{"id":3926,"date":"2021-09-16T18:24:17","date_gmt":"2021-09-16T18:24:17","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=3926"},"modified":"2023-10-21T12:40:03","modified_gmt":"2023-10-21T12:40:03","slug":"3926-2","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/","title":{"rendered":"Income Tax Audit Applicability &#038; Application in India\u00a0"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69da791b8b3e8\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69da791b8b3e8\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#An_Overview_Income_Tax_Audit\" title=\"An Overview Income Tax Audit\u00a0\">An Overview Income Tax Audit\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Who_is_required_to_undergo_a_tax_audit\" title=\"Who is required to undergo a tax audit?\">Who is required to undergo a tax audit?<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#The_purpose_of_a_tax_audit\" title=\"The purpose of a tax audit\">The purpose of a tax audit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Appointment_of_Tax_Auditors_in_a_Firm\" title=\"Appointment of Tax Auditors in a Firm\">Appointment of Tax Auditors in a Firm<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Letter_of_Appointment_for_Tax_Audit\" title=\"Letter of Appointment for Tax Audit\">Letter of Appointment for Tax Audit<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Tax_Auditors_Removal\" title=\"Tax Auditor&#8217;s Removal\">Tax Auditor&#8217;s Removal<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Accounts_audited_in_compliance_with_any_other_legislation\" title=\"Accounts audited in compliance with any other legislation\">Accounts audited in compliance with any other legislation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/3926-2\/#Penalty_for_failing_to_complete_a_tax_audit\" title=\"Penalty for failing to complete a tax audit\">Penalty for failing to complete a tax audit<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"An_Overview_Income_Tax_Audit\"><\/span><span style=\"color: #000080;\"><strong>An Overview <\/strong><\/span><span style=\"color: #000080;\"><strong>Income Tax Audit\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-6196\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13.jpg\" alt=\"Tax audit Limit \" width=\"1080\" height=\"977\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13.jpg 1080w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13-300x271.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13-1024x926.jpg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13-768x695.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/photo_2023-08-23_19-14-13-800x724.jpg 800w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\n<ul>\n<li>A tax audit may only be undertaken by a Chartered Accountant or a partnership of Chartered Accountants. If the latter is used, the name of the signatory who signed the report on behalf of the company must be included in the audit report. When registering at the e-filing site, the signatory must enter his or her membership number.<\/li>\n<li>The Statutory Auditor can also conduct tax audits. It is crucial to know that the number of tax audit reports that Chartered Accountants can file is limited. A Chartered Accountant is only allowed to conduct 60 tax audits each year. In the event of a corporation, the tax audit limit will apply to each of the partners.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Who_is_required_to_undergo_a_tax_audit\"><\/span><span style=\"color: #000080;\"><strong>Who is required to undergo a tax audit?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure id=\"attachment_3931\" aria-describedby=\"caption-attachment-3931\" style=\"width: 1200px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-3931\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability..jpg\" alt=\"Income Tax Audit Applicability.\" width=\"1200\" height=\"628\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability..jpg 1200w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability.-300x157.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability.-1024x536.jpg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability.-768x402.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability.-800x419.jpg 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><figcaption id=\"caption-attachment-3931\" class=\"wp-caption-text\"><span style=\"font-size: 16px;\">If a taxpayer&#8217;s sales, turnover, or gross earnings surpass Rs 1 crore in a fiscal year, he or she must have a tax audit performed. However, under some other instances, a taxpayer may be obliged to have their accounts audited. In the tables below, we have classified the numerous situations:<\/span><\/figcaption><\/figure>\n<p>NOTE: The Rs 1 Crore threshold limit for a tax audit is planned to be enhanced to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) provided the taxpayer&#8217;s cash receipts are restricted to 5% of gross receipts or turnover and cash payments are limited to 5% of aggregate payments. The following are the many types of taxpayers:<\/p>\n<table style=\"height: 1304px;\" width=\"919\">\n<tbody>\n<tr>\n<td><span style=\"color: #000080;\"><strong><em>Nature of Business or Profession<\/em><\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong><em>Category of Taxpayer<\/em><\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong><em>When audit is Mandatory?