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 AUDIT UNDER FISCAL LAWS - TAX AUDIT
7 FORM - 3CD
Clause
EEE
Clause Clause Clause Clause Clause Clause
1 to 8
9 10 11 12 13 14
1: Name of the assessee. 8(A) : State Whether the assessee has opted for taxation
2: Address. u/s 115BA/115BAA/115BAB/ 115BAC/115BAD.

It
(a) If firm/AOP: indicate a) Whether BoA is prescribed

É
a) Nature of business/ Whether the profit and a) Method of accounting a) Method of valuation of
3: PAN Note: -Above sections are applicable to the company assesses
am names of partners/ u/s 44AA if yes, list of books

I
profession (If more loss account includes any employed in P.Y. closing stock employed
4: Whether the assessee is liable to members and their prescribed.
main
only. The reply to the above clause can either be a “yes” or “no”. than 1, detail of profit & gains assessable on b) Change in method of
pay indirect tax if yes, please furnish b) List of BoA maintained & in P.Y.
• If Answer is No: - If the assessee has not opted for any profit sharing ratios. each business/ presumptive basis, if yes accounting.
the registration no. any other address. If maintained in
identification number allotted for
concessional rates as provided under the sections , then, (b) If there is any change in profession) computer system, list of
indicate the amount & relevant c) Details of such change b) Details of deviation if Aorta
the same.GIIsaewisereg.no
the tax auditor is not required to take any further steps and sections. d) Any adjustments to be any from the method
the partners/members BoA generated. of valuation prescribed
5: Status. no further audit procedure is required to be followed. The b) If there is any (44AD , 44ADA, 44AE, 44AF, made to P&L in compliance
or in their profit sharing Address of locations, If
Too
answer to such question as per the clause in such case can be change in nature of 44B,44BB,44BBA, 44BBB etc.) u/s 145A, and the effect
6: Previous year. maintained more than one with ICDS.

é
ratio since the last date thereof on the P&L,
7: Assessment year. given as “No” only. business/ profession location. e) Details of such adjustments.
of the preceding year please furnish.
8: Indicate the relevant clause of • If Answer is Yes : -However, if the assessee informs that it particulars of same. c) List of BoA and nature of f) Disclosures as per ICDS.
the particulars of such
section 44AB under which audit has opted for the concessional rate of taxation as per the relevant documents examined.
provisions of the Act, then the audit approach is required to changes.
has been conducted.
be modified. ICDS PAGE 89

Clause

IET tamed
Clause 15 Clause 16 Clause
Clause Clause 20
sigggrom
(a) to (d) (a) to (e)

2
17 18 19

É
a) Any sum paid to an employee as bonus
Particulars of depreciation allowable as per IT Act (Section 32) in Amounts admissible u/s or commission, whether such sum was
Particulars of capital Clause 17 Where any land or building or
Amount not credited to P&L, Note: following form- 32AC,32AD, 33AB, 33ABA, payable to him as profits or dividends.
assets converted into both is transferred during the P.Y. for a consid-
a) Description of asset/block of asset excluding value of G/W of

É
being – 35(I)(i), 35(I)(ii), 35(I)(iia), b) Details of contribution received from

F
stock in trade – eration less than value adopted or assessed • Where value adopted for

I
b) Rate of depreciation a business or profession. 35(2AA), 35AC, 35AD, 35CCA, employees for various funds referred in
a) Item falling within scope of Stamp Duty < 110% of

1
a) Description of or assessable by any authority of a State Govt. section 36(I) (va) –
(cc) Adjusted WDV. 35CCB, 35CCC,35CCD,

capital assets.
b) Date of acquisition.
c) Cost of acquisition.
y
section 28. referred to in section 43CAor 50C. sales consideration  Sales c) Actual cost/WDV
35D,35DD,35DDA,35E I. Serial number
ted as due by the consideration itself will be the (ca) Adjustment made to the d) Additions/deductions during the II. Nature of fund
authorities concerned. Details of property year with dates, date put to use. • Indicate the amount debited
deemed consideration WDV u/s 115BAC/115BAD III. Sum received
to P&L and amount actually

t
d) Amount at which c) Escalation claims Consideration received or accrued (for AY 2021-2022 only). e) Depreciation allowable. IV. Due date
admissible.

I
the asset is accepted. • For transfer of residential unit (cb) Adjustment made to WDV f) WDV at the end of year. V. Actual amount paid
converted into stock d) Any other item of income.
Value adopted or assessed or
assessable
beg.ae for first time applicant, where of Intangible asset due to
• The amount not debited to P&L
but admissible.
VI. Actual date of payment to
e) Capital receipt, if any. consideration < 2 crores, between Note: concerned authorities.
in trade. • Deductions to be certified by
Whether provisions of section 12-11-20 to 36-6-21, 120% instead • Financial Act no more permits claiming depreciation on goodwill, and
43CA(1) 2nd proviso or section 56(2) of 110% considered. tax auditor
• The opening WDV of goodwill to be reduced from the block of asset to
(x) 4th proviso applicable? [Yes/No] Q.7 As an auditor appointed
which it relates (however block to not be reduced below NIL)
under section 44AB of the In-
come tax Act, 1961, how would

