48 TAX AUDIT PROBLEMS AND SOLUTIONS BY CA NITESH MORE, KOLKATA INDEX
48 TAX AUDIT PROBLEMS AND SOLUTIONS
BY
CA NITESH MORE, KOLKATA
INDEX
TECHNICAL ISSUES
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OTHER ISSUES
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1.
Steps for Filling Online Tax Audit
Report
2.
Software Requirements
3.
Problem in Slowdown of System
4.
Problem of Negative Figures
5.
Problem of Providing Quantitative
Details
6.
Problem in Entry of Large No. Of Fixed
Assets
7.
Problem in Viewing Stock Figures
8.
Problem of Depreciation in Webtel
Software
9.
Problem of No Space for Commodity
10. Problem
in Calculation of NP Ratio
11. Problem
of Blank Fields in Saved Draft Xml File
12.
Problem of Viewing Data of Xml before
Uploading
13.
Problem of Printing/Saving Uploaded Xml
File
14.
Problem of Fakepath
15. Problem
in Viewing Xml File from Client’s Login
16. How
to Print Uploaded Xml Files
17.
Problem in Getting Activation Link/SMS
for Completing Registration
18. Unable to See Xml in Assessee’s Login
19. Non Acceptance of Negative
Figures in Form 29B
20. Use of Special Characters
21. Problem
of Non Generation of XML
22. Problem of Swapping Of Due Date
and Actual Date
23. TAR Rejected By Assessee If
Uploaded Again
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1.
No. of Tax Audit a CA can Sign? Issue
of section 44AD
2.
Online Filling, Date of Signing and
Date of Filling
3.
Can a Partner Sign On Behalf Of Other
Partners?
4.
Can Return Be Filed After Due Date
5.
ITR 7 to Be Filed Online?
6.
Mandatory E-Filling of Trust, Society
7.
Responsibility of Tax Auditor for Delay
in Uploading
8.
Penalty for Non Furnishing of Report
9.
Waiver of Penalty for Non Furnishing
10. Format
of Maintenance of Records of Tax Audit
11. Communication
with Previous Auditor
12. Should
CA Accept Tax Audit If Undisputed Fees of Previous Auditor Not Paid
13.
Tar
of Pvt Ltd Company
14.
Address
for NRI Director in ITR
15.
Pan
of Relative for Unsecured Loan
16. Return Can Be Uploaded Before TAR
17. Problem
of Three Tax Auditors of Same Assessee
18. Problem of Different Methods of
Valuation of Stock in Two Firms
19. Approval of Tar by Assessee Is
Mandatory
20. How
to Show Additional Depreciation
21. Date
Of TAR Vs Date Of Furnishing TAR
22. Format
For Tax Audit U/S 44AD
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FREQUENTLY ASKED QUESTIONS ON E-FILLING
OF TAX AUDIT REPORTS - TECHNICAL ISSUES
1.
STEPS FOR FILLING ONLINE TAX AUDIT REPORT
Q1. What are the steps to be followed for E-filling of Tax Audit
Report?
Ans. 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
2.
SOFTWARE REQUIREMENTS
Q2. What are operating system and runtime environment requirement
for E-filling of Tax Audit Report?
Ans. Operating
System – 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.
3.
PROBLEM IN SLOWDOWN OF SYSTEM
Q3. Our system becomes very slow during working on e-utility. What
should we do?
Ans. Remove
all old versions of Java to improve performance. Better use Google chrome. Can also use Mozilla Firefox.
4.
PROBLEM OF NEGATIVE FIGURES
Q4. System is not accepting negative figures in brackets i.e. “()”.
What should we do?
Ans. Use
negative sign. i.e. minus “-“
5.
PROBLEM OF PROVIDING QUANTITATIVE DETAILS
Q5. 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?
Ans. 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"
6.
PROBLEM IN ENTRY OF LARGE NO. OF FIXED ASSETS
Q6. 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.
Ans. 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 – Sale of assets for each of group should be entered
in a separate row while filling online form 3CD.
