Simplification of Tax Audit Report Forms – A Suggestion

The Income Tax Audit Report Forms 3CD alongwith applicable Forms 3CA / 3CB / 29B / 29C / 10B etc prescribed under Income Tax Rules are very expansive and seek a lot of details, which in many cases, are not applicable to the respective category of assessee’s.

My submission is that instead of a combination of audit report forms – a comprehensive & combined audit report applicable to a particular category of assessee be prescribed– Individual or HUF, Firm or AOP, Company, Trust – which will contain relevant particulars pertaining to those assessee’s and reduce the clutter of not-applicable clause as well as be easy to comprehend by the Assessee, Auditor and the officers of Income Tax Department.

This is akin to the different forms prescribed for Income Tax Returns for different categories of assessee’s.

For Example :-

AR No. Corresponding ITR Present Audit Report Forms Applicable to which class of Assessee’s
AR 3 ITR 3 Form 3CB – 3CD

Form 29C

Individuals / HUFs whose turnover exceeds the ceiling amounts prescribed u/s 44AB
AR 4 ITR 4 (SUGAM) Form 3CB – 3CD

Form 29C

Individuals / HUFs whose turnover does not exceeds the ceiling amount prescribed u/s 44AB but liable to audit by virtue of Section 44AD
AR 5 ITR 5 Form 3CB – 3CD

Form 29C

Partnership Firms (including LLPs) | Association of Persons or Body of Individuals
AR 6 ITR 6 Form 3CA – 3CD

Form 29B

Companies other than claiming exemption u/s 11
AR 7 ITR 7 Form 3CB – 3CD

Form 10B

Trusts, etc filing return u/s 139(4A), 139(4C), 139(4D)
For example
Clause 9 of Form 3CD is applicable to Partnership Firms / AOP only – ITR 5
Clause 21(b)(i) & 21(b)(ii) & 34 (TDS) of Form 3CD is not applicable to assessee’s who are required to file Audit Reports because of lower profit percentage than prescribed u/s 44AD, etc.
Clause 32(b), 32(c), 32(d), 32(e) & Clause 36 of Form 3CD is applicable only to assessee’s who are Companies – ITR 6

There is a case for similar data structure for the following Information furnished in ITR and Audit Report – for matching by use of Computer / IT Technology.
1. Clause 10(a) & 10(b) of Form 3CD & Schedule – Nature of Business in ITR
2. Clause 18 of Form 3CD & Depreciation Schedules – DPM, DOA and DEP in ITRs
3. Clause 19 of Form 3CD & Expenditure on Scientific Research – Schedule ESR in ITRs
4. Clause 13(e) of Form 3CD & Schedule ICDS in ITRs
5. Clause 33 of Form 3CD & Schedules – 80-IA, 80-IB, [80IC or 80IE], VI-A*
*Chapter VI-A – Part B (excluding Section 80G, 80GGA, 80GGB, 80GGC) & Part CA & Part D are applicable only to Individuals / HUFs – in the proposed scheme AR 3 & AR 4 only.
6. Form 29C – Schedule AMT in ITR 3,5
7. Form 29B – Schedule MAT in ITR 6

The proposal is in line with Ease of Doing Business policy of Government of India and also to promote Ease of Compliance for TaxPayers and Tax Practitioners and for users of Tax Audit Report namely, the Income Tax Department, Ministry of Finance, Government of India.

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