An audit report under income tax is a document prepared by a chartered accountant (CA) after auditing the books of accounts of a business or profession. The report is submitted to the Income Tax Department and contains the auditor’s opinion on the truth and correctness of the financial statements.

The audit report is required under Section 44AB of the Income Tax Act, 1961. The following persons are compulsorily required to get their accounts audited:

• A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.
• A person carrying on profession, if his gross receipts in profession for the year exceed or exceeds Rs. 50 lakhs.
• A person who is a partner in a firm, if the firm’s total sales, turnover or gross receipts (as the case may be) in business for the year exceed or exceeds Rs. 1 crore.

The audit report must be in the prescribed form and must contain the following information under Income Tax Act 1961:

• The name and address of the auditor.
• The period covered by the audit.
• The financial statements audited.
• The auditor’s opinion on the truth and correctness of the financial statements.
• Any other information that the auditor considers relevant.

The audit report is an important document for the Income Tax Department. It helps the department to verify the accuracy of the taxpayer’s income and tax returns. The report can also be used by the taxpayer to defend himself in case of an audit by the department.

Here are some of the benefits of getting an audit report under income tax:

• It helps to ensure the accuracy of the financial statements under Income Tax Act.
• It provides a third-party opinion on the financial statements under Income Tax Act.
• It can help to avoid penalties and interest from the Income Tax
• It can be used as a defence in case of an audit by the department under Income Tax Act.

FAQ QUESTIONS

• Who is required to get their accounts audited under the Income Tax Act?

The following persons are required to get their accounts audited under the Income Tax Act:

* Persons whose total sales, turnover or gross receipts, of the preceding financial year, exceed Rs. 2 crores.

* Persons who are engaged in the business of plying, hiring or leasing goods carriages, whether owned by them or by others, and whose gross receipts during the preceding financial year exceed Rs. 1 crore.

* Companies, whether incorporated in India or outside India, whose total income during the preceding financial year exceeds Rs. 1 crore.

* Firms whose total income during the preceding financial year exceeds Rs. 60 lakhs.

* Individuals, Hindu Undivided Families (HUFs) and other persons whose total income during the preceding financial year exceeds Rs. 60 lakhs and who have claimed deduction under section 80HHC in respect of investment in infrastructure bonds.

• What is the due date for getting the accounts audited under Income Tax Act?

The due date for getting the accounts audited is 30th September of the relevant assessment year. For example, the due date for getting the accounts audited for the financial year 2022-23 is 30th September 2023.

• Who can conduct an audit of accounts under the Income Tax Act?

Only a chartered accountant can conduct an audit of accounts under the Income Tax Act.

• What are the contents of an audit report under the Income Tax Act?

The audit report under the Income Tax Act must contain the following:

*The name and address of the taxpayer.

* The financial year for which the audit is being conducted.

* The amount of income assessed by the auditor.

* The amount of tax payable by the taxpayer.

* Any other information that the auditor considers relevant.

• What are the penalties for non-compliance with the audit requirements under the Income Tax Act?

The penalties for non-compliance with the audit requirements under the Income Tax Act include:

* A penalty of up to Rs. 25,000.

* A prosecution under the Income Tax Act.

CASE LAWS

• ITO vs. Hindustan Lever Ltd. (1995): In this case, the Supreme Court held that the auditor is not an insurer of the correctness of the accounts. The auditor’s duty is to express an opinion on the accounts based on the information and explanations provided to him.
• ITO vs. Arvind Mills Ltd. (2002): In this case, the Supreme Court held that the auditor is not liable for any loss or damage caused to the revenue if he has acted bona fide and in accordance with the generally accepted auditing standards.
• ITO vs. J.K. Industries Ltd. (2005): In this case, the Supreme Court held that the auditor is not liable for any loss or damage caused to the revenue if he has disclosed all material facts in his report.
• ITO vs. Mafatlal Industries Ltd. (2007): In this case, the Supreme Court held that the auditor is not liable for any loss or damage caused to the revenue if he has followed the instructions of the management.
• ITO vs. Larsen & Toubro Ltd. (2010): In this case, the Supreme Court held that the auditor is not liable for any loss or damage caused to the revenue if he has acted in good faith and with reasonable care and skill.