Step 6 - 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.
7.
PROBLEM IN VIEWING STOCK FIGURES
Q7. I filled stock details in point 28A.
When after validating and saving, I reopen the form; only one stock figure is
displayed.
Ans. 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.
8.
PROBLEM OF DEPRECIATION IN WEBTEL SOFTWARE
Q8. 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.
Ans: The
Problem Was Faced Many CA Using Webtel Software Due To Non Updation. I Suggest Submitting
Revised Return or Making Rectification U/S 154.
9.
PROBLEM OF NO SPACE FOR COMMODITY
Q9. 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?
Ans. You can
select, say, retailers & thereafter choose others (i.e. 104, 204, etc as
applicable).
10.
PROBLEM IN CALCULATION OF NP RATIO
Q10. 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?
Ans. You have
to calculate NP ratio as a whole of the business for which tax audit was
conducted.
11.
PROBLEM OF BLANK FIELDS IN SAVED DRAFT XML FILE
Q11. When we reopen draft saved xml file, many fields which we had
already entered is showing blank.
Ans. 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.
12.
PROBLEM OF VIEWING DATA OF XML BEFORE UPLOADING
Q12. How we can view data of XML before
uploading?
Ans. 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 à Microsoft Office Access 2003/2007 à New blank data
base à Click blank data base à A window with file name database1.accdb
will appear on the right hand side pane. Ã 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 à Click OKà Import XMLà Click OKà Check the box
"Save import steps"Ã 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.
13.
PROBLEM OF PRINTING/SAVING UPLOADED XML FILE
Q13. There is no provision for saving or
printing downloaded Forms 3CB-3CD, or XML file.
Ans. 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.
14.
PROBLEM OF FAKEPATH
Q14. 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.
Ans. Kindly check the name of folder is “fakepath” and not as fake path, in C
drive.
15.
PROBLEM IN VIEWING XML FILE FROM CLIENT’S LOGIN
Q15. 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.
Ans. Your XML
File contains the right data. Do not worry, upload it.
16.
HOW TO PRINT UPLOADED XML FILES
Q16. CA has no option to print uploaded xml files. How to print?
Ans. 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.
17.
PROBLEM IN GETTING ACTIVATION LINK/SMS FOR COMPLETING REGISTRATION
Q17. 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?
Ans. 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.
18. UNABLE TO SEE XML IN
ASSESSEE’S LOGIN
18. I had uploaded
one Form 3CD, 10 days back and same was reflecting in my log in and I also
received message for uploading. Now when I go to assessee log, same form is not
available for validation. When I try to re-file from my log in I am getting
massage that you are already submitted and assessee has not rejected/accepted.
Ans. Kindly Go to Work lists and approve it.
19. NON ACCEPTANCE OF NEGATIVE FIGURES IN FORM 29B
Q19. In the department utility, the
point no.9 of Annexure A of Form 29B is not accepting negative figures.
Ans. Kindly Type 0, Until Such Inherent
Error in Software Is Rectified By Department
20. USE OF SPECIAL CHARACTERS
Q20. Can we use special characters
while typing address in different places of online form 3CD?
Ans. No, special characters are not
allowed while typing address.
21.
PROBLEM OF NON GENERATION OF XML
Q21. The department utility is opening the saved data and saving draft successfully
but it does not generate XML file when we click generate XML file
Ans. First validate it and generate
22. PROBLEM OF SWAPPING OF DUE DATE AND ACTUAL DATE
Q22. I have noticed that under the Clause
No. 16(b) there is an error in the utility. The columns of due date and actual
date for payments as show in the utility have been reversed against the actual
data being generated in the XML file. The column headers should be swapped. The
same is also evident from the form being generated at the time of approval.
Ans. This is the inherent problem. Kindly do
not swap the dates at the time of data entry. IT department had been
communicated with such problems.
23. TAR REJECTED BY ASSESSEE IF UPLOADED AGAIN
Q23. If a TAR is rejected by assessee and
uploaded again, then an error message comes.
