Tax audit is the verification of the books of accounts maintained by a taxpayer. A tax audit aims to validate the income tax computation made by the taxpayer in the income tax return and to ensure compliance with the laws of Income Tax. It is conducted by the IRS to verify information or uncover fraud and inaccurate tax returns. The IRS chooses tax returns to examine both randomly and intentionally.
Tax Audit is the independent verification of the books of accounts of the assessee to form an opinion on the matters related to taxation compliances carried out by the assessee. IRS conducts a Tax Audit to examine your tax return a little more closely and verify that your income and deductions are accurate. Typically, your tax return is selected for audit when something you have entered on your return is out of the ordinary. These are the three main types of IRS audits; the mail audit, the office audit and the field audit.
Tax Audit under section 44AB
Section 44AB of the Income Tax Act, 1961, consists of the provisions for an income tax audit. Income Tax audit is aimed at evaluating whether an individual or company has accurately filed the income tax returns of an assessment year. An external agency is mandated to assess returns filed from income, deductions and expenditures and other rules as stated by the Income Tax Act, 1961.
The Chartered Accountant appointed for conducting a tax audit of an individual or an organization has to present the tax audit report online, using his/her official login credentials. The taxpayer also has to mention the relevant information about their Chartered Accountant in their login platform.
Once the tax audit report is uploaded by the auditor, it has to be either accepted or rejected by the taxpayer via their login portal. If the taxpayer rejects the tax audit report, the entire process has to be repeated until the tax audit report is accepted by the taxpayer.
The tax audit report has to be filed on or before the pre-determined due date of filing income return, i.e., 30th November of the subsequent assessment year for taxpayers who have engaged in an international transaction and 30th September of the subsequent assessment year for other taxpayers.
Tax Audit reports can be presented in two different ways by tax auditors, differing is based on the laws under which the accounts have been audited.
Form 3CB and Form 3CD: For tax audit reports presented under Section 44AB of the Income Tax Act, 1961, Form 3CB and the prescribed details have to be reported in Form 3CD.
Form 3CA and Form 3CD: When a taxpayer prefers to get the accounts audited under any law other than Section 44AB, then the relevant form is Form 3CA, while the prescribed details have to be reported in the Form 3CD.
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