BE
This symbol

wot
you verify and report on the

bitecovered
Clause Clause Clause Clause refers to all the
Clause following : (N-17)

a) o21
Details of amounts debited to P&L being in the nature of capital, y 22 23 24 25
Any amount of
amendmends
applicable from May-21
(i) The assesse has borrowed
Rupee ET 50 lakhs from various
personal, advertisement expenditure etc. Amount inadmissible Amounts deemed to be profits & gains u/s profit chargeable and onwards persons partly in cash and party
Particulars of payments to tax u/s 41 and
u/s 23 of the MSME 32AC,32AD, 33AB or 33ABA or 33AC. by account payee cheque -
Rip
b) Amount inadmissible u/s 40(a). made to persons computation thereof.
c) Amount debited to P&L being, interest, salary bonus, commission or development Act, 2006. specified u/s 40A (2)(b) Hint: See clause 31 (a) & 31 (c)
It lays down that an Deemed gains arising out of sale of asset on (ii) The assesse has paid rent
remuneration, inadmissible u/s 40(b)/ 40(ba) and computation thereof. i.e. power to A.O. to fix
interest payable or paid quantum of disallowance which allowance was claimed under sec- of ` 5 lakhs for premises to his
d) Disallowance / deemed income u/s 40A (3) by the buyer, under or tion 32AD will have to be reported. If asset brother. - Hint: See clause '23'
e) Provision for payment of gratuity not allowable u/s 40A (7). of expenditure excessive Q.9 In the course of your tax audit assignment u/s 44AB of the
in accordance with the or unreasonable. acquired as per the provisions is sold within
f) Any sum paid by the assessee as an employer not allowable u/s 40 A (9). 5 years from the date of installation, then the Income Tax Act, 1961 of Dream Bank Ltd. You have instructed
provision of this Act, shall Name of party , PAN, your assistant to find out receipt of capital nature which might Q.8 What can be the possible
g) Particulars of any liability of a contingent nature. not for the purpose of nature of payment, deduction shall be deemed to be the income not have been credited to Profit & Loss Account and needs to instances of capital receipt
h) Amount of deduction inadmissible in terms of section 14(A) in respect of computation of income amount Remark be reported in Para 16(e) of 3CD. Your audit assistant seeks which, if not credited to the P &
expenditure in relation to income which does not form part of total income. under IT Act, 1961, be (if excessive or NOTE: No deduction is allowable U/S 33AC your guidance in reporting the same. Specify any four illustra- L Account, needs to be reported
i) Amount inadmissible under the proviso to section 36(I) (iii). allowed as a deduction. unreasonable) from AY 18-19 tive examples of such receipt.(M-19–New). in Form 3CD? (M-13)(N-15).
Hint: See clause ‘16(e)’
Hint: See clause ‘16(e)’

AB AUDIT HOGA SABSE SCORING by CA. Sarthak Niraj Jain CA FINAL AUDIT : AUDIT OF INSURANCE COMPANIES 82
Q.6 M/s. SB & Co. has been appointed as tax auditor under section 44 AB of Income tax Act, 1961 by Woodcraft Interior Consultants, a professional partnership Q.10 As an auditor of a partnership firm under section 44AB of the Income tax Act, 1961, how would you report on the following:
firm, having turnover 1.25 Crores. M/s. RS & Co. are the statutory auditors of the firm but they are unable to give their report on the financial statements of the (i) Capital expenditure incurred for scientific research assets (ii) Expenditure incurred at clubs. (N-12)(N-11) Hint: See clause ‘19 & 21’
firm. M/s. SB & Co., have, however, completed their tax audit and want to issue their reports. Comment. (M-17) - Hint: See point ‘6-VI’
 AUDIT UNDER FISCAL LAWS - TAX AUDIT
FORM - 3CD

Imaginations
Clause Clause Clause Clause 29,
Clause
26 27 28 29 29 A & 29 B
30
OTHER INCOME 29 A
In respect of any sum referred to in clause (a),(b),(c),(d),(e), (f) or (g) of • Whether during the P.Y. the assessee has • Whether during the P.Y.
a. Amount of CENVAT/GST Advance received on capital asset forfeited or negogiation do not result • Details of any
section 43B the liability for which – received any property, being share of a the assessee received any in transfer of capital asset to be reported Tax auditor is required to amount borrowed
A. Pre-existed on the first day of previous year but was not allowed in credit availed for or utilised consideration for issue of shares
company not being a company in which report the nature of such income and the amount involved on HUNDI or any
the assessment of any preceding P.Y. and was– during the P.Y. and its the public are substantially interested, which exceeds the FMV as
29 B amount due thereon
a. Paid during the year. treatment in the P&L a/c and without consideration or for inadequate referred to in section 56(2) (viib)

