Presentation of Tax Audit issue by C A P K Agarwalji is attached.
C A Shah D J
USA
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From: Suresh Somani <casksomani@gmail.com>
To: new_delhi_ca@yahoogroups.com
Sent: Friday, 30 August 2013 7:19 AM
Subject: [New_Delhi_CA] COMPILATION –RESOLVE YOUR PROBLEMS OF TAX AUDIT [1 Attachment]
From: Suresh Somani <casksomani@gmail.com>
To: new_delhi_ca@yahoogroups.com
Sent: Friday, 30 August 2013 7:19 AM
Subject: [New_Delhi_CA] COMPILATION –RESOLVE YOUR PROBLEMS OF TAX AUDIT [1 Attachment]
COMPILATION –RESOLVE YOUR PROBLEMS OF TAX AUDIT REPORT(TAR)
BY CA GIRISH KULKARNI(DT 28.08.2013)
Courtesy – Mail based on mail from CA Nitiesh More with resources from CA Deepak Tibrewal, CA P. K. Agarwalla & CA Raj Singhania. I appreciate the work taken by many members to resolve the issues. I had added certain information
Index (Page 1 to 9):-
Part I- Basic Steps and Provisions relating to TAR (1-2)
Part II- EDP Aspects of TAR (2-5)
Part III – Common Issues Relating to TAR(5-7)
Part IV – Other Relevant Information Relating to TAR (7-9)
Part V – Applicability of SA relating to Tax Audit excluding SA 700 for AY 2013-14 onwards impacting professional ethics (9-11)
Part I BASIC STEPS AND PROVISIONS RELATING TO TAR
What are the Tax Audit Reports which are to be compulsorily filed online?
As per Notification No. 34/2013 dated 01/05/2013, & Notification No. 42/2013 dated 11/06/2013, Audit reports under Sections 10 (23C) (iv), (v), (vi) or (via), 10A, 12A (1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB are to be filed electronically. (It covers audit report u/s 44AD, 44AE, 44AF also) (FROM FY 2012-13, SEC 44AF ISNOT APPLICABLE)
Should we sign Tax Audit Report on 30th September?
As the word "before" has been used in sec. 44AB, we should not sign Tax Audit Report on 30th September. You should sign Tax Audit Report before 30th September, since the assessee is required to "obtain" Tax Audit Report before the due date i.e. 30th September.
Where Tax audit is to be conducted u/s 92E & 44AB, what is the last date of filling online Tax Audit Report?
30th Nov.
Can Income tax Return be e-filed on or after 30th Sept/Nov Without TAR?
Online Tax Audit Report(TAR) should be submitted online before uploading Income Tax Return for proper compliance, else return shall be treated defective. Present the return can be uploaded without TAR. But date needs to be mentioned. Failure may attract penalty U/s 271B to extent of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower. If you already uploaded return, do file Audit Report immediately to avoid Penalty.
Steps for Filing TAR
The Members must have registered themselves. If not please rush immediately , please do it. Verify your digital Signature, that the said is valid till uploading of Audit Report.
If you are facing any problem, Please verify the Birth date Mismatch and take help of ICAI for this by visiting ICAI Website by clicking following link
Step 1- One Time Registration of Chartered Accountant at E-filling website
Step 2 – Login to Assessee account at e-filling website and Add CA
Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.
Step 4 – Uploading XML file at E-filling website from CA's Login Id
Step 5 – Approval of form uploaded by CA at E-filling website from Assessee's Login Id
Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately
Documents to be attached to Tax Audit Report?
B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed. Here, The limit of 50 MB per attachment and the client signature is not necessary now(The said condition is now removed). Further the CARO and other law report uploading is not involved along with Tax Audit Report.
Implications of non submitting of TAR till Due Date due to technical problems
Option 1 :- To save penalty and Interest, You can request Juridictional Income Tax Commissioner of Income Tax U/s 119(2)(b). Else the issue is also appealable on the grounds mentioned in various TDS cases. E.g. Branch Manager, UCO Bank vs. ACIT (ITAT Cuttack)
S. 272A(2)(k): Delay in filing TDS return through NSDL is a technical breach.
Representation issues
If you wish to represent the issues before through ICAI , you can mail suggestions with dtc.memoranda@icai.in alongwith the screenshots.
PART II :EDP ASPECTS OF TAR
ALWAYS USE LATEST VERSION.SAVE ALL ATTACHMENTS IN A FOLDER IN YOUR SYSTEM AND FIND SOLUTION AS AND WHEN REQUIRED. PLEASE ALSO VERIFY VALIDITY OF DIGITAL SIGNATURE OF YOU AND CLIENT TO AVOID RELATED PROBLEMS.