Ans. This is the inherent problem. Kindly download
and fill up fresh form.
FREQUENTLY ASKED QUESTIONS ON E-FILLING
OF TAX AUDIT REPORTS – OTHER ISSUES
1.
NO. OF TAX AUDIT
Q1. Whether Tax Audit Report u/s 44AD etc will be counted in the
specified limits of 45 Tax Audits?
Ans.
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
Q2. What are the limits on signing of Tax Audit Report?
Ans. 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, 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 ISNOT APPLICABLE)
2.
ONLINE FILLING, DATE OF SIGNING AND DATE OF FILLING
Q3. What are the Tax Audit Reports which are to be compulsorily
filed online?
Ans. 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 is
not applicable)
Q4. Should we sign Tax Audit Report on 30th September?
Ans. 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.
Q5. Where audit is to be conducted
u/s 92E, what is the last date of filling online Tax Audit Report?
Ans. Normally,
Tax Audit Report is to be submitted by 30th September. However, for
these assesses Report u/s 92E as well as Tax Audit Report can be filled by 30th
November.
3.
CAN A PARTNER SIGN ON BEFALF OF OTHER PARTNERS
Q6. Please advice in case of partnership firm can only one partner
sign all the reports?
Ans.
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"]
4.
CAN RETURN BE FILED AFTER DUE DATE
Q7. Can Income tax Return be e-filed after 30th
September? However we will file Tax Audit Report within 30th
September?
Ans. Yes, Online Tax Audit Report is to be filed by 30th
September to avoid penalty of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower.
However, return may be filed later. However, such return will be treated as
belated return.
5.
ITR 7 TO BE FILED ONLINE?
Q8. Whether e-Filing of ITR 7 For AY
2013 - 14 mandatory or can we file paper returns also?
Ans. It
Is Mandatory To Submit Online
6.
MANDATORY E-FILLING OF TRUST, SOCIETY
Q9. Are All Charitable
Trust and Cooperative Society’s Income Tax Return Are to E-File?
Ans: The
Charitable Trusts etc. are Required To File Return Online Also.
7.
RESPONSIBILITY OF TAX AUDITOR FOR DELAY IN UPLOADING
Q10. Is tax auditor responsible
for delay in uploading of Tax Audit Report?
Ans.
Guidance Note on Tax Audit states that normally, it is the professional duty of
the CA to ensure that the audit accepted by him is completed before the due
date. Hence, yes, if delay is attributable to his part.
8.
PENALTY FOR NON FURNISHING OF REPORT
Q11. What are the penalties for non furnishing a Tax Audit Report?
Ans. Sec 271B
states that, if any person fails to get his accounts audited in respect of any
previous year or years relevant to an assessment year or furnish a report of
such audit as required under section 44AB, the Assessing Officer may direct
that such person shall pay, by way of penalty, a sum equal to one-half per cent
of the total sales, turnover or gross receipts, as the case may be, in
business, or of the gross receipts in profession, in such previous year or
years or a sum of one hundred fifty thousand rupees, whichever is less.
9.
WAIVER OF PENALTY FOR NON FURNISHING
Q12. What are the circumstances under which penalty cannot be
imposed for non furnishing of Tax Audit Report?
Ans. 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.
10.
FORMAT OF MAINTAINANCE OF RECORDS OF TAX AUDIT
Q13. What is the format for maintaining records of Tax Audit
Assignments?
Ans. 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.
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Name of
the Auditee
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AY of the
Auditee
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Date of
Appointment
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Date of
acceptance
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Name of
the firm on whose behalf the member has accepted the assignment
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Date of
communication with the previous auditor (applicable)
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1
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2
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3
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4
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5
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6
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7
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11.
COMMUNICATION WITH PREVIOUS AUDITOR
Q14. Is communication with the previous tax auditor necessary?
Ans. Yes
12.
SHOULD CA ACEEPT TAX AUDIT IF UNDISPUTED FEES OF PREVIOUS AUDITOR NOT PAID
Q15. Should a CA accept Tax audit where
undisputed fees of previous auditor have not been paid?