É
if yes, furnish details.
excluding interest
b. Not paid during the P.Y. treatment of o/s CENVAT/GST consideration as referred to in section 56(2) 1. In case of an immovable property, where the stamp duty
Sec. 56(2) (viib) provides that on the amount
B. Was incurred in the P.Y. and was – credit in the accounts. (viia), if yes, please furnish the details of value exceeds the consideration by less than the higher of borrowed / repaid,
a. Paid on or before the due date for furnishing the return of the The tax auditor shall maintain the same. Section 56(2) (viia) provides where a company, not being a
(i) ` 50,000 or otherwise than
company in which public are
income of the P.Y. u/s 139(I). following info in his working that where a firm or a company not being a (ii) 10% of the consideration, the difference is not chargeable to tax.
through an account
substantially interested, receives
b Not paid on or before the aforesaid date. (State whether, Sales Tax, paper – company (in which public is not substantially Therefore, for any immovable property, where the stamp duty value is
in any P.Y. from any person being
up to 110% of the sale consideration, no addition can be made under payee cheque.
Custom Duty, Excise Duty or any other Indirect Taxes, Levy, Cess, i. Opening balance of interested) a resident, any consideration

ÉE
• W/o consideration FV > 50,000/- section 56(2)(x).

I
Impost etc. is passed through the P&L) CENVAT/GST availed / for issue of such shares exceeds

3
Sum payable to Indian railways for use of assets to be reported: utilised.
• any sum payable by the assessee to the Indian Railways for ii. Closing / o/s balance.
the use of railway assets can be claimed only on payment iii. Treatment in P&L a/c.
• Not services like freight, etc
b. Particular of I/E of prior
Explanation period credited or debited to
• Due date for employee’s contribution to be the due date
P&L a/c
• Consideration < FMV by an amount • The tax auditor
the FMV of the shares shall be Note : 10% substituted by 20% for transfer u/s 43CA should obtain
exceeding ` 50,000 chargeable to Income tax under for specified period.
The aggregate FMV by exceeding ` 50,000/- complete list
other sources.
such consideration is chargeable to IT under 2. Any property 'other than immovable property, for of borrowings
• Clause not applicable where the
other sources. consideration is received by – consideration < FMV, difference if > 50,000 added to Income and repayments
Note : Section 56(2) (viia) is applicable i. Venture capital undertaking from other sources'. of HUNDI loan
otherwise than a/c
on or after the 1/6/2010 but before from venture capital fund / 3. Any money received without consideration in excess of 50,000
payee cheque
company. the whole aggregate to be added to income from other sources.

D I
under labour laws and not due date of furnishing returns 1/4/17-hence not relevant for exam.
ii. Company or classes of
persons CG may notify.

Clause Clause Clause 29B

Clause Clause 30 B 30 C Related Example
30 A 30 B

E
Related Exmple Example 1: Company has Example 2: If an Example 3: If an assessee
Whether primary adjustment to transfer price, Whether the assessee has incurred • As per Section 94B(1) 1. The third-party lender and the Whether the assessee has entered into an received an advance for assessee has forfeited has not forfeited the amount
as referred to section 92CE (1), has been made expenditure during the previos year by way of the Act, if an Indian associated enterprise of the Indian impermissible avoidance arrangement, as capital asset and the same the amount without even though the conditions
during the previous year? of interest or of similar nature exceeding Company or a borrower both are non-resident, referred to in section 96, during the previuos is outstanding for 5 years right of forfeiture as per of forfeiture is applicable as
If yes, please furnish the following details: one crore rupees as referred to in section Permanent reporting under clause 30B is year? If yes, please specify: and expected to remain agreement, then can it per contractual terms, will it
(i) Under which clause of sub-section (1) of 94B (1)? establishment of a applicable. outstanding as at 31 March become income under become income under section
section 92CE primary adjustment is made? If yes, please furnish the following details: foreign company in (i) Nature of impermissible avoidance 2021. What would be tax section 56(2)(ix) and 56(2)(ix) and reportable under
2. The third-party lender is a non- arrangement:
(ii) Amount (in `) of primary adjustment: (i) Amount (in `) of expenditure by way India resident but theassociated en- auditor reporting reportable under clause clause 29A?
(iii) Whether the excess money available with of interest or of similar nature incurred: • interest or of similar terprise of the Indian borrower is (ii) Amount (in ` ) of tax benefit in the previous responsibility? 29A? Answer: If the assessee
the associated enterprise is required to be (ii) Earnings before interest, tax, nature exceeding one year arising, in aggregate, to all the parties to Answer: The requirement Answer: If the assessee contends that the amount has
resident of India, reporting under
repatriated to India as per the provisions depreciation and amortization crore rupees which is the arrangement of reporting arises only on has forfeited the amount not been forfeited, the tax
clause 30B is applicable, even if the
of sub-section (2) of section 92CE? (EBITDA) during the previous year (in `) deductible forfeiture of such amount. without right to forfeit auditor needs to look at all facts
associated enterprise is resident,
(iv) If yes, whether the excess money has (iii) Amount (in `) of expenditure by way • in respect of any debt If an advance has been and in case there is no of the case and may obtain a
since the lender is a non-resident.
been repatriated within the prescribed interest or of similar nature as per (i) issued by a *Note : The reporting under clause 30C received and has been action by the other management representation
above which exceeds 30% of EBITDA 3. The lender and the associated en-
time non-resident, being an has been now applicable outstanding for a party, the amount so that even though the contract
terprise of the Indian borrower both
(v) If no, the amount (in `) of imputed (iv) Details of interest expenditure brought associated enterprise considerable period of time, forfeited may become permits forfeiture on some
interest income on such excess money forward as per section 94B (4) are Indian residents, reporting under
of such borrower, there is no income under sub clause conditions and even though
which has not been repatriated within the (v) Details of interest expenditure carried clause 30B is not applicable. requirement to report such (ix) and the tax auditor such conditions have occurred,
• the interest shall not
prescribed time: forward as per section 94B (4) be deductible > 30% amount unless and until it should report such for- the assessee has not yet
of EBITDA. is forfeited by an act of t he feiture with appropriate forfeited the advance and other
assessee under clause 29A. note under clause 29A. sums received.
Q.12 ABC Pvt. Ltd. and XYZ Pvt. Ltd. are the Companies in which public are not substantially interested.
Q.11 XYZ Ltd. pays `90000 for its 6 employees to a Hotel as boarding and lodging expenses of such employees for a conference. The During the previous year 2020-21, ABC Pvt. Ltd. received some property being shares of XYZ Pvt. Ltd.
Company pays the amount in cash to the Hotel. The Hotel gives 6 bills each amounting to `15000. The Company contends that each The details of which are provided below: (a) No. of Shares = 1000 (b) Face Value = ` 10 per share (c)
bill is within the limit, so there is no violation of the provisions of the Income tax Act, 1961. As the tax auditor, how would you deal Aggregate Fair Market Value = ` 1,00,000 (d) Consideration Value =Nil As the tax auditor how would you
with the matter in your tax audit report for the Assessment Year 2021-22?(N-14) Hint: See clause '21' deal with the situation? (M-16)(MTP-N-18)-Hint: See clause ‘28 & 29B’