UNRESOLVED ISSUES OF TAR OF
Following are unresolved issues from Income Tax Department
"save draft" facility of the utility is provided in very cumbersome manner and each time you want to save a single page, you have either to save a new file or replace the existing one. Further whenever you put the curser on a dropdown box for choosing Yes, No or not applicable, you will lose the place and again have to find the same again . This is not only time consuming but irritating also.
The utility does not have the facility to see the Form 3CD in non-xml format i.e. format in which you can view the whole form to detect the mistake and take the print of it. If you want to print the form then first you have to upload it and take the print of the Form from the account of assessee work list. See here in the earlier utility which was replaced by new one on 24th July 2013 there was a facility to see the print preview of the form and print the form.
Further if the utility is filled by you assistant and you want to check it then you have to open the saved draft or validated XML file in the open draft option then you will be surprised that you have lost all the options "yes , no , NA options in drop down Boxes and again have to fill the same .
Further There is are problems with filling the Depreciation figures specially in case of multiple additions in a assets and further in cases where both additions and deletions are there in a single asset the filling of figures is confusing and cumbersome . In case of PF deposit, after filling the correct due date and date of deposit, you will find that both are interchanged with each other and you will find this fact when you see the final copy of the Form 3CD and as already mentioned by us that it is very difficult to see the final copy of the form 3CD. (Reference http://taxguru.in/income-tax/3cd-3cb-utility-problems.html)
CA REGISTRATION ISSUES
A Chartered Accountant in practice registered himself with his DSC in the e-filing website. But he neither received any sms nor any activation link in his e-mail. When he tried again to register himself, the message was that he is already registered. But when he tried to log in, it was informed that the link is not activated. What should he do now?
Go to login page and enter your User ID i.e. ARCA(Mem. No.) e.g. ARCA300700 and enter your Password as given then click on "Resend Activation Link". You will get a mail from the site. If it does not work then reset your Password by sending mail at validate@incometaxindia.gov.in.
Operating system and runtime environment requirements
Windows XP with Service Pack 3/ Windows 7/ Windows 8.
Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.
System becomes very slow during working on e-utility.
Remove all old versions of Java to improve performance. Better use Google chrome. Can also use Mozilla Firefox.
Offline TAR is not accepting negative figures in brackets i.e. "()". What should we do?
Use negative sign. i.e. minus "-"
When we reopen draft saved xml file, many fields which we had already entered is showing blank.
The software has some inherent errors as a result when we reopen draft saved xml file, it shows blank i.e. we have to re-enter the fields again. These fields are 7(B), 8(B), 9(A), 10, 11(D), 12(B), 21(Notes), 22(A), 22 AND 23.
How we can view data of XML before uploading?
You can view the xml file of tax audit report prepared in e utility of department. CA P.K. Agarwalla has prepared the screen shots of the process to view the same. The process is as follows:
Go to Programme à Microsoft Office àMicrosoft Office Access 2003/2007 à New blank data base àClick blank data base à A window with file name database1.accdb will appear on the right hand side pane. à Click on create. Your new date base is saved by default in my Documents. (You may save the same to your choice folder)
A new data base is opened. Go to and click External data à Click XML file>Browse the xml file for which you want to create/view or save the data àClick OKàImport XMLàClick OKàCheck the box "Save import steps"à Close.
Your data base is ready, on the left hand side pane the indexes for "All Tables" do appear. By clicking any Table/ any point you can easily view and save its contents presently appearing in the XML file. Once the xml file is saved and the data base is reopened it will show the updated entries lying in the XML file. If some member finds any error in the tables he can easily make corrections opening the utility.
Detailed procedural step for Microsoft Access Office 2007 as well as Microsoft Office 2003 is attached (2 files attached – namely "Importing XML in MS Office 2003 version" & "Importing XML in MS Office 2007 version" herewith for ready understanding.
There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.
U can save the work in middle by using "Save Draft" Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.
FAKEPATH PROBLEM: When we are uploading the 3CA and 3CD online one error is coming cannot read fake path file. I have placed the XML file in c drive fakepath folder and using Google chrome for that. Please help on the issue.
Kindly check the name of folder is "fakepath" and not as fake path, in C drive.
