Tax audit, as mentioned in section 44AB of the Income tax Act, needs to be conducted by a professional auditor approved by the Income Tax Department. This professional could be a Chartered Accountant (CA) having a full-time certificate of professional practice or a company specialising in this field. The tax audit ensures the accuracy and correctness of the Books of Account owned and maintained by the taxpayers and that their income is calculated on the basis of the applicable Income Tax Rules. Form 3CB is one of the key forms which is used to submit an audit report generated u/s 44AB of the Income Tax Act, 1961.
Different types of audits are prescribed under various laws, like company audits under company law, cost audits under cost accounting law, etc. Certain taxpayers must get the books of accounts of their business/profession audited under the Income Tax Act, 1961, known as a tax audit. A tax audit means a Chartered Accountant reviews a business’s accounts and checks their compliance with the Income Tax laws.
The Chartered Accountant conducts a tax audit of the taxpayer’s accounts under Section 44AB. Certain businesses and professionals are legally required to mandatorily carry out regular audits under Section 44AB of the Income Tax Act.
What is a Tax Audit?
Tax audit is a cross-examination of the books of accounts of the taxpayer by a Chartered Accountant (holding full-time Certificate of Practice) under the Income Tax Act 1961. The auditor has to furnish the audit report in the specified audit form along with the detailed particulars.
Section 44AB deals with the conditions under which Tax audit becomes mandatory for some taxpayers. The main purpose of a tax audit is to verify the accuracy of the financial records and avoid any fraud or tax evasion.
What is a Tax Audit Report?
The person conducting a tax audit has to provide the findings in a report using specified ‘Audit Forms’ prescribed by the income tax department. Section 44AB prescribes Forms 3CA and 3CB. Along with these two forms, the auditor has to furnish a form 3CD. Let us discuss these forms in detail.
The Chartered Accountant will file the tax audit report electronically to the Income Tax Department. After the filing of the report by the Chartered Accountant, the taxpayer must approve the tax audit report from his/her Income Tax e-fling account.
Prescribed audit forms under Section 44AB
The audit report has to be furnished in either of the following forms:
(i) Form 3CA and (ii) Form 3CB
Form 3CA
In respect of a taxpayer carrying on a business or profession and who is already mandated to get his accounts audited under any other law (i.e. law other than income tax law). The Form contains the auditor’s report and the particulars of the audit conducted.
For instance, A company is required to get its accounts audited compulsorily under the Companies Act 2013. So, it will furnish Form 3CA.
Particulars of Form 3CA
Point 1
- Name and address of the taxpayer along with Permanent Account Number.
- Name of the Auditor (Individual/ Firm as the case may be).
- Law under which accounts have been audited (eg: Companies Act).
- Date of Audit Report.
- Period of Profit & Loss Account/ Income & Expenditure Account. (Beginning Date & End Date)
- Date of Balance Sheet.
Point 2
- Declaration of attaching Form 3CD along with the audit report.
Point 3
- Audit Observations/ Qualifications found in the details related to Form 3CD.
Point 4
- Place & Date of signing audit report.
- Name, Address, and Membership Number of the Auditor.
- Stamp/ Seal of the Auditor.
Form 3CB
In respect of a taxpayer carrying on a business or profession but who is not required to get his accounts audited under any other law. The Form contains the auditor’s report and the particulars of the audit conducted.
A proprietorship entity or partnership firm with a turnover of more than 1 crore and not opting for the presumptive income scheme is not required to get its accounts audited under any other law except income tax. So, it will furnish Form 3CB.
Along with either of the forms mentioned above, the tax auditor shall also furnish Form 3CD which forms part of the audit report and contains the prescribe particulars.
Particulars of Form 3CB
Point 1
- Date of Balance Sheet.
- Period of Profit & Loss Account/ Income & Expenditure Account. (Beginning Date & End Date).
- Name and address of the taxpayer along with Permanent Account Number.
Point 2
- Address, where the books of accounts are kept
- Address of branches (if books are kept at branches also).
Point 3(a)
- Audit Observations/ Qualifications/ Comments/ Discrepancies.
Point 3(b)
- Declaration by the auditor regarding –
- Obtaining all the information and explanations necessary for the audit.
- Assurance that the organization (including branches) maintains proper books of accounts.
- Balance sheet and Profit & Loss Account gives a true and fair view.
Point 4
- Declaration of attaching Form 3CD along with the audit report.
Point 5
- Audit observations/ discrepancies found in the details related to Form 3CD.
Point 6
- Place & Date of signing audit report.
- Name, Address, and Membership Number of the auditor.
- Stamp/ Seal of the auditor.
Particulars of Form 3CD
Form 3CD is a 44-points detailed statement of particulars. All the details related to various aspects of the business and transactions have to be filled at appropriate places. A detailed explanation of each point of Form 3CD
FAQs
What are the Key Differences between Form 3CA, 3CB and 3CD?
The key difference between Form 3CA and Form 3CB is with respect to the applicability. While Form 3CA needs to be submitted by individuals who are mandatorily required to be audited u/s 44AB of the Income Tax Act, Form 3CB is applicable to even those who are audited under other sections too. While both 3CA and 3CB are short single page forms, Form 3CD is a much more detailed document that shows details of the audit that was carried out by the auditor. Form 3CD operates as a supporting document that needs to be submitted with both Form 3CA and 3CB as proof of completion of a mandatory audit.
How to download Form 3CB
You can download Form 3CB for free from the Income Tax of India website. Subsequently the downloaded form can be printed, filled out and submitted with the appropriate authorities.
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