Tax Audit Clause related 8. Clause 4: What if the assessee is NOT registered under Indirect tax Acts, but is liable to pay tax therein?

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1 Tax Audit Rept Issues F Discussion CA K.Gururaj Acharya, Bangale General Issues 1. Considering the limit of 60 TAs per partner, if a Firm has A & B as Partners and Partner A signs 120 repts & B doesn t sign any TAR, Is it OK? 2. In case of LLP should repting f Tax Audit be in Fm 3CA 3CB? 3. What are the various observations qualifications that could be given under Clause 3 of Fm 3CA Clause 5 of Fm 3CB? 4. While filling Fm 3CD what are the general principles to be kept in mind wrt the following items - - Where there are judicial pronouncements - When there are conflicting judicial opinions and - The role of AS, G/N, SAs issued by ICAI? 5. Can Test Check be used f giving details in Fm 3CD, in cases of huge vol. of transactions, esp. w.r.t. 40A(3), 269 SS / T & TDS repting under cl.34 of 3CD reg. TDS/TCS? 6. Accountant U/s 288 What are qualifications & disqualifications f a person to be appointed as a Tax audit? 7. Partnership firm engaged in Cement trading whose turnover is Rs. 80 lacs having a net loss of Rs. 5,00,000/ f FY a) Is this firm required to get the accounts audited under S. 44AB r/w S. 44AD? b) Are provisions of Chapter XVIIB (TDS), 40(a)(ia), 40A(3) etc applicable to such firm? Tax Audit Clause related 8. Clause 4: What if the assessee is NOT registered under Indirect tax Acts, but is liable to pay tax therein? 9. Clause 11(c): What must be repted under: Nature of relevant documents. CA. K. G. Acharya Page 1 of 5

2 10. Clause 12: a. Assessee carries on 3 business i.e Grocery with turnover Rs.160 Lakhs, Civil Contract Rs.20 Lakhs and Textiles Rs.30 Lakhs. He opts to declare income at 8%. Is Audit mandaty f FY , considering that total turnover > Rs.2 Cre? b. Assessee carries on 2 business i.e Grocery with turnover Rs.250 Lakhs and Textiles Rs.80 Lakhs. Is TA mandaty f both the business? 11. Clause 17: Whether leasehold rights, development rights, TDR, FSI, etc. would fall under this provision? 12. Clause 17: Transfer of immovable property done during FY at the guidance value prevailing on the agreement to sell date & thereafter there is an increase in the guidance value at the time of registration What is the tax effect from the perspective of the seller if the seller is in the business of real estate otherwise? 12.2 What is the tax effect from the perspective of the buyer if the buyer is an individual if the buyer is a Company? 13. Clause 18: What is the rate of Depreciation - F software embeded in CNC machines? - F Computers & Books f AY & Clause 18: Whether improvements on 2 nd hand machines are eligible f Addl. Depn of 20% U/s.32(iia)? 15. Clause 20(b): The current status of requirements f disclosure in clause 20(b) ESI/PF vis a vis clause 26-section 43b, as several changes and court rulings regarding disallowance under this head have been repted. 16. Clause 20(b): In case of clause 20 (b) regarding details of contributions received f employees f various fund [sec. 36 (1)(va)] Whether details are to be provided full year month wise only f those cases deposited after a delay. 17. Clause 21(a): What disclosures are to be made WRT Clause 21(a) being - Expenditure by way of penalty fine f violation of any law f the time being fce - Expenditure by way of any other penalty fine not covered above - Expenditure incurred f any purpose which is an offence which is prohibited by law 18. Clause 21(a): What will be the repting requirements in the following cases? 18.1 Penalty f a traffic offence. CA. K. G. Acharya Page 2 of 5

3 18.2 Interest f delayed payment of sales tax 18.3 Penal interest to banks / LD 18.4 CSR Expense 18.5 Freeby Exp incurred by pharma Cos. On Docts 18.6 Gifts to customers 18.7 Payment to antisocial elements / police f protection to construction site 19. Clause 21(a): Asset partly used f personal purpose What are the expenditures that would be shown as incurred f Personal purpose with respect to Mot Car under clause 21(a) of tax audit rept: Clause 21(a): Please furnish the details of amount debited to the P&L account, being in the nature of personal expenditure. 20. Clause 21(d): a) Whether Rule 6DD f the purpose of S. 40A(3) allows journal entry as a acceptable mode of payment? b) What is the remedy when goods have to be purchased through Cash payment? [Which is supreme Business Income Tax!!] 21. Clause 21(h): Disallowance u/s 14A: Is any qualification disclaimer Emphasis rept required, when rule 8D is not applied? 22. Clause 22: What are the provisions with respect to MSME credits as per a) Micro Small & Medium Enterprises Development Act, 2006 b) Companies Act c) IT Act Vis-à-vis Tax Audit Rept. 23. Clause 26 of Fm 3CD Reg. Sec 43B- what is the answer to the Query State whether Sales tax, Custom duty, E.D any other indirect tax levy, cess, impt etc., is passed through the P&L A/C 0 Yes 0 No? What could be the implication f the answer, if it is Yes No? 24. Clause 26: 43B Expenses disallowed in year 1 Paid befe due date Does the assessee have an option of not claiming it as a deduction in year 1? CA. K. G. Acharya Page 3 of 5

