According to section 44AB of the Income Tax Act, following are mandatorily required to get their accounts audited:
· An individual engaged in business with Rs.1 crore and above as the annual turnover of business.
· An individual engaged in any sort of profession with income receipts in a year aggregated to be Rs.50 lakhs and above.
· An individual who, under Section 44AD, qualifies for the presumptive taxation scheme but at a later stage claims that the profits for the business are lower than the profits calculated earlier as per the presumptive taxation scheme. It is also applicable in case, the income on record is calculated to be more than the amount which is not chargeable for taxation or is tax-free.
· If the assessee qualified under the presumptive taxation scheme, after a specific period opts out of it, will lose the ability to go back to the said taxation scheme for a continuous period of 5 assessment years after opting out.
· An individual who qualifies to choose the presumptive taxation scheme of selection under Section 44AE but then claims that the profits for such business are lower than the profits calculated in accordance with the presumptive taxation scheme of section 44AE.
· An individual who qualifies to choose the presumptive taxation scheme of selection under Section 44BBB but then claims that the profits for such business are lower than the profits calculated in accordance with the presumptive taxation scheme of section 44BBB.
You can submit your tax audit report easily with the help of Enterslice.
Who is Responsible for Tax Audit Report
Submitting the Tax Audit Report is the final step which requires to be performed in an orderly manner. After the audit is thoroughly done, the auditor submits a detailed audit report with opinions and inferences of the financial statements in a format prescribed by the Institute of Chartered Accountants of India. The report must not contain any misstatements, ambiguous or misleading statements.
The audit report first mentions the legal name of organization/individual and the details of the financial statements being audited. Every tax audit report along with other headings as per format, must have these three heads: ‘Management’s Responsibility for the Standalone Financial Statements’, ‘Auditor’s Responsibility’ and ‘Report on Other Legal and Regulatory Requirements’. The auditor, in case of any negligence brought forward, may be held accountable. Thus, the auditor must be coherent in his opinions and must act independent of any factors.
Objectives of Tax Audit
Tax audit is being conducted to achieve the following:
i. A proper system ensures maintenance of its record of income, revenue, expense etc in a correct and verified manner.
ii. Tax audits minimize the risk of frauds and other illegal practices
iii. In case of discrepancies, there is an ease of methodical examination of the well-maintained record.
iv. It also facilitates the implementation of tax laws during routine verification since proper presentation of accounts saves time of the assessing officer
v. Also, be noted that failure to comply with the Income Tax rules attracts penalty, thus tax audits for compliance are a wise choice
Penalty for Non-Compliance
According to section 271B of the Act, if any person who is required to comply with section 44AB, does not do so, as per the prescribed manner, a penalty may be imposed by the Assessing Officer which may be:
(a) 0.5% of the total turnover, sales or gross receipts, in business, or of the gross receipts in profession of an individual, in such year or years as under scrutiny, OR
(b) Rs. 1,50,000.
Whichever is lower
Though, there may not be penalty imposed a reasonable and bonafide cause for such failure is brought forward.
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