83 CA FINAL AUDIT : AUDIT PLANNING, STRATEGY & EXECUTION Visit FAST e-Store | www.elearn.fast.edu.in | Connect with FAST at 95225 64050
Q.13 You are appointed as tax auditor of Mr. X, a practicing advocate in Agra. During the previous year he collected Service Tax of `7 lakhs but utilized for personal use. The Commissioner of Central Excise issued a show cause notice to him why the tax collected by him is not deposited to the Government
account. He appeared before the Commissioner and stated his inability to pay the sum due to financial crisis. The proceedings are still pending. Mr. X requests you not to disclose his Service Tax registration details while filling particulars to be furnished in Form No. 3CD. As a tax auditor how would you
deal with this (M-16) - Hint: See clause ‘4’
 26955151st
AUDIT UNDER FISCAL LAWS - TAX AUDIT
FORM - 3CD

Clause Clause
2695 Imt Clause Clause Clause Clause Clause

I
31 (b) 31 (c) 31 (d) 31 (e) 32 33
31 (a)
Particulars of each loan or deposit in an amount Particulars of repayment of loan or deposit or Section -wise
Particulars of each specified sum in an amount Particulars of each repayment of loan Particulars of repayment of loan or
exceeding the limit specified in sec. 269SS taken or or deposit or any specified advance any specified advance in an amount exceeding details of
exceeding the limit specified in section 269SS taken deposit or any specified advance a. Details of brought forward loss or depreciation allowance,
accepted during P.Y. – in an amount exceeding the limit the limit specified in section 269T received by a deduction, if any,
or accepted during the previous year: - in an amount exceeding the limit in the following manner, to the extent available:
i. Name, Address and PAN (if available with the specified in section 269T made during cheque or a bank draft which is not an account admissible under
i. Name, address and PAN (if available with specified in section 269T received 1 Serial Number
assessee) of the lender or depositor; the previous year: payee cheque or account payee bank draft dur- chapter VI-A or
the assessee) of person from whom specified otherwise than by a cheque or
ii. Amount of loan or deposit taken or accepted; i. Name, address and PAN (if available ing the previous year: - 2 Assessment Year chapter III (sec.
sum is received; bank draft or use of electronic
iii. Whether the loan or deposit was squared up with the assessee) of the payee; i. Name, address and PAN (if available with 3 Nature of loss/ allowance (in rupees)
ii. Amount of specified sum taken or accepted; clearing system through a bank 10A / sec. 10AA)
during the previous year; ii. Amount of repayment; the assessee) of the lender, or depositor 4 Amount as returned* (in rupees)
iii. Whether the specified sum was taken or account during the previous year: - Please furnish

t
iv. Maximum amount outstanding in the account at iii. Maximum amount outstanding in or person from whom specified advance is 5 All losses/allowances not allowed under section
accepted by cheque or bank draft or use of i. Name, address and PAN (if the following
any time during the previous year; the account at any time during the received; 115BAA/ 115BAC/115BAD
electronic clearing system through a bank available with the assessee) particulars:
v. Whether the loan o deposit was taken or accepted previous year; ii. Amount of loan or deposit or any specified
account; of the lender, or depositor or 6 Amount as adjusted by withdrawal of • Section under
by cheque or bank draft or use of electronic iv. Whether the repayment was made advance received by a cheque or a bank draft
iv. In case the specified sum was taken person from whom specified additional depreciation on account of
clearing system through a bank account; which is not an account payee cheque or which deduction
or accepted by cheque or bank draft, by cheque or bank draft or use of advance is received; opting for taxation under section
vi. In case the loan or deposit was taken or accepted electronic clearing system through a account payee bank draft during the previous is claimed.
whether same was taken or accepted by ii. Amount of loan or deposit 115BAC/115BAD^
year.

