Compulsory Audit of Accounts [Section 44AB]

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1. Who has to get his Accounts Audited on Compulsory Basis

The following persons are required to get their accounts compulsorily audited by a chartered accountant—

(1) A Person carrying on Business

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 setting forth such particulars as may be prescribed.

Compulsory Audit of Accounts-Section 44AB
Compulsory Audit of Accounts-Section 44AB

Specified date 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 transaction30th November of the relevant assessment year
(b) In any other case30th September of the relevant assessment year

It may be noted that the assessee is required not only to get his accounts audited by the specified date but also furnish the audit report on or before the specified date, irrespective of the fact whether the return of income is filed by that date or not. If the audit report is submitted on or before the due date but the return of income is filed subsequently then a copy of the tax audit report and the proof of filling the same should be submitted along with the return of income.

(2) A Person carrying on Profession

In the case of a person carrying on profession, the provisions for compulsory audit are applicable if his gross receipts in profession exceed Rs. 50,00,000 in any previous year.

(3) A Person covered under Section 44AD, 44AE, 44AF, 44BB, 44BBB

In case of a person who is carrying on the business and covered under section 44AE, 44BB 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) A Person covered under Section 44ADA

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 covered under Section 44AD (4)

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.

As per section 44AD(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of section 44AD(1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of section 44AD(1).

2. Due date for getting Books Audited/ Submission of Audit Report and Form No. –

These provisions are given in the table below—

Different taxpayersAudit Form No.Statement particularsDue date for getting books auditedDue date for submission of audit report
In the case of a person who carries on business or profession and who is required by or under any law to get his accounts auditedForm No. 3CAForm No. 3CDDue date of furnishing return of income under section 139(1)Due date of furnishing return of income under section 139(1)
In the case of a person who carries on business or profession but not being a person referred to aboveForm No. 3CBForm No. 3CDDue date of furnishing return of income under section 139(1)Due date of furnishing return of income under section 139(1)

3. 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.

(i) 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.

4. Report of Audit of Accounts [Rule 6G]

1. The report of audit of 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;

Advertising agents, clearing, forwarding and shipping agents, couriers, insurance agent, nursing home, stock and share brokers and dealers in shares and securities and travel agents have been held to be business.

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