4 25. Clause 27(a): What is the answer f the Question in Cl. 27 (a) in Fm 3CD on CENVAT? The e-filing ptal requires repting in the following fmat: CENVAT Credit is availed of utilized during the previous year and its treatment in the P&L A/C. 0 Yes 0 No Treatment in Profit & Loss Account Treatment of outstanding CENVAT Credits in the accounts. Treatment of outstanding CENVAT Credits in the accounts 26. Clause 28: Whether the receipt of shares, wherein the allotments were made by the Company on Private placement preferential allotment rights issue, to be considered? 27. Clause 31(a/b): a) Loan taken repaid by way of journal entry. - Whether audit is required to rept such journal entry transaction as violation of S 269SS/T in its tax audit rept? - Whether Penal Provisions u/s 271D/E gets attracted? b) Full cash paid at the time of registration of Immovable Property without any advance payment Whether this transaction is in contravention of S.269SS? 28. Clause 34(a): Are the following assessees liable to TDS provisions under Chapter XVII B and are they liable f disallowance U/s 40a(ia): - The assessee opts to pay tax on 8% of the turnover U/s.44AD. - The assessee wants to declare lower than 8% profits and get his books audited. 29. Clause 34(c): Whether the concept of materiality can be followed, while repting under this clause? 30. Clause 34(c): Till when is interest required to be calculated U/s 201(1A) to be repted in 3CD? 31. Clause 41: a. What precautions to be taken by Audit, to ascertain the demands raised under various tax laws? b. Whether adjustment of refund, f some demand, is to be disclosed? CA. K. G. Acharya Page 4 of 5

5 32. Clause 34(a): What should be the disclosure in the following case: a) Interest as per Profit & Loss Account Rs.10,00,000/- (including interest as mentioned in item 2 to 15 below) b) Interest to Partners Rs. 1,20,000 c) Interest to Bank Rs.70,000 d) Interest paid to Government Rs.30,000 (Section 196) e) Interest to others: less than Rs.5,000 Rs.50,000 f) Interest covered under Fm 15G/15H Certificate of non deduction Rs.1,50,000 g) Int. covered under Certificate of deduction at lower 2% (instead of 10%) on Rs.50,000/- h) Interest covered under Certificate of deduction at Nil rate (instead of 10%) on Rs.25,000/- i) Interest to Non Residents covered u/s 195 Rs.1,25,000 (TDS Rs.37,500 u/s 195) j) Interest on deducted at Nmal rate ie. 10% Rs.60,000 (TDS Rs.6,000) k) Int. on deducted at Higher Rate (15% instead of 10% by mistake) Rs.40,000 (TDS Rs.6,000) l) Int. on deducted at lower rate (5% instead of 10% by mistake) Rs.30,000 (TDS Rs.1,500) m) Interest on deducted at lower rate, but remitted at specified rate Rs.90,000 (TDS made Rs.4000 but remitted Rs.9,000) n) Interest on deducted, but not remitted Rs.35,000 (TDS Rs.3,500) o) Interest on deductible, but not deducted Rs.45,000 p) on is not deducted but Resident Payee has complied all 4 conditions in Proviso to S. 201(1) & therefe deduct not deemed as Assessee in Default Rs. 80,000. Where should the following be disclosed: Interest paid to person who does not Possess PAN TDS 20% TDS 10% Query TAN Section Nature of Payment amount of payment receipt of the nature specified in column (3) required to be deducted out of (4) deducted at specified rate out of (5) Tax Deducted out of (6) deducted at less than specified rate out of (7) (5) tax deducted on (8) tax deducted not deposited to the credit of the Central Government out of (6) & (8) (7) & (9) (1)(2)(3) (4) (5) (6) (7) (8) (9) (10) Interest as per P&L 10,00,000 TAN / 194A / Interest 8,75,000 4,55,000 3,80,000 25,500 30,000 1,500 3,500 Good Bad Ugliest Tax specified rate + 25,500 Tax lower than the specified rate + 1,500 tax deducted but not deposited to CG - 3,500 TDS remittance Challan to match 23,500 Expenditure on which Tax deducted but not remitted 35,000 Expenditure on which Tax deductible but not deducted 45,000 Disallowance U/s 40(a)(ia) 80,000 CA. K. G. Acharya Page 5 of 5

Specified Date And Tax Audit Penalty Reasonable Causes Tax Auditor & Limit

Specified Date And Tax Audit Penalty Reasonable Causes Tax Auditor & Limit Western India Regional Council Student Workshop on 7th August, 2015 Tax Audit Under Section 44AB of The Income-Tax Act, 1961 Presented By RAKESH M. VORA RPJ & ASSOCIATES COVERAGE Clause by Clause 23 to