I
by cheque or bank draft, whether the same was an account payee cheque or an account bank account; • Amounts
or any specified advance is 7 Amounts as assessed (give reference to relevant
taken or accepted by an account payee cheque or v. In case the repayment was made (Particulars at (c), (d) and (e) need not be given admissible
payee bank draft. received otherwise than by a order)
an account payee bank draft. by cheque or bank draft, whether in the case of a repayment of any loan or deposit as per the
(Particulars at (a) and (b) need not be given in cheque or bank draft or use 8 Remarks
*(These particulars need not be given in the case the same was taken or accepted or any specified advance taken or accepted from IT Act, 1961
the case of a government company, a banking of electronic clearing system
of a Government Company, a banking company by an account payee cheque or an the Government, Government company, bank-
company or a corporation established by the through a bank account during Note and fulfils the
or a corporation established by a Central, State or account payee bank draft. ing company or a corporation established by the
Central, State or Provincial Act.) the previous year. conditions, if any

IT
Central, State or Provincial Act). • *If the assessed depreciation is less and no
Provincial Act.) specified under
appeal pending then take assessed.
• ^To be filled in for assessment year 2021-2022 the relevant
only. provision of IT
Act, 1961.
Non Clause b. Whether a change in share holding of the company has
Applicability (ba) Particulars of each receipt in an amount exceeding (bc) Particulars of each payment made in an amount 34 taken place in the P.Y. due to which the losses incurred
the limit specified in section 269ST, in aggregate from a exceeding the limit specified in section 269ST, in prior to the P.Y. cannot be allowed to be carried forward

Provisions of Sec. 269SS of
Income Tax Acts 1961 are not
applicable on the following
organisation:
(a) The Government;
i
person in a day or in respect of a single transaction or
in respect of transactions relating to one event or
occasion from a person, during theprevious year,
where such receipt is
otherwise than by a cheque or bank draft or use of
aggregate to a person in a day or in respect of a single
transaction or in respect of transactions relating to one
event or occasion to a person, otherwise than by a
cheque or bank draft or use of electronic clearing system
through a bank account during the previous year:-
(a) Whether the assessee is required to deduct or collect tax as per provisions of chapter XVII-B or in terms of sec. 79.
chapter XVII-BB if yes, furnish details of -
c. Whether the assessee has incurred only speculation
i. TAN. ii. Section.
loss referred to in sec. 73 during the P.Y., if yes, furnish
iii. Nature of payment. iv. Total amount of payment / receipt.
details.
v. Total amount on which tax was required to be deducted / collected.

(b) Any banking company, post
office savings bank or
electronic clearing system through a bank account:-
(i) Name, address and Permanent Account Number
(if available with the assessee) of the payer;
(i) Name, address and Permanent Account Number (if
available with the assessee) of the payee;
(ii) Nature of transaction;
2
vi. Total amount of tax deducted / collected at specified rate out of (v). d. Whether the assessee has incurred any losses referred
vii. Amount of tax deducted / collected out of (vi). to in sec. 73A in respect of any specified business

co-operative bank;
(c) Any corporation
established by a Central,
State or Provincial Act;
(d) Any Government company
as defined in section 2(45)
of the Companies Act, 2013
(e) Such other institution,
association or body or class
of institutions, associations
or bodies which the Central
Government may, for
reasons to be recorded in
writing, notify in this behalf
in the Official Gazette:
(ii) Nature of transaction;
(iii) Amount of receipt (in ` );
(iv) Date of receipt;
(bb) Particulars of each receipt in an amount exceed-
ing the limit specified in section 269ST, in aggregate
from a person in a day or in respect of a single
transaction or in respect of transactions relating to
one event or
occasion from a person, received by a cheque or
bank draft, not being an account payee cheque or
anaccount payee bank draft,
during the previous year:—
(i) Name, address and Permanent Account Num-
ber (if available with the assessee) of the payer;
(ii) Amount of receipt (in `);
ÉE
viii. Total amount on which tax was deducted or collected at less than specified rate out of
(iii) Amount of payment (in `); during the P.Y., if yes, furnish details.
(iv) Date of payment; (vii).
ix. Amount of tax deducted or collected on (viii). e. In case of a company, please state that
x. Amount of tax not deposited to the credit of CG out of (vi) and (viii) whether the company is deemed to be
carrying on a speculation business as
(b) Whether the assessee has furnished the statement of tax deducted or tax collected
(bd) Particulars of each payment in an amount within prescribed time, if not please furnish details: referred to in sec. 73, if yes, furnish details as
exceeding the limit specified in section 269ST, in i. TAN. ii. Type of from. speculation loss.
aggregate to a person in a day or in respect of a iii. Due date for furnishing. iv. Date of furnishing, if furnished.
single transaction or in respect of transactions v. Whether, the statement of TDS / TCS contains information about all transactions required Note: Amount as adjusted by withdrawal of
relating to one event or occasion to a person, made to be reported. additional dep. on a/c of opting for taxation
by a cheque or bank draft, not being an account
vi. If not please furnish list of details/tr. which are not reported. u/s 115BAD* is required to be filled in for AY
payee cheque or an account payee bank draft,
(c) Whether the assessee is liable to pay interest u/s 201 (IA) or sec. 206C (7) if yes, please furnish: 2020-21 only.
during the previous year:—
i. TAN. ii. Amount of interest u/s 201 (IA) / 206C (7) if payable,
(i) Name, address and Permanent Account Number
iii. Amount paid out of (ii) along with date of payment.
(if available with the assessee) of the payee;
(ii) Amount of payment (in `);