Ans. 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”
13. TAR OF PVT LTD COMPANY
Q16. Whether Form
3CA or Form 3CB to use for Tax Audit Report purpose of a Pvt. Ltd. Co. having
statutory Audit done by the same CA.
Ans. Form No 3CA-3CD
14. ADDRESS FOR NRI DIRECTOR
IN ITR
Q17. While filling
Director Details in ITR 6, only Indian Address is accepted in the form.
However, one of the directors is an NRI and having foreign address. Should we
fill in a local address of the Director and proceed or there is some other way
out?
Ans. ITR-6 Required Residential Address. If Indian Address
Available Then Give.
Particulars of MD, Directors, Secretary and Principal officer(s)
who have held the office during the previous year
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Name
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Designation
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Residential
Address
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PAN
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S.No.
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||||
15. PAN OF RELATIVE FOR
UNSECURED LOAN
Q18. Whether it is
mandatory to mention Pan No of Party Related with Unsecured Loan in online 3CD
Form
Ans. EFiling software is not accepting it without PAN. Hope
error will be rectified soon.
16. RETURN CAN BE UPLOADED
BEFORE TAR
Q19. Is there any
problem in uploading Income Tax Return before filing/approval of Tax Audit
forms?
Ans. Date of furnishing TAR to department is to be mentioned
in ITR. So TAR is to be filed first.
17.
PROBLEM OF THREE TAX AUDITORS OF SAME ASSESSEE
Q20. An Individual Has Three Businesses Audited By Same/Different
Tax Auditors. How To Submit Tax Audit Report?
Ans.
In my view, you can follow the below mentioned steps.
a)
Combine data of all B/S, P/l, tax audit report and submit as one
b)
If tax audit conducted by different CAs, any CA can submit.
c)
It is advised to attach physical copies of all Tax Audit Reports too, for
disclosure of the fact that (i) different CAs have done Tax audit and (ii) that
CA who is filling had relied on the work of all other Cas. (iii) There are
three different Tax audit report whose data has been combined while submitting
online TAR.
18. PROBLEM OF DIFFERENT METHODS OF VALUATION OF
STOCK IN TWO FIRMS
Q21. An Individual Have 2 Firms. In One Firm, Method Of
Valuation Of Closing Stock Is Cost Or Market Price Whichever Is Less. However,
In Other Firm, Stock Is Valued At Market Price. How To Show It In Online Form
3cd?
Ans. It
is better to mention the facts in separate sheet and attach with the online
audit report.
19. APPROVAL OF TAR BY ASSESSEE IS MANDATORY
Q22. What If The Assessee Does Not
Approve The Audit Report Submitted Before The Due Date
Ans. It may
be presumed that no tar has been submitted by assessee
20.
HOW TO SHOW ADDITIONAL DEPRECIATION
Q23. How To Show Additional Depreciation in the Online Form
3CD.
Ans. Add It
with Normal Depreciation
21.
DATE OF TAX AUDIT REPORT VS DATE OF FURNISHING TAX AUDIT REPORT
Q24. What is the difference between date of TAR and date of
furnishing of TAR?
Ans. Date
of TAR is the date of signing by the auditor and date of furnishing TAR is the
date on which assessee approves the audit report uploaded by CA.
22.
FORMAT FOR TAX AUDIT U/S 44AD
Q25. What is the format for Tax Audit u/s 44AD?
Ans. The
Tax Audit under the provisions of section 44AD are to be conducted u/s 44AB.
Hence, the format prescribed for Tax Audit u/s 44AD is 3CB & 3CD.
PREPARED
BY :- CA NITESH KUMAR MORE
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FOR JOINING OUR GOOGLE GROUP TO RECEIVE IMPORTANT UPDATES:
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#1.
Email to moreassociate@gmail.com or #2 visit caniteshmore-05@googlegroup.com
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Courtesy
- CA Deepak Tibrewal, CA P.K. Agarwalla & CA Raj Singhania
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COMMENTS