J. B. NAGAR CPE Study Circle of WIRC TAX AUDIT: Practical issues

2It prescribes 8% of turnover or gross receipts as net profit from the business, or at a sum higherthan aforesaid as declared in the return as income chargeable to income. In case an eligibleassessee chooses to offer income lower than what is prescribed, then, the assessee is requiredto maintain books of account and get them audited u/s. 44AB.Similarly S. 44AE provides assessee owning less than 10 carriages and earning from business ofplying, hiring or leasing goods carriages will have presumptive income from heavy goodsvehicles Rs. 5,000 per vehicle per month and from light goods vehicle Rs. 4,500 per vehicle permonth. If such assessee chooses to offer income lower than what is prescribed, then, theassessee is required to maintain books of account and get them audited u/s. 44AB of the Act.Who can be appointed as Tax AuditorA Chartered Accountant or a firm of Chartered Accountants in full time practice can beappointed as Tax Auditor. Internal Auditor cannot be a tax auditor. (wef 12.12.08)Communication with previous auditor, whether necessary?Yes. What, if previous auditor objects on outstanding consultancy fees?How many Tax Audits a Chartered Accountant can undertake?A firm of Chartered Accountants cannot accept more than 45 Tax Audits per partner. A membercannot accept more than 45 tax audits.How can a Company remove Tax Auditor?Removal of tax auditor does not require compliance as specified u/s. 224 of Companies Act.There is no specific procedure, however, it is possible for the management to remove a taxauditor when there are valid grounds for such removal.Is it mandatory to submit to tax audit report to AO after efilling returnAnnexure less return. Under rule 12(2) the report etc. should not be furnished along withreturn of income. Tax Audit report may be retained by the assessee in his records and producedto AO whenever called for during hearings. However, filling up particulars of tax audit in theereturn is important and date of of audit mentioned therein is also significant.Consequence of failure to carry out tax audit in time (S. 271B)If an assessee fails to procure tax audit reprot within prescribed time AO can levy penalty of anamount being lower of ½% of Turnover or gross receipts or Rs. 1,50,000/- (wef 1.4.11, earlierRs. 1,00,000/-). However if failure is for reasonable cause penalty is not to be levied. S.273BCan penalty u/s. 271B be imposed when books of account not maintained?Assessee not maintaining books of account, penalty can be levied only u/s. 271A for violation ofSec. 44 AA and there being no possibility of offence contemplated u/s. 44AB of failure to getthe accounts audited, penalty u/s. 271B cannot be imposed. Surajmal Parsuram Todi Vs. CIT[1996] 222 ITR 691 (Gau)