AB AUDIT HOGA SABSE SCORING by CA. Sarthak Niraj Jain CA FINAL AUDIT : AUDIT OF INSURANCE COMPANIES 84
Q.14 Tiger Ltd., is a company engaged in the production of wool. Along with its production business, it is also engaged in buying and selling of securities with the Q.15 The provisions of Sec. 269SS of Income Tax Acts 1961 are not applicable to some organisations.
expectation of a favourable price change. During the year, its speculation loss on account of purchase and sale of securities was to the tune of `12 lakhs. As a tax Mention those organisations. (Jan-21-Old) Hint:- Clause-31(a)-Non-Applicability
auditor, what is the reporting requirement in Form 3 CD under Section 44 AB of the Income tax Act, 1961 ?(M-18-Old) - Hint : See clause ‘(32)(e)’
 AUDIT UNDER FISCAL LAWS - TAX AUDIT
FORM - 3CD
Clause Clause Clause Clause Clause
36 37 39 40 LIST OF ICDS

If
35

I
Whether any cost Whether any audit was
a. In the case of trading concern give quantitative details of
Clause 36 shall be audit was carried out, if conducted u/s 72A of the Financial Details regarding turnover, gross profit A. ICDS I Accounting Policies.
the principal items of goods traded –
yes, give the details, if Act, 1994 in relation to valuation etc. for P.Y. and preceding P.Y. – B. ICDS II Valuation of Inventories
u
i. Opening stock. omitted as clause
ii. Purchase during the P.Y. any of disqualification of taxable services, if yes, give the C. ICDS IIIConstruction Contracts.
iii. Sales during the P.Y. requirement of or disagreement on any details if any, of disqualification or S.N. Particulars P.Y. Preced- D. ICDS IV Revenue Recognition.

É
iv. Closing stock. disclosing DDT is matter / item / value disagreement on any matter / item / ing P.Y. E. ICDS V Tangible Fixed Assets.
v. Shortage / excess if any. The auditor should obtain / quantity as may be value / quantity as may be reported
removed. 1 Total turnover of - - F. ICDS VI The Effects of Changes in
certificates from the assessee in respect of above reported / identified by / identified by the auditor.
the cost auditor. the Assessee Foreign Exchange Rates.
items.
2 Gross profit / - - G. ICDS VII Government Grants.
b. In the case of manufacturing concern, give quantitative
details of the principal items of raw materials, finished turnover H. ICDS VIII Securities.

I
goods & by – products Clause Clause I. ICDS IX Borrowing Costs.
Clause 3 Net profit / - -
A. Raw material 38 41 J. ICDS X Provisions, Contingent
36 A turnover
i. Opening stock. ii. Purchase during P.Y. Liabilities and Contingent
Whether any audit was Please furnish the details 4 Stock-in-trade/ - -

É
iii. Consumption during P.Y. iv. Sales during P.Y. Whether the assesee has received any amount in the Assets.
conducted under the Central of demand raised or refund turnover
v. Closing stock. vi. Yield of finished products.

É E
nature of dividend as referred to in section 2(22)(e) ?

É
Excise Act, 1994, if yes, give

vii. % of yield.
B. Finished / by-products :
i. Opening stock.
iii. Qty. manufactured.
v. Cl. Stock.
É
viii. Shortage / excess. If yes, please furnish the following details: issued tax laws other than IT 5. Material consumed , - - Penalty for not getting the accounts
the details if any of disquali- 9
(i) Amount received (in ` ) Act, 1961, and Wealth Tax Act, FG produced audited as required u/s 44AB
ii. Purchase. fication or disagreement on
(ii) Date of receipt 1957, along with details, of
iv. Sales. any matter / item / value/ According to section 271B, if any person who is
Note: Since DDT is not applicable w.e.f. AY 2021-22, hence reporting relevant proceedings. required to comply with section 44AB fails to
vi. Shortage / excess. quantity as may be reported /
under this required would not be relevant identified by the auditor. get his accounts audited in respect of any year
8 or years as required under section 44AB, the
Assessing Officer may impose a penalty. The
penalty shall be lower of the following amounts:

É
Clause Clause Clause COMPLIANCE WITH INCOME COMPUTATION AND (a) 0.5% of the total sales, turnover or gross

