or refunds are admitted as due by the authorities concerned;
(c) escalation claims accepted during the previous year;
(d) any other item of income;
(e) capital receipt, if any.
29. 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:
Details     of property Consideration received       or accrued Value adopted or assessed or assessable Whether provisions of second proviso to sub-section (1) of section 43CA or fourth proviso to clause (x) of sub- section  (2)   of

section               56

applicable?[Yes/No]

30. Particulars of depreciation allowable as per the Income-tax Act, 1961 in respect of each asset or block of assets, as the case may be, in the following form:-

  • Description of asset/block of
  • Rate of
  • Actual cost or written down value, as the case may
    • (ca) Adjustment made to the written down value under section 115BAC/115BAD (for assessment year 2021-2022 only) ………….
    • (cb) Adjustment made to written down value of Intangible asset due to excluding value of goodwill of a business or profession……….
    • (cc) Adjusted written down value.
  • Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustments on account of –
    • Central Value Added Tax credits claimed and allowed under the Central Excise Rules, 1944, in respect of assets acquired on or after 1st March, 1994,
    • change in rate of exchange of currency, and
    • subsidy or grant or reimbursement, by whatever name
  • Depreciation
  • Written down value at the end of the

31. Amounts admissible under sections:

Section Amount debited to profit and loss account Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfills the conditions. If any specified under the relevant provisions of Income-tax Act, 1961 or Income- tax Rules, 1962 or any other guidelines, circular, etc., issued in this behalf.
32AC
32AD
33AB
33ABA
35(1)(i)
35(1)(ii)
35(1)(iia)
35(1)(iii)
35(1)(iv)
35(2AA)
35(2AB)
35ABB
35AC
35AD
35CCA
35CCB
35CCC
35CCD
35D
35DD
35DDA
35E

32. (a) Any sum paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or [Section 36(1)(ii)].
(b) Details of contributions received from employees for various funds as referred to in section 36(1)(va):

Serial number Nature of fund Sum received from employees Due date for payment The actual amount paid The actual date       of payment to        the

concerned authorities

33. a) Please furnish the details of amounts debited to the profit and loss account, being in the nature of Capital, personal, advertisement expenditure etc:

34. (a) Amounts inadmissible under section 40(a):

  • as payment to non-resident referred to in sub-clause (i)
    • Details of payment on which tax is not deducted:
      • date of payment
      • amount of payment
      • nature of payment
      • name and address of the payee
    • 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 of payment
      • amount of payment
      • nature of payment
      • name and address of the payee
      • amount of tax deducted
  • as payment referred to in sub-clause (ia)
    • Details of payment on which tax is not deducted:
      • Date of payment
      • Amount of payment
      • Nature of payment
      • Name and address of the payee
    • 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 of payment
      • Amount of payment
      • Nature of payment
      • Name and address of the payer*
      • Amount of tax deducted
      • Amount out of (V) deposited, if any
  • Under sub-clause (ic) [wherever applicable]
  • Under sub-clause (iia)
  • Under sub-clause (iib)
  • Under sub-clause (iii)
    • Date of payment
    • Amount of payment
    • Name and address of the payee
  • Under sub-clause (iv)
  • Under sub-clause (v)

* should be read as “payee” for proper reporting

35. (a) Amounts debited to profit and loss account being, interest, salary, bonus, commission or remuneration inadmissible under section 40(b)/40(ba) and computation thereof;

36. (a) Disallowance/deemed income under section 40A(3):

  • On the basis of the examination of books of account and other relevant documents/evidence, whether the expenditure covered under section 40A(3) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft. If not, please furnish the details:
Serial number Date of payment Nature of payment Amount Name    and Permanent Account Number     or

Aadhaar Number   of the payee, if available

  • On the basis of the examination of books of account and other relevant documents/evidence, whether the payment referred to in section 40A(3A) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft If not, please furnish the details of amount deemed to be the profits and gains of business or profession under section 40A(3A);
Serial number Date of payment Nature of payment Amount Name    and Permanent Account Number    or Aadhaar Number    of the payee, if

available

37. provision for payment of gratuity not allowable under section 40A(7);

38. any sum paid by the assessee as an employer not allowable under section 40A(9);

39. particulars of any liability of a contingent nature;

40. amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income

41. amount inadmissible under the  proviso to section 36(1)(iii)

International Taxation Services

42. Clause 22- Amount of Interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006

43. Particulars of payments made to persons specified under section 40A(2)(b). [Clause 23]

44. Amounts deemed to be profits and gains under section 32AC or 32AD or 33AB or 33ABA or 33AC

45. Any amount of profit chargeable to tax under section 41 and computation

46. In respect of any sum referred to in clause (a), (b), (c), (d), (e), (f) or (g) of section 43B, the liability for which:-

  • pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was
    • paid during the previous year;
    • not paid during the previous year;
  • was incurred in the previous year and was
    • paid on or before the due date for furnishing the return of income of the previous year under section 139(1);
    • not paid on or before the aforesaid

(State whether sales tax, customs duty, excise duty or any other indirect tax, levy, cess, impost etc. is passed through the profit and loss account.)

