Audit of accounts of certain persons carrying on business or profession [Section 44AB] :

(i) It is obligatory in the following cases for a person carrying on business or profession to get his accounts audited before the “specified date” by a Chartered Accountant:

(1) if the total sales, turnover or gross receipts in business exceeds Rs 100 lakh in any previous year; or

(2) if the gross receipts in profession exceeds Rs 25 lakh in any previous year; or

(3) where the assessee is covered under section 44AE, 44BB or 44BBB and claims that the profits and gains from business are lower than the profits and gains computed on a presumptive basis. In such cases, the normal monetary limits for tax audit in respect of business would not apply.

(4) where the assessee is covered under section 44AD, and he claims that the profit s and gains from business are lower than the profits and gains computed on a presumptive basis and his income exceeds the basic exemption limit.

(ii) The person mentioned above would have to furnish by the specified date a report of the audit in the prescribed forms. For this purpose, the Board has prescribed under Rule 6G, Forms 3CA/3CB/3CD containing forms of audit report and particulars to be furnished therewith.

(iii) In cases where the accounts of a person are required to be audited by or under any other law before the specified date, it will be sufficient if the person gets his accounts audited under such other law before the specified date and also furnish by the said date the report of audit in the prescribed form in addition to the report of audit required under such other law. Thus, for example, the provision regarding compulsory audit does not imply a second or separate audit of accounts of companies whose accounts are already required to be audited under the Companies Act, 1956. The provision only requires that companies should get their accounts audited under the Companies Act, 1956 before the specified date and in addition to the report required to be given by the auditor under the Companies Act, 1956 furnish a report for tax purposes in the form to be prescribed in this behalf by the CBDT.

(iv) However, the requirement of audit under section 44AB does not apply to a person who derives income of the nature referred to in sections 44B and 44BBA.

(v) The expression “specified date” in relation to the accounts of the previous year or years relevant to any assessment year means the due date for furnishing the return of income under section 139(1). For due date of furnishing return of income, refer section 139(1) in Chapter 21 “Assessment Procedure”.

(vi) It may be noted that under section 271B, penal action can be taken for not getting the accounts audited and for not filing the audit report by the specified date.

Note – The Institute has brought out a Guidance Note dealing with the various aspects of tax audit under section 44AB. Students are advised to read the same carefully.