We have covered Tax Audit in our previous posts.In this post we will explain the remaining aspects of Tax Audit u/s 44AB
Types of Tax Audit:
Though Tax Audit is always covered u/s 44AB but the requirements are initiated due to coverage of various conditions under different sections which are explained as follows:
As can be seen from above that the requirements of Tax Audit though invoked through sec 44AB but they are by virtue of sec 44AD ,44ADA,44AE etc as explained above
Consequences of failure to get books Audited:
A penalty equal to 1/2% of Turnover subject to maximum Rs 150000.00 is leviable however if the assessee proves that the failure or delay was due to genuine cause then the penalty may be waived
Due date for Tax Audit:
For the tax audit due date is 30/09/2018 for A Y 2018-19 .please note that not only it is important to get Audit Done but the report should be uploaded by the due date along with Income Tax return.
Remaining points that were not covered in previous post on Tax Audit:
Payments made to related persons:
A related person is defined as follows:
Individual: Any relative
HUF: Any member of HUF
Partnership firm: Any partner or relative of any partner
Company:Any Director or relative of director
OR a person or entity who has a substantial interest in the concern where substantial interest means controlling stake more than 25%
Now clause 23 requires that any payment made to any related party more specifically those defined in sec 40A(2)(b) be reported (explained as above)
The logic behind this clause is that any expenditure claimed as unreasonable by involving any of the related person shall be disallowed.
Allowance of certain payments if not made within the due date:
Sec 43B imposes a restriction that any statutory payment if not made by the due date of filing of income tax return shall be disallowed .It shall however be allowed in the year of payment.The payments in this category are TDS,Interest on loan from bank, contribution towards PF etc
Remission of liability: Sec 41
There may be cases when liability ceases towards a payment eg a creditor dies with no one to claim the amount .This is called remission of liability .These type of amounts are to be reported under clause 25
We have tried to explain major points reported by the Auditors in their Tax Audit Reports.These details have been discussed from point of view of the Assessee. There are other details but these are readily available from the books of accounts and the Auditor derives them himself for eg Sales,Purchases,Closing Stock Value and related Ratios so these are not discussed here.