47. Amount of Central Value Added Tax credits availed of or utilized during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the

48. Particulars of income or expenditure of prior period credited or debited to the profit and loss

49. 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.

50. 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.

51. (a) Whether any amount is to be included as income chargeable under the head ‘income from other sources’ as referred to in clause (ix) of sub-section (2) of section 56? (Yes/No)

(b) If yes, please furnish the following details:

  • Nature of income:
  • Amount thereof:

52. (a) Whether any amount is to be included as income chargeable under the head ‘income from other sources’ as referred to in clause (x) of sub-section (2) of section 56? (Yes/No)

(b) If yes, please furnish the following details:

  • Nature of income:
  • Amount (in ) thereof:

53. Details of any amount borrowed on hundi or any amount due thereon (including interest on the amount borrowed) repaid, otherwise than through an account payee [Section 69D].

54. (a) Whether primary adjustment to transfer price, as referred to in sub-section (1) of section 92CE, has been made during the previous year? (Yes/No)

(b)  If yes, please furnish the following details:-

  • Under which clause of sub-section (1) of section 92CE primary adjustment is made?
  • Amount (in ) of primary adjustment:
  • Whether the excess money available with the associated enterprise is required to be repatriated to India as per the provisions of sub-section (2) of section 92CE? (Yes/No)
  • If yes, whether the excess money has been repatriated within the prescribed time (Yes/No)
  • If no, the amount (in Rs.) of imputed interest income on such excess money which has not been repatriated within the prescribed

55. (a) Whether the assessee has incurred expenditure during the previous year by way of interest or of similar nature exceeding one crore rupees as referred to in sub-section (1) of section 94B? (Yes/No)

(b)  If yes, please furnish the following details:-

  • Amount (in Rs.) of expenditure by way of interest or of similar nature incurred:
  • Earnings before interest, tax, depreciation and amortization (EBITDA) during the previous year (in ):
  • Amount (in Rs.) of expenditure by way of interest or of similar nature as per (i) above which exceeds 30% of EBITDA as per (ii) above:
  • Details of interest expenditure brought forward as per sub- section (4) of section 94B: 
A.Y. Amount (in Rs.)
  • Details of interest expenditure carried forward as per sub- section (4) of section 94B:
A.Y. Amount (in Rs.)

56. (a) Whether the assessee has entered into an impermissible avoidance arrangement, as referred to in section 96, during the previous year? (Yes/No)

(b) If yes, please specify:-

  • Nature of the impermissible avoidance arrangement:
  • Amount (in Rs.) of tax benefit in the previous year arising, in aggregate, to all the parties to the arrangement

57. (a) Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year :-

  • name, address and permanent account number or Aadhaar Number (if available with the assessee) of the lender or depositor;
  • amount of loan or deposit taken or accepted;
  • whether the loan or deposit was squared up during the previous year;
  • maximum amount outstanding in the account at any time during the previous year;
  • whether the loan or deposit was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account;
  • in case the loan or deposit was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank draft.

(b) Particulars of each specified sum in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year:—

  • name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the person from whom specified sum is received;
  • amount of specified sum taken or accepted;
  • whether the specified sum was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account;
  • in case the specified sum was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank

(Particulars at (a) and (b) need not be given in the case of a Government company, a banking company or a corporation established by the Central, State or Provincial Act.)

58. (ba) Particulars of each receipt in an amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, during the previous year, where such receipt is otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account:-

  • Name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payer;
  • Nature of transaction;
  • Amount of receipt (in );
  • Date of receipt;

(bb) Particulars of each receipt in an amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, received by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year:—

  • Name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payer;
  • Amount of receipt (in );

(bc) Particulars of each payment made in an amount exceeding the limit specified in section 269ST, in aggregate to a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion to a person, otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year:-

  • Name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payee;
  • Nature of transaction;
  • Amount of payment (in );
  • Date of payment;

(bd) Particulars of each payment in an amount exceeding the limit specified in section 269ST, in aggregate to a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion to a person, made by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year:—

  • Name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payee;
  • Amount of payment (in );

(Particulars at (ba), (bb), (bc) and (bd) need not be given in the case of receipt by or payment to a Government company, a banking Company, a post office savings bank, a cooperative bank or in the case of transactions referred to in section 269SS or in the case of persons referred to in Notification No. S.O. 2065(E) dated 3rd July, 2017)

59. Particulars of each repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T made during the previous year:—

  • name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payee;
  • amount of the repayment;
  • maximum amount outstanding in the account at any time during the previous year;
  • whether the repayment was made by cheque or bank draft or use of electronic clearing system through a bank account;
  • in case the repayment was made by cheque or bank draft, whether the same was repaid by an account payee cheque or an account payee bank

International Taxation Services

60. Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T received otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year:—

  • name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payer;
  • repayment of loan or deposit or any specified advance received otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year.

61. Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T received by a cheque or bank draft which is not an account payee cheque or account payee bank draft during the previous year:—

    • name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payer;
    • repayment of loan or deposit or any specified advance received by a cheque or a bank draft which is not an account payee cheque or account payee bank draft during the previous

(Particulars at (c), (d) and (e) need not be given in the case of a repayment of any loan or deposit or any specified advance taken or accepted from the Government, Government company, banking company or a corporation established by the Central, State or Provincial Act)

62. Clause 32(a)- Details of brought forward loss or depreciation allowance

63. Clause 32(b)- Details of change in shareholding, if any

64. Clause 32(c) – Speculation Loss under section 73 of the Income Tax Act:

65. Clause 32(d) – Details of Losses incurred in respect of a Specified business as referred to under section 73A

66. Clause 32(e) – Details of speculation loss, if any, incurred from deemed Speculation business as referred to in Explanation to section 73:

67. Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA).

Section under which deduction is claimed Amounts admissible as per the provision of the Income Tax Act, 1961 and fulfils the conditions, if any, specified under the relevant provisions of Income Tax Act, 1961 or Income Tax Rules,1962 or any other guidelines, circular, etc,

issued in this behalf.

68. Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB

69. whether the assessee is required to furnish the statement of tax deducted Cor tax collected. If yes, please furnish the details:

70. whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). If yes, please furnish:

71. (a) In the case of a trading concern, give quantitative details of the principal items of goods traded:

  • Opening stock;
  • Purchases during the previous year;
  • Sales during the previous year;
  • Closing stock;
  • shortage / excess, if

72. (b) In the case of a manufacturing concern, give quantitative details of the principal items of raw materials, finished products and by-products :

  • Raw materials:
    • opening stock;
    • purchases during the previous year;
    • consumption during the previous year;
    • sales during the previous year;
    • closing stock;
    • yield of finished products;
    • percentage of yield;
    • shortage/excess, if
  • Finished products/By-products:
    • opening stock;
    • purchases during the previous year;
    • quantity manufactured during the previous year;
    • sales during the previous year;
    • closing stock;
    • shortage/excess, if

73. [Clause 36] Omitted by the Income-tax (Eighth Amendment) Rules, 2021, w.e.f. 1-4-2021

74. (a) Whether the assessee has received any amount in the nature of dividend as referred to in sub-clause (e) of clause (22) of section 2? (Yes/No)

(b)  If yes, please furnish the following details:-

  • Amount received (in ):
  • Date of receipt:

75. 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

76. 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

77. 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.

78. Details regarding turnover, gross profit, , for the previous year and preceding previous year:

Serial number Particulars Previous year Preceding previous year
1. Total turnover of the assessee
2. Gross profit/turnover
3. Net profit/turnover
4. Stock-in-trade/turnover
5. Material consumed/finished

goods produced

(The details required to be furnished for principal items of goods traded or manufactured or services rendered)

79. 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.

80. (a) Whether the assessee is required to furnish statement in Form 61 or Form No. 61A or Form No. 61B? (Yes/No)

(b) If yes, please furnish:

81. (a) Whether the assessee or its parent entity or alternate reporting entity is liable to furnish the report as referred to in sub- section (2) of section 286 (Yes/No)

(b) if yes, please furnish the following details:

  • Whether report has been furnished by the assessee or its parent entity or an alternate reporting entity
  • Name of parent entity
  • Name of alternate reporting entity (if applicable)
  • Date of furnishing of report

82. Break-up of total expenditure of entities registered or not registered under GST:

83. Signature and Stamp/Seal of the signatory

84. Code of Ethics and other matters

85. Format of Financial Statements

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

LATEST ARTICLES

Section 194M of Income Tax Act

Section 194M of Income Tax Act - TDS from Payment

Tax Deduction at Source (TDS) | TDS Rate FY 2022-23 | Dates

Chapter XVII-B of the Income Tax Act, 1961, (hereinafter referred

Deductions under UAE Corporate Tax Law

Introduction - Deductions under UAE Corporate Tax Law A Taxable

Cabinet Resolution on Tax Residency in the UAE

Cabinet Resolution on Tax Residency in the UAE Introduction The

Leave a Reply

Your email address will not be published. Required fields are marked *

Have query and need a consultation with
tax expert?

Arinjay Jain

M&A | International Tax | Direct Tax

We provide consultation to resolve your queries in the Area of International Tax, Merger, Demerger and Foreign Investment, though call with our Tax Expert Mr. Arinjay Jain for a 15 minutes session.