VIEW XML FROM CLIENT LOGIN:- We uploaded form 3CD of a client. When it is viewed from the client's login (i.e. for approving or rejecting), the dates in point no. 16(b) of form 3CD is getting interchanged (i.e. in the due dates column actual dates are seen and vice versa). But there is no mistake at our end. We have filled in the data in the income tax offline utility correctly and generated xml.
Your XML File contains the right data. Do not worry, upload it.
PRINTING REPORT: XML FILES CA has no option to print uploaded xml files. How to print?
CA has no option to print uploaded xml files. However, it can be printed from assessee's login id, even before approval by assessee as the said xml file can be downloaded, from assessee's login id, in the pdf format by default.
PART III: COMMON ISSUES RELATING TO TAR
Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?
Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available,
a) Write nil in online form 3CD &
b) Report why quantitative details is not provided in the following two places:
i) In paper form 3CD &
ii) Notes to accounts
c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: "Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details"
But you have to qualify properly as per SA 705 and other standards of Auditing.
FIXED ASSETS: An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.
In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.
i. Assets put to use on or before 2nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2nd October, wherever possible.
ii. Assets put to use after 2nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31st March, wherever possible.
It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.
The above can be summarized in the following steps:
Step 1 - All fixed assets may be grouped into different blocks of assets.
Step 2 - Each of these groups can be further divided into 2 parts. (i) Assets put to use on or before 2nd October (ii) assets put to use after 2nd October (eligible for half of depreciation)
Step 3 - For assets brought on or before 2nd October, we can argue that those assets were put to use on 2nd October and accordingly relevant entries can be made in the online form 3CD.
Step 4 - For assets brought after 2nd October, we can argue that those assets were put to use on 31st March and accordingly relevant entries can be made in the online form 3CD.
Step 5 - It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.
VIEW STOCK FIGURES : I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.
It is the inherent problem of the software but your xml file contains the correct data. Open the xml file in Internet Explorer and check it. You can edit xml file, however you have to adopt unceremonious way to edit the xml file for the necessary correction for the item in subsequent rows of point 28A. Therefore it is advised to fill up point 28A before filling any other point from point 7 onwards.
DEPRECIATION OF FIXED ASSETS. We have received demand relating to AY 2012-13, for almost for all companies for which income tax return were filled using Webtel software. The demand pertains to non-deduction of deprecation u/s32 in the return processed u/s 143(1) by CPC Bangalore, as claim by us in ITR 6. I just want to know if any other user of Webtel are also facing same problem.
The Problem Was Faced Many CA Using Webtel Software Due To Non Updating. I Suggest Submitting Revised Return or Making Rectification U/S 154.
COMMODITY NO SPACE: In online Form 3CD, nature of business is to be mentioned i.e. Trading/Manufacturing & Retailer/ Wholesaler, but there is no space given for a particular commodity, say, cloth/ medicine/ cement. What should we do?
You can select, say, retailers & thereafter choose others (i.e. 104, 204, etc as applicable).
NET PROFIT RATIO: If any businessman having a cloth business & also keeps photocopy machine/ agent of LIC, the income from photocopy machine / commission received from LIC is used for calculating the NP ratio. If so, then in this case GP ratio is less then NP ratio. So what to do about it?
You have to calculate NP ratio as a whole of the business for which tax audit was conducted.
PART IV: OTHER RELEVANT INFORMATION RELATING TO TAR
Whether Tax Audit Report u/s 44AD etc will be counted in the specified limits of 45 Tax Audits?
As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, these will not be included and you can file unlimited such Tax Audit Reports. Income Tax Department shall not restrict the limit for uploading.
What are the limits on signing of Tax Audit Report?
As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008,
a) A CA can sign up to 45 Tax Audit.
b) In case of Partnership Firm, It shall be construed as the specified
number of tax audit assignments for every partner of the firm.i.e. limit will be 45 / Partner.
c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF IS NOT APPLICABLE)
d) Member practicing in Individual name and also a partner :The 45
count for all the firms together in relation to such partner shall not exceed the "specified number of tax audit assignments" in the aggregate.
e) Each year's audit would be taken as a separate assignment. The audit of one or more branches of the same concern by one Chartered Accountant in practice shall be construed as one tax audit assignment.
SIGNING BEHALF OF PARTNERS, Please advice in case of partnership firm can only one partner sign all the reports?
a) Clause 12 Of Part I of Schedule I of Chartered Accountants Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm
b) Sign can be either digital or physical
c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.
[Clause 12 of Part I of Schedule I of Chartered Accountants Act states that "A CA in practice will be guilty if he allows a person not being a member of the institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, any balance-sheet, P&L a/c, report or financial statements"]. But, Member must have Full Time Certificate of Practice to sign Tax Audit
MULTIPLE AUDITOR OF ONE ASSESSEE: An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?