<\/em><\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td><strong>Any Professions (Specified or Non-specified)<\/strong><\/td>\n<td>Any<\/td>\n<td>When the gross receipts exceeds Rs. 50 lakhs during the relevant previous year.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business<\/strong><\/td>\n<td>Bothe Payment and Receipt in case does not exceed 5% of the Total Receipts and Payments respectively.<\/td>\n<td>If the previous year&#8217;s total sales, turnover, or gross receipts from the business exceeded Rs. 5 Crore.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business<\/strong><\/td>\n<td>Either payment or receipt in cash exceeds 5% of the total receipts and payment respectively<\/td>\n<td>If the previous year&#8217;s total sales, turnover, or gross receipts from business exceeded Rs. 1 crore.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business eligible for Presumptive Tax Scheme under Section<br \/>\n44AD<\/strong><\/td>\n<td>HUF or Resident Individual<\/td>\n<td>If an assessee&#8217;s income exceeds the maximum exemption level and he has chosen for the plan in any of the previous five years but does not do so in the current year.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business eligible for Presumptive Tax Scheme under Section<br \/>\n44AD<\/strong><\/td>\n<td>Resident Partnership Firm<\/td>\n<td>The taxpayer has chosen for the plan in any of the previous five years but does not do so in the current year.<\/td>\n<\/tr>\n<tr>\n<td><strong>Profession eligible for Presumptive Tax Scheme under Section<br \/>\n44ADA<\/strong><\/td>\n<td>Resident Assessee<\/td>\n<td>The taxpayer contends that his professional earnings are less than those calculated under Section 44ADA, and that his overall income exceeds the maximum exemption limit.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business eligible<br \/>\nfor Presumptive<br \/>\nTax Scheme un-<br \/>\nderSection44AE<\/strong><\/td>\n<td>Any Assessee involved in the transportation, employment, or leasing of commodities<\/td>\n<td>The taxpayer contends that his company earnings are less than the profit determined under Section 44AE.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business eligible<br \/>\nfor Presumptive<br \/>\nTax Scheme un-<br \/>\nder Section 44BB<\/strong><\/td>\n<td>Non-resident assessee engaged in exploration of mineral oil<\/td>\n<td>The taxpayer contends that his company earnings are less than the profit determined under Section 44BB.<\/td>\n<\/tr>\n<tr>\n<td><strong>Business eligible for Presumptive Tax Scheme under Section<br \/>\n44BBB<\/strong><\/td>\n<td>Foreign Co. engaged in civil construction<\/td>\n<td>Taxpayer contends that his profits from business are lower than the profit computed under Section 44BBB<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-3929\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability-Application-in-India.jpg\" alt=\"Income Tax Audit Applicability &amp; Application in India\" width=\"954\" height=\"970\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability-Application-in-India.jpg 600w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2021\/09\/Income-Tax-Audit-Applicability-Application-in-India-295x300.jpg 295w\" sizes=\"(max-width: 954px) 100vw, 954px\" \/><\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_purpose_of_a_tax_audit\"><\/span><span style=\"color: #000080;\"><strong>The purpose of a tax audit<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The primary goals of a tax audit are as follows: \u2022 Proper bookkeeping without fraud activities, and verification of the same by an auditor.<\/p>\n<ul>\n<li>For reporting anomalies discovered thorough review of the books of accounts.<\/li>\n<li>For reporting different information such as tax depreciation, compliance with income tax law provisions, and so forth.<\/li>\n<li>Auditing simplifies the computation of taxes and deductions.<\/li>\n<li>The primary responsibility is to check the information provided in the taxpayer&#8217;s income tax return about income, taxes, and deductions.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Appointment_of_Tax_Auditors_in_a_Firm\"><\/span><span style=\"color: #000080;\"><strong>Appointment of Tax Auditors in a Firm<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>The Board of Directors is in charge of appointing tax auditors in a company. The Board may also transfer this authority to another officer, such as the CEO or CFO. Auditors in a partnership or sole proprietorship can be appointed by a partner, sole proprietor, or a person approved by the assessee. Furthermore, a taxpayer may engage two or more chartered accountants as joint auditors to conduct the tax audit. If all of the joint auditors agree with the findings, the audit report must be signed by all of them. In the event of disagreements, the auditors must state their views independently in a separate report.