42
Whether the assessee is required to furnish state-
ment in Form No.61 or Form No.61A or Form 61B?
if submitted, are to be disclosed:
i. Income-Tax Department Reporting Entity
Identification No.
ii. Type of Form.
iii. Due date for furnishing.
ÉÉ
iv. Date of furnishing, if furnished.
v. Whether the Form contains information about
all details/transactions which are required to
be reported.
vi. If not, furnish list of the details/transactions
which are not reported
• Form 61 (Statement containing
particulars of declaration received in Form
43
Any company liable to reporting
under section 286 (2) of the Act,
needs to disclose the following
information in Form 3CD
i. Whether report has been
furnished by the assessee
or its parent entity or an
alternate reporting entity?
ii. Name of parent entity.
iii. Name of alternate reporting
entity (if applicable).
iv. Date of furnishing of report.
The auditor would need to go
through the CbCR and then
report under this clause
44
Break-up of total expenditure of entities registered or not
registered under the GST
(a) Total amount of expenditure incurred during the year
(b) Expenditure in respect of entities registered under
GST
(i) Relating to goods or services exempt from GST
(ii) Relating to entities falling under
composition scheme
(iii) Relating to other registered entities
(iv) Total payment to registered entitites
(c) Expenditure relating to entities not registered under
GST
DISCLOSURE STANDARDS (ICDS)
• Section 145 of the Income tax Act,
1961 deals with the Method of Ac-
counting.
• Under section 145(1), income charge-
able under the heads “Profits and
gains of business or profession” or
“Income from other sources” shall be
computed in accordance with either
the cash or mercantile system of ac-
counting regularly employed by the
assessee.
• Further, Section 145(2) empowers the
Central Government to notify in the
Official Gazette from time to time,
income computation and disclosure
• Central Government in exercise of the
powers conferred under
section 145(2), notified ten income
computation and disclosure
standards (ICDSs) to be followed by
all assesses (other than an
individual or a HUF who is not
required to get his accounts of one
previous year audited in
accordance with the provisions of
section 44AB), following the
mercantile system of accounting,
• ICDS to be followed for the purposes
of computation of income
chargeable to income-tax under the
I
receipts, as the case may be, in business, or
of the gross receipts in profession, in such
year or years.
(b) ` 1,50,000.
However, according to section 273B, no penalty
shall be imposed if reasonable cause for such
failure is proved.
Q.17 ABC Ltd., is consistently following Accounting
Standards as required under section 133 of the Com-
panies Act, 2013. During your tax audit under section
44AB of the Income tax Act, 1961, the Board of
Directors informed you that profits of the Company is
properly arrived at and the Accounting Standards ap-
plicable to it have been followed consistently and as
such, there need not be any adjustments to be made
as per Income Computation and Disclosure Standards
notified under section 145 of Income tax Act, 1961.

E
No. 60)(No PAN) standards to be followed by any class head “Profit and gains of business or Based on the requirements of Law in this regard,

É
• Form 61A (Statement of Specified
Financial transactions)
• Form 61B (Statement of Reportable Account
under section 285BA (1)of the Act)
Even expenditure made in pre-GST period to be of assessee or in respect of any class of profession” or “Income from other examine the validity of the stand of Management in
given based on subsequent registration income. sources”. from the A.Y. 2017-18. this regard. (M-18 New)
Hint : See point ‘Section 145(2) & Clause 13(d)&(e)’
Country-by-Country
Reporting (CbCR) as referred *Note : Reporting under Clause 44 has Q.16 ABC Printing Press, a proprietary concern, made a turnover of above ` 10.03 crore for the year ended 31.03.2021. The Management explained its auditor
to in Section 286 been now applicable Mr. Z, that it undertakes different job work orders from customers. The raw materials required for every job are dissimilar. It purchases the raw materials as per
specification/requirements of each customer, and there is hardly any balance of raw materials remaining in the stock, except pending work-in-progress at the
year end. Because of variety and complexity of materials, it is rather impossible to maintain a stock-register. Give your comments. (SM)(RTP-M-20)(N-09)
Hint : See clause 35(b) & 11(b)

85 CA FINAL AUDIT : AUDIT PLANNING, STRATEGY & EXECUTION Visit FAST e-Store | www.elearn.fast.edu.in | Connect with FAST at 95225 64050

