Taxaudit u/s 44ab readwith councils general guidelines

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nazeer (Querist)
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29 September 2012 Dear members,

i want clarifications regarding the following doubt of mine.please support your answers with relevant caselaws / FAQ's / or notifications or ICAI interpretations.

Question :

1)Tax audit limits to sign u/s 44AB of IT act for one Auditor is 45 signs per year.

Does the above limit of 45 include the below assignment also ?

"The assessee has a turnover of 50 lakhs and he claims his profit to be lower than the deemed profit u/s 44AD - thereafter he maintains books u/s 44AA and gets his books audited u/s 44AB".

2) What is the consequence to the auditor who signs the tax audits more than the limits specified in councils general guidelines ?

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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29 September 2012 1) for cases which covers under section 44AD or 44AE but the assessee at his option makes audit u/s44AB because of offering of income lower than minimum prescribed income doesn't calculated(consider) for the purpose of limit for tax audits per CA.

2) If the CA makes audit exceeding the prescribed limit i.e 45 tax audits per CA then he will consider as professional misconduct and liable for punishment of ICAI according to the "INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA REGULATIONS,1949".

OM SAI SRI SAI JAI JAI SAI

nazeer

nazeer (Querist)
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03 October 2012 Dear Dintakurthi,
Thankyou for replying ttomy query, but could you please support your answer with some evidence / interpretation stating a caselaw or something.

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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03 October 2012 Mr.Nazeer Please Read the Following Notification by ICAI it gives Clarification to You.
NOTIFICATION DATED 13TH JANUARY, 1989
[PUBLISHED IN PART III SECTION 4 OF THE GAZETTE OF INDIA DATED 4TH
FEBRUARY, 1989]
No. 1-CA(7)/3/88): In exercise of the powers conferred by clause (ii) of Part II of
the Second Schedule to the Chartered Accountants Act, 1949, the Council of the
Institute of Chartered Accountants of India hereby specifies that a member of the
Institute in practice shall be deemed to be guilty of professional misconduct, if he
accepts, in a financial year, more than the "specified number of tax audit assignments"
under Section 44AB of the Income-tax Act, 1961.
Provided that in the case of a firm of chartered accountants in practice, the "specified
number of tax audit assignments" shall be construed as the specified number of tax
audit assignments for every partner of the firm.
Provided further that where any partner of the firm is also a partner of any other firm or
firms of chartered accountants in practice, the number of tax audit assignments which
may be taken for all the firms together in relation to such partner shall not exceed the
"specified number of tax audit assignments" in the aggregate.
Provided further that where any partner of a firm of chartered accountants in practice
accepts one or more tax audit assignments in his individual capacity, the total number
of such assignments which may be accepted by him shall not exceed the "specified
number of tax audit assignments" in the aggregate.
Explanation:
1. For the above purpose, the "specified number of tax audit assignments means-
(a) in the case of a chartered accountant in practice or a proprietary firm of
chartered accountant, 30 tax audit assignments, in a financial year, whether in respect of corporate or non-corporate assessees.
(b) in the case of a firm of chartered accountants in practice, 30 tax audit
assignments per partner in the firm, in a financial year whether in
respect of corporate or non-corporate assessees.
In computing the "specified number of tax audit assignments" each year's audit
would be taken as a separate assignment.
In computing the "specified number of tax audit assignments", the number of
such assignments, which he or any partner of his firm has accepted whether
singly or in combination with any other chartered accountant in practice or firm
of such chartered accountants, shall be taken into account.
The audit of the head office and branch offices of a concern shall be regarded
as one tax audit assignment.
The audit of one or more branches of the same concern by one chartered
accountant in practice shall be construed as only one tax audit assignment.
6. The above notification shall come into force from the financial year
commencing on or after 1st April, 1989.
7. A chartered accountant in practice and every partner of a firm of such
chartered accountants holding immediately before 1st April, 1989, tax audit
assignments in excess of the specified number, shall within sixty days from 1st
April, 1989, intimate his inability to conduct tax audit in excess of the specified
number of the concerned assessees.
8. A chartered accountant in practice shall maintain a record of the tax audit
assignments accepted by him in each financial year in the format as may be
prescribed by the Council.
Sd/-
M.C. Narasimhan
Secretary