In my view, you can follow the below mentioned steps:
a) Multiple Report of same assessee (i.e. Auditorwise) can be submitted.
b) If tax audit conducted by two CAs, any CA can submit. In such Circumstance,But before upload, others CAs authority must be taken for proper document compliance and proper disclosure should be made in the report which you are uploading .
c) Physically Copy submission is not necessary due to present status of law.
REVISION AFTER UPLOADING TAR:Can online filed Tax Audit Report be revised?
A Tax Audit Report which has not been approved by assessee can be revised. However after it has been approved by the assessee, it should not be revised. However, there is no restriction by the utility, as of now, to upload revised xml. So we should take due care, so that correct data is uploaded in the first instance itself. However, members may kindly note that, all the xml files uploaded will be there in their domain.
All Charitable Trust to E-file Income Tax Return ?
Yes, The Charitable Trusts etc. are Required To File Return Online Also.
Waiver of Penalty U/s 271B: What are the circumstances under which penalty cannot be imposed for non furnishing of Tax Audit Report?
As per section 273B, no penalty is imposable under section 271B on the assessee for the above failure if he proves that there was reasonable cause for the said failure. The onus of proving reasonable cause is on the assessee. Some of the instances where Tribunals/Courts have accepted as "reasonable cause" are as follows:
(a) Resignation of the tax auditor and consequent delay;
(b) Bona fide interpretation of the term `turnover' based on expert advice;
(c) Death or physical inability of the partner in charge of the accounts;
(d) Labour problems such as strike, lock out for a long period, etc.;
(e) Loss of accounts because of fire, theft, etc. beyond the control of the assessee;
(f) Non-availability of accounts on account of seizure;
(g) Natural calamities, commotion, etc.
Format for maintaining records of Tax Audit Assignments
Record of Tax Audit Assignments
1. Name of the Member accepting the assignment
2. Membership No.
3. Financial year of audit acceptance
4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.
| Sl. No. | Name of the Auditee | AY of the Auditee | Date of Appointment | Date of acceptance | Name of the firm on whose behalf the member has accepted the assignment | Date of communication with the previous auditor (applicable) |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| | | | | | | |
Should a CA accept Tax audit where undisputed fees of previous auditor have not been paid?
As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008, "a member of the Institute in practice shall not accept the appointment as auditor of an entity in case the undisputed audit fee of another CA for carrying out the statutory audit under the Companies Act, 1956 or various other statutes has not been paid"
Part V – Applicability of SA relating to Tax Audit excluding SA 700 for AY 2013-14 onwards Impacting Professional Ethics
Many Members misunderstood that SA 700 is not applicable for AY 2013-14. This is Very Critical Aspect for Tax Audit for the period 31.03.2013 and onwards. Excluding SA 700, ALL OTHER STANDARDS OF AUDITING ARE MANDATORY NOW. SA 700 is not applicable to Tax Audit since Department did not amendment form, The ICAI has issued appropriate clarification from time to time. Many Members are not foucussing the SAs and ignoring its impact. Some of SAs affecting Tax Audit are listed below
SA-240- Auditor's Responsibilities Relating to Fraud
SA-705- Modifications to the Opinion
SA-315- Identifying and Assessing Risks of Material Misstatements
SA-330- Auditor's Responses to Assessed Risks
SA-580- Written Representations
SA-610- Using the Work of Internal Auditors
SA-620- Using the Work of an Auditor's Expert SA-720- Auditor's Responsibility in Relation to Other Information in Documents
SA-505:- Major sundry debtors and creditors balance confirmation
In future, the implication for auditor can be in following form
In case of fraud in Books ,If details are not available, the auditor should the procedure expected from him as per SA. He should evaluate following
§ SA-320- Materiality in Planning and Performing an Audit
§ SA-330- Auditor's Responses to Assessed Risks
He should qualify the report as per requirement of SA 705. SA 705 is mandatory for Tax Audit (Only SA 700 is not applicable)
In the Audit report, A Auditor may report NIL. The auditor should understand the nature and complexity and must report as per SA 705.
CA GIRISH KULKARNI
JOSHI KULKARNI & CO.
LOCATION :- AURANGABAD , MUMBAI, PUNE , NANDED
CONTACT 92253 06814 EMAIL girishkulk@joshikulkarni.co.in
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CA S K Somani
Somani & Co
9312211526
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