11 AUDIT OF PUBLIC TRUST
Back Drop
n Sections 12AA of the Income-tax Act deals with
the conditions as to registration of Trust etc.
n According to this section, exemption from
income tax would be available under section
11 and 12 of the Act in relation to the income
of any trust or institution provided to following
conditions are satisfied:
(i) The total income of the trust without
deduction u/s 11 or 12 exceeds maximum
amount which is not chargeable to income
tax in any P.Y.
(ii) The accounts of the trust or institution for
that year have been audited by an
accountant.
n The audit report to be submitted in Form No.
10B.
Routine checking
n Check BOA and other records having regard to
the system of accounting & internal control.
n Vouch transactions of the trust to satisfy that:
- Transactions are within the ambit of trust;
- Transactions are properly authorized;
I
- All income due is properly accounted;
- All expenses on outgoing are recorded as
per system followed by trust;
- Amount shown as applied towards the
object of trust are covered by the objects
of the Trust
Obtain Trial Balance on the closing date
n and market values shown.
n Obtain Balance Sheet and P&L a/c of the trust
authenticated by the trustees and check the
same with the Trial Balance
Annexure to the Audit Report
Obtain from the trustees:
E
- A certified list of persons carried by section 13 (3).
- A statement enlisting the various items specified in the annexure to Form 10B and
giving the information against each item together with explanatory or supporting
schedules.
91 CA FINAL AUDIT : AUDIT PLANNING, STRATEGY & EXECUTION
AUDIT UNDER FISCAL LAWS - TAX AUDIT
Preliminary
n Obtain a resolution from trust
specifying the appointment &
scope of audit.
n Obtain letter of appointment
n
from trust.
Obtain certificate as to the
opening balances of asset &
liabilities of the trust.
I n Obtain a certificate of system of
accounting policies & internal
control.
n Obtain list of institutions/
activities run/carried out by
the trust.
n Obtain certified true copy of
trust deed.
Accounting Principles
n Auditor to follow GAAP and
ascertain the accuracy, truth and
fairness of the Balance Sheet &
Profit and Loss Account.
Auditor to scrutinize that:
n
- All asset of the trust are verified.
- All assets have been properly
valued and depreciation duly
p
provided for.
- All liabilities properly
accounted for.
- The investments of the trust are
properly classified and indicated
- Outstanding due to the trust are
properly accounted for and their
recoverability examined and
provision made for irrecoverable.
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The liability of the tax auditor in The opinion expressed by
respect of tax audit will be the same
as in any other audit assignment. It
the tax auditor is not
binding on the assessee. If the
I
may be noted that when any question tax auditor has qualified his
6
relating to the audit conducted by a report and expressed an
tax auditor arises, he is answerable opinion on a particular item,
1
to the Council of the Institute under the assessee may take a
the Chartered Accountants Act. In all 12 different view while preparing
matters concerning tax audit, ICAI’s his return of income. In such
disciplinary jurisdiction will prevail CODE OF ETHICS cases, it is advisable for the
AND OTHER assessee to state his viewpoint
In case the assessee is found guilty
of having concealed the particulars
MATTERS
Some of the issues which are
5 É
and support the same by any
judicial pronouncements on
which he wants to rely.
2
of his income it would not ipso commonly raised in regard to
facto mean that the tax auditor is different aspects of tax audit
vis-à-vis the liability /
also responsible. If the Assessing
Officer comes to the conclusion obligations of the tax auditor
If the qualified assistant
that the tax auditor was grossly are considered here under.
(whether or not holding the
negligent in the performance of certificate of practice) is
his duties, he can refer the matter found to be grossly negligent
to the ICAI so that appropriate
4
in the performance of his
3
action can be taken against the duties, the Council of the
tax auditor under the Chartered Institute can take disciplinary
Accountants Act. action against him.
The Assessing Officer or any other authority who If the actual work relating to examination of books and records is done by a
is authorised to issue summons and to call for qualified assistant in a firm of chartered accountants and the partner of the firm
evidence or documents, can call upon the tax signing the audit report has relied upon this work, action, if any, for professional
auditor who has audited the accounts to give any negligence can be initiated against the member who has signed the report and
evidence or produce documents. in such an event, it would be open for the member concerned to prove that he
has taken due care and diligence in the performance of his duties and is not
ADDITIONAL
QUESTIONS
aware of any reason to believe that he should not have so relied.
Example
Q.28
AB Ltd. is a company in which public are
ABC & Co.
Example not substantially interested. During the
(a partnership firm) engaged
Example 4. Mr. Vishal Raka, previous year 2020-21, the company issued
in trading of electronic goods is
owning an Agency of Samsung Mobile shares to residents of India and provides you
expecting a turnover of ` 165 lacs for
for the city of Pune and expects the the following data related to such issue:
the FY 2021-22. (Assume the partnership
turnover of ` 87 lacs during the FY 2021-22. No. of shares issued 1,00,000
firm would not be able to ensure that the aggregate of all
 Though Section 44AD is applicable to an Face Value ` 10 per share
amounts received including amount received for sales,
Individual, it is not applicable to Commission Fair Market Value (FMV) ` 60 per share
turnover or gross receipts during the previous year, in cash,
income. In the given case, since, Mr. Vishal Consideration received ` 80 per share
does not exceed five per cent of the said amount and aggregate
earns the commission income, he cannot take The management of the company
of all payments made including amount incurred for expendi-
the benefit of section 44AD. His total turnover contends that, it is a normal issue of
ture, in cash, during the previous year does not exceed
during the FY 2021-22 in respect of shares, thus, needs not to be reported.
five per cent of the said payment).
commission income is not expected to As the tax auditor of AB Ltd., how would
 Section 44AD would be applicable to Partnership FirmThus,
exceed ` 1 crore, therefore, he need you deal with the matter in your tax audit
ABC & Co. can declare the minimum profit @ 8% of the turno-
not get his books of a report? (MTP-N18) Hint : See clause ‘28
ver as its turnover during the PY 2021-22 is not expected to
counts audited u/s & 29B’
exceed ` 2 crores. If the firm do not opt for presumptive
44AB of the Act.
income scheme under section 44AD, it has to get books
of accounts audited u/s 44AB of the Act.