OM SAI SRI SAI JAI JAI SAI

nazeer

nazeer (Querist)
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12 October 2012 Dear dintakurthi,
your efforts are appreciated, thankyou very much,but the above notification which you gave specifies the limits of 'specified no. of tax audit assignments' with respect to the individual/ if he is a partner in firm / or if on taking up of partial assignment. But the clarity what i require is different , which reads as follows

"whether, the assignment which has turnover below 60lakhs for AY 2011-12, and at the option of assessee, tax audit is done,books are maintained and lower income is claimed in such tax audit" - whether this assignment is to be included in the above 'specified no.of assignments as mentioned in the notification'.

My intention is, since the audit is not conducted under 44AD i.e, it is done u/s 44AB so it would be included in the 'specified no.of assignments'

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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12 October 2012 For such cases they couldn't consider for limit for tax audits. It is clarified by the ICAI.

ICAI General Guidelines dated 8/8/2008 says, audit of assessee covers under presumptive taxation will not be counted for the threshold limit to tax audits.

However the tax audits limit increased to 45 instead of 30(according to i provided notification) Vide ICAI notification dt:11/5/2007.

As members are aware, the maximum limit of Tax Audit for a member in practice, as individual or as a partner in a firm, was fixed at 30 as back as in 1989 with the objective of ensuring quality and equitable distribution of work. In view of fast expanding economy and increase in number of such assignments coinciding with enhancement of professional competence of members to perform quality services in an IT-enabled environment, it was decided to review the maximum Tax Audit limit. As such, the Council of the Institute at its 268th meeting held from 30th April to 2nd May 2007 has decided to increase the Tax Audit limit for practising Chartered Accountants, as individual or as a partner in a firm, from 30 to 45.

OM SAI SRI SAI JAI JAI SAI

nazeer

nazeer (Querist)
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13 October 2012 Dear Dintakurthi, I m really sorry if i m arguing with you.....

as you said that icai has clarified that audits under presumptive taxation will not be counted for specified limit - i too agree for that .

but in my case i am not conducting audit under presumptive basis.... my client maintains book , all bills and vouchers , and every thing and gets audited u/s sec 44AB and claims lower income than income arrived under presumptive basis.

moveover if you see the definition of Sec 44AB in bare act it includes even my case in the fourth / third clause of that section in bare act

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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13 October 2012 Hello nazeer i am sorry to say i think you are just in mistake of understanding the section. Tax audit should be done according to section 44AB. Under section 44AD no body cann't do audit because that section doesn't related to tax audit. And section 44AD and 44AE required tax audit according to the section 44AB in the case of who liable to offer their income according to section 44AD or 44AE but offered lower income. As well as section 44AB refers required to do tax audit in the case of business whose turnover exceeds Rs.60 lacs or in the case of professionals exceeds Rs.15 lacs and all other those or offering their income lower than the sections prescribed 44AD or 44AE.

From the beginning i am saying who are liable to offer their income under presumptive basis but the assessees at their option making tax audit u/s 44AB because of offering lower income than such presumptive income. This case of tax audit doesn't count for the limit to no of tax audits.
"Audit of assessee covers under presumptive taxation" means those are required to offer presumptive income but due to some reason at their option then making audit. but not means audit according to section 44AD.

I think now you will understand. Otherwise please call me: 08985063892, Please free to call me doubt have any doubt regarding to call me if you have question mark? still.

OM SI SRI SAI JAI JAI SAI

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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13 October 2012 And one more thing you are not arguing with me, it's not the mistake to get the clarification till you solve that/understand that.

OM SAI SRI SAI JAI JAI SAI

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