Analysis of Form 3CA, 3CB and 3CD - Part 1: Form 3CA

Vivek Agarwal FCA, CS, LLB , Last updated: 05 November 2020
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Analysis of FORM 3CA, 3CB and 3CD [Series of articles]

S.No.	Form No.	Description
1	3CA	Audit Report under Section 44AB in a case where the accounts of the business or profession of a person have been audited under any other law
2	3CB	Audit Report under Section 44Ab in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G
3	3CD	Statement of particulars required to be furnished under Section 44AB

Part 1:

Analysis of Form No. 3CA

S.No.

Heading

Side Heading

Explanation

Applicability

Tax Audit Report in Form No. 3CA is applicable, where a person having business/profession, is required to get its accounts audited under any law (eg, Statutory Audit under the Companies Act, 2013/LLP Act, 2008).

Example

In the case of a company, which follows the April-March period as its financial year, the Tax Audit report would in Form No. 3CA, if the Tax Audit is applicable to it. However, in case of partnership firm or proprietary concern, which is not required to get their accounts audited under any other Law, Tax Audit report would be in Form No. 3CB.

In the case of LLP following April-March as its financial year and if it is required to get its account audited under the LLP Rules, 2009, then the Tax Audit report would be in Form No. 3CA. However, if it is not required to get its accounts audited under the LLP Rules, then Form No. 3CB would be applicable. It may be noted that under section 24 of the LLP Act, an audit is mandatory in case the LLP whose turnover in the relevant financial year exceeds Rs 40 lakh or whose contribution exceeds Rs 25 lakh.

Other points

The Tax Audit report is now mandatorily required to be uploaded on the e-filing portal.

Format:

Form No. 3CA consists of three paragraphs

Para 1

1. *I/we report that the statutory audit of M/s. _________________ (Name and address of the asseessee with Permanent Account Number) was conducted by *me/us/M/s. ____________________________________________________ in pursuance of the provisions of the ___________________________ Act, and*I/we annex hereto a copy of *my/our/their audit report dated _______________________ along with a copy of each of:-

(a) the audited *profit and loss account/income and expenditure account for the period beginning from ----------------------to ending on -----------------------------.

(b) the audited balance sheet as at, _____; and

(c) documents declared by the said Act to be part of or annexed to, the *profit and loss account/income and expenditure account and balance sheet.

Analysis

In case, the Tax Auditor is different from the statutory auditor, then the Tax Auditor needs to mention the name of the statutory auditor. However, if the Tax Auditor also happens to be the statutory auditor, then the fact that he has conducted the statutory audit should be mentioned.

Newly set up business:

The beginning period of profit and loss account should be carefully mentioned in case of business newly set up during the year. In this regard, the Tax Auditor should obtain the information regards, the date of incorporation, date of commencement of business, etc, and then decide the period of profit and loss account/income and expenditure account.

The business closed before 31 March

In case the business was closed before 31 March and books were prepared till the close of business, then in such a case, the Tax auditor should report the period till the closing date, instead of 31 March.

Para 2

2. The statement of particulars required to be furnished under section 44AB is annexed herewith in Form No. 3CD

Para 3

3. In *my/our opinion and to the best of *my/our information and according to an examination of books of account including other relevant documents and explanations given to *me/us, the particulars given in the said Form No. 3CD is true and correct subject to the following observations/qualifications if any:

(a)
(b)
(c)

Analysis:

It may be noted that with the amendment in Form No. 3CA, all the observations/qualifications are now required to be mentioned on the face of Form No. 3CA under para 3. The purpose of giving observations/qualifications along with the opinion is to make the Audit Report comprehensive so that the Assessing Officer and other users of the Tax Audit report can understand the impact of observations/qualifications.

Where any of the requirements in this Form is answered in the negative or with qualification, give reasons, therefore.

True and correct

Usage of words 'True and Correct' lay emphasis on the factual accuracy of the particulars/information given in Form No. 3CD. Further, the expression also implies completeness and correctness of the information given in the said form.

Particulars should be furnished in the respect of material items and the Tax Auditor should ensure factual accuracy relating to these particulars.

The signing of FORM 3CA

Form No. 3CA is required to be signed by the Tax Auditor. In case, the appointment is in the name of the Firm/LLP, the partner may sign on behalf of such Firm/LLP. However, in such a case, the name of the concerned firm/LLP should be mentioned and the status or capacity in which the Tax Audit report signed by the Chartered Accountant (as a proprietor/partner) should be clearly brought out.

> Membership number

> Registration number of the firm

SA 700

From 1 April 2012, all the Audit reports are to be issued based on the requirements of SA 700 (Revised) - Forming an Opinion and Reporting on Financial Statements.

There is no specifically allocated field for providing information relating to the respective responsibilities of the assessee and the tax auditor as required in terms of the principles laid out in the SA 700. However, having regard to the importance of these respective responsibility paragraphs from the perspective of the readers of the tax audit report, these respective responsibility paragraphs can be provided in the space provided for giving observations, etc, under cl (3) of Form No. 3CA

Responsibility Paragraphs:

illustration of the Assessee's responsibility paragraph and Tax Auditor's responsibility paragraphs in respect of Form No. 3CB which can be suitably reworded for the purpose of reporting under Form No. 3CA:

"Assessee's Responsibility for the Financial Statements and the Statement of Particulars in Form 3CD

1. The assessee is responsible for the preparation of the aforesaid financial statements that give a true and fair view of the financial position and financial performance (if applicable) in accordance with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India (Refer note below). This responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

2. The assessee is also responsible for the preparation of the statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 annexed herewith in Form No. 3CD read with Rule 6G(1)(b) of Income Tax Rules, 1962 that give true and correct particulars as per the provisions of the Income-tax Act, 1961 read with Rules, Notifications, circulars, etc that are to be included in the Statement.

Tax Auditor's Responsibility:

3. My/Our responsibility is to express an opinion on these financial statements based on my/our audit. I/We have conducted this audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purposes of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. I/We believe that the audit evidence I/we have obtained is sufficient and appropriate to provide a basis for my/our audit opinion."

Note: in case of the assessee being a Company, the reference would be to the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956/ section 133 of the Companies Act, 2013)

Also read - Tax Audit Report and Forms 3CA, 3CB, 3CD, and 3CE - A Comprehensive Analysis