Tax Audit
A Tax Audit is a statutory audit conducted under Section 44AB of the Income Tax Act for taxpayers meeting specified thresholds.
The objective is to verify correctness of books of accounts, computation of income, application of deductions and compliance with tax laws.
A properly conducted tax audit minimises risk of notices, re-assessments and penalties.
Who Requires a Tax Audit?
- Businesses with total turnover/gross receipts exceeding the prescribed limits under Section 44AB.
- Professionals whose gross receipts exceed the threshold specified in the Act.
- Taxpayers covered under presumptive taxation schemes opting out or exceeding limits.
- Entities required to maintain books of accounts and get them audited under other statutes (bank, company law, etc.).
Scope & Key Objectives
- Examine accounting records, vouchers and supporting documents.
- Verify correctness of income computation and claimed deductions.
- Identify non-compliance, tax planning opportunities and potential risk areas.
- Prepare Tax Audit Report (Form 3CA / 3CB and 3CD) as required by the Income Tax Act.
Documents Required
- Books of accounts (cash book, ledger, journals, trial balance).
- Financial statements: balance sheet, profit & loss account.
- Bank statements, loan documents and reconciliations.
- Income & expense invoices, contract documents.
- Statutory records: GST returns, TDS challans, Form 26AS, ROC filings (if applicable).
- Details of related-party transactions, fixed assets and inventory records.
Tax Audit Process
- Engagement & Planning: Agree scope, timelines and audit fee; obtain prior period info.
- Risk Assessment: Identify high-risk areas and plan audit procedures.
- Fieldwork: Verify books, vouchers, bank reconciliations and statutory compliance.
- Draft Report: Prepare draft Form 3CA/3CB & Form 3CD and highlight observations.
- Management Discussion: Discuss findings and proposed adjustments with management.
- Finalisation & Filing: Finalise audit report, sign (by licensed CA) and file as required with Income Tax return.
Deliverables
- Signed Tax Audit Report (Form 3CA/3CB and 3CD) ready for e-filing.
- Management letter outlining observations, weaknesses and recommended controls.
- Reconciliations and schedules supporting audited figures.
- Assistance during assessment, scrutiny or notice resolution.
How Ctrl Tax Advisory Helps
- Experienced Chartered Accountants conduct thorough tax audits as per ICAI & Income Tax norms.
- Practical recommendations to strengthen internal controls and tax compliance.
- End-to-end support for filing audited returns and responding to tax notices.
- Flexible audit scheduling to minimise business disruption.
