All about Tax Audit and Form 3CD (Part-2)

Sl. No.

Particulars

Comments

1

Name of the assessee

This clause requires the auditor to state the name, address and PAN/Aadhaar of the assessee whose accounts are being audited. The auditor should also ensure that the name matches with the name on PAN/Aadhaar. If tax is in respect of the branch, mention the name of such branch along with name of the assessee.

2

Address

3

Permanent Account Number (PAN) branch should be mentioned along with the name of the assessee.

4

Whether the assessee is liable to pay indirect tax like excise duty, service tax, sales tax, goods and services tax, customs duty, etc. If yes, please furnish the registration number, GST number or any other identification number allotted for the same

This clause requires the auditor to state the registration number obtained by the assessee under indirect tax.

5

Status

The status mentioned under this clause refers to the different classes of assesses included in the Act – individual, Hindu Undivided Family (HUF), company, firm (includes LLP), Association of Persons (AOP), Body of Individuals (BOI), local authority and artificial juridical person and not the residential status. The auditor is required to mention the status as explained above

6

Previous year from ___ to ____

This relates to the financial year pertaining to which the accounts are audited. This period is typically from the 1st April to 31st March of the next year.Special care has to be taken in case of closure of existing businesses, new businesses, amalgamations, demergers, conversions, reconstitution etc as the date of beginning/ending of the previous year may be different.

7

Assessment Year

The assessment year relevant to such previous year for which the accounts are being audited must be stated.

8

Indicate the relevant clause of section 44AB under which the audit has been conducted

The applicable clause [(a) to (e)] of Section 44AB under which tax audit is being conducted should be selected- Clause(a)- Total sales/turnover/gross receipts of business exceeding specified limits. Clause(b)- Gross receipts of profession exceeding specified limits. Clause (c)- Profits and gains lower than deemed profit under section 44AE/44BB/44BBB. Clause (d)- Profits and gains lower than deemed profit under section 44ADA. Clause (e)- When provisions of section 44AD(4) are applicable. It also provides the following options-Third proviso to section 44AB- Audited under any other law. Clause 44AB(a) proviso- Where aggregate cash receipts and cash payments exceed specified limits.

8

(a)

Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/115BAC/115BAD

This is a new clause inserted in the Form 3CD. This clause is applicable only to individuals, HUFs, companies and co-operative societies.The auditor is required to state whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/115BAC/115BAD by filing relevant forms

9

(a)

If firm or association of persons, indicate name of partners/members and their profit sharing ratios

The name of the partners or members of a firm or AOP or LLP or BOI will be mentioned here along with their profit sharing ratio. Further, profit sharing ratio includes the ratio at which losses would be shared.

(b)

If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change

All changes that occur during the year, no matter how often, in relation to partners/members or profit sharing ratio must be mentioned here.

10

(a)

Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession)

This clause is applicable to all assessees covered under tax audit.The principal line of each business or profession is to be determined and stated i.e the sector and the sub sector in which the business or profession falls. If there are any changes in the nature of business or profession to be carried out, the same needs to be mentioned. Temporary discontinuance of business need not be mentioned.

(b)

If there is any change in the nature of business or profession, the particulars of such change

11

(a)

Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed.

Clause 11(a) shall apply only in respect of assessees for whom books of accounts have been prescribed under section 44AA. Clause 11(b) and (c) shall apply to all the assessess, whether or not for whom books of account have been prescribed under section 44AA.Books of accounts shall include cash book, journal, ledger, etc.The tax auditor lists the books and records that were checked by him.

(b)

Lists of books of account maintained and the address at which the books of account are kept.

(c)

List of books of account and nature of relevant documents examined

12

Whether the profit or loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant section (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, Chapter XII-G, First Schedule or any other relevant section)

The amount of profit that relates to a business subject to the presumptive scheme of taxation must be reported here. In case of multiple businesses, only the amount of profit that relates to the businesses subject to the presumptive scheme of taxation will be reported section-wise.

13

(a)

Method of accounting employed in the previous year

The clause 13(a) to (c) applies to all assessees.The method of accounting, whether cash or mercantile must be mentioned. Companies however are compulsorily required to maintain their accounts on accrual or mercantile basis under the Companies Act. If there has been any change in the method of accounting the same should also be reported along with the effect of such change on the profit or loss.

(b)

Whether there had been any change in the method of accounting employed vis-à-vis the method employed in the immediately preceding previous year.

(c)

If answer to (b) above is in affirmative, give details of such change, and the effect thereof on the profit or loss.

(d)

Whether any adjustment is required to be made to the profits or loss for complying with the provisions of income computation and disclosure standards notified under section 145(2)

The clauses (d) to (f) applies only to assessees following mercantile system of accounting.The Income Tax Act has prescribed certain Income Computation and Disclosure Standards (ICDS) ranging from ICDS I to ICDS X. The effect of these ICDS must be taken in the computation of tax to arrive at the net tax liability – The increase in profit, decrease in profit and net effect is mentioned as per each ICDS.

(e)

If answer to (d) above is in the affirmative, give details of such adjustments

(f)

Disclosure as per ICDS

The ICDS also contains certain disclosure requirements and this is the clause under which such disclosures are ultimately made.

14

(a)

Method of valuation of closing stock employed in the previous year.

The tax auditor is required to state the method of valuation of closing stock in the previous year. The assessee must account for closing stock as per AS 2 or Ind AS-2, as applicable. If there has been any deviation in the method of valuation of closing stock, the same should also be reported along with its effect on the profit and loss.

(b)

In case of deviation from the method of valuation prescribed under section 145A, and the effect thereof on the profit and loss