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Letter_of_Appointment_for_Tax_Audit\"><\/span><span style=\"color: #000080;\"><strong>Letter of Appointment for Tax Audit<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Before proceeding with the tax audit, the tax auditor must acquire a letter of appointment from the concerned assessee. The appointment letter must be officially signed by the person authorized to sign the income tax return. The auditor&#8217;s compensation must be included in the letter.<\/li>\n<li>In addition, the appointment letter should state that no other auditor has been entrusted with the duty for the current fiscal year, and it may provide information on the prior auditor. The latter is given in order to promote communication between the newly appointed auditor and his predecessor.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Auditors_Removal\"><\/span><span style=\"color: #000080;\"><strong>Tax Auditor&#8217;s Removal<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Management has the authority to fire a tax auditor if the auditor has delayed the submission of the report to the point that it is no longer feasible to submit the audit report before the stated due date. A tax auditor cannot be fired because he provided an adverse audit report or because the assesee is concerned that the tax auditor would give an unfavorable audit report. If a Chartered Accountant is dismissed on unjust grounds, the Institute of Chartered Accountants of India (ICAI)-established Ethical Standards Board has the authority to intervene.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Accounts_audited_in_compliance_with_any_other_legislation\"><\/span><span style=\"color: #000080;\"><strong>Accounts audited in compliance with any other legislation<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>If a taxpayer is required to have his books of accounts audited under another legislation, such as statutory audits of corporations under company law requirements, the person is not obligated to undertake his audit again for taxes purposes. The taxpayer just has to receive the audit report required by income tax legislation before the return&#8217;s due date.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Penalty_for_failing_to_complete_a_tax_audit\"><\/span><span style=\"color: #000080;\"><strong>Penalty for failing to complete a tax audit<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Penalty for non-filing or late submission of a tax audit report<\/p>\n<ul>\n<li>If a taxpayer is obligated to have a tax audit performed but fails to do so, the following penalties may be imposed:<\/li>\n<li>5 percent of all sales, revenue, or gross revenues<\/li>\n<li>150,000 rupees<\/li>\n<li>If a taxpayer who is obligated to have his or her accounts audited fails to do so, a penalty may be imposed under Section 271B of the Income Tax Act. The penalty for failing to complete a tax audit is 0.5 percent of the turnover or gross revenues, up to Rs.1, 50,000.<\/li>\n<\/ul>\n<p>However, if there is a justifiable explanation for such failure, no penalty under section 271B shall be imposed. So far, Tribunals\/Courts have accepted the following legitimate causes:<\/p>\n<ul>\n<li>Natural Disasters<\/li>\n<li>The Tax Auditor&#8217;s Resignation and the Resultant Delay<\/li>\n<li>Long-term labour issues, such as strikes and lockouts<\/li>\n<li>Accounts lost due to circumstances beyond the Assessors&#8217; control<\/li>\n<li>The partner in charge of the accounts&#8217; physical incapacity or death<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>An Overview Income Tax Audit\u00a0 A tax audit may only be undertaken by a Chartered Accountant or a partnership of Chartered Accountants. If the latter is used, the name of the signatory who signed the report on behalf of the company must be included in the audit report. When registering at the e-filing site, the &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[142],"tags":[867],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3926"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=3926"}],"version-history":[{"count":5,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3926\/revisions"}],"predecessor-version":[{"id":6350,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/3926\/revisions\/6350"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=3926"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=3926"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=3926"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}