Transcript Slide 1

abbas & co.
Chartered Accountants
CA Abbas Gulamhusainwala
COVERAGE
Introduction of New clauses in Form 3CA, 3CB and 3CD
Amendment in Existing clauses to Form 3CA, 3CB and 3CD
Deletion of the Existing clauses
Amendments
Form 3CA
In case of Books of Accounts to be
Audited under any other Act.
Form 3CB
o Word “for the year ended on 31st March,__________” is replaced with “for the period
beginning from __________ to ending on ___________” in case of audited profit and
loss account or income and expenditure account.
o Word “as at 31st March,_______” is replaced with “as on________” in case of audited
balance sheet. 3CB
o Word “to examination of books of account including other relevant documents” is
added to clause 3 of the Form 3CA.
o Word “Signed” is replaces with “Signature and stamp/Seal of the signatory” and Full
address is required
o Negative remarks and qualification are needs to reported with reasons.
Amendments
Form 3CD
o
o
o
o
Renumbering of existing clauses.
Addition of 15 New Clauses.
Amendments in 7 Clauses.
Deletion of one clause and ANNEXURE-I related to abstract of balance sheet and
statement of profit and loss.
o Item-wise reporting for each clause/sub point, along with:
 Dates
 Nature
 Name
 Address
 Description of property etc.
o Reporting of obtained Certificates related to specific clauses removed.
Introduction of new clauses:
Clause-4: Disclosure of information for Indirect Tax registration
Whether the assessee is liable to pay indirect tax like
o
Excise Duty,
o
Service Tax,
o
Sales Tax,
o
Customs Duty, etc.
If yes, furnish the registration number or any other identification number allotted for the
same.
Key point:
 What is the reporting responsibility of auditor and verification of the liability
of the assessee
 If liable for registration and failed to register, still needs to report
Clause-8: Applicable provision of section 44AB
(i) Indicate the relevant clause of section 44AB under which the audit has been conducted
a. Business turnover exceeds Rs. 1 Crore
b. Professional receipts exceeds Rs. 25 Lacs
c. Business covered under deeming provisions under
o Section 44AE- Business of plying, hiring or leasing goods carriage – not more than
ten – HGV Rs. 5,000 p.m. and LGV Rs. 4,500 p.m.
o Section 44BB – Business of exploration, etc of mineral oils – 10% of amount
received by the assessee
o Section 44BBB – Business of civil construction, etc,, in certain turnkey power
projects
And the income is claimed to be lower than the profit or gain so deemed.
d. Business covered under section 44AD
o And the income is claimed to be lower than the profit and gain so deemed and
income exceeds the maximum amount which is not chargeable to tax
Clause-17: Transfer of land, building or both – section 43CA/50C of the IT Act
Where any land or building or both is transferred during the previous year for a
consideration less than value adopted or assessed or assessable by any authority of a
State Government referred to in section 43CA or 50C, please furnish:
Details of
property




Consideration
received or
accrued
Value adopted or
assessed or
assessable
Key point:
How to report in case of percentage completion report
Transfer under the Act and actual date of transfer by sale deed
If the assessee has filed an appeal for challenging the valuation
If the assets is not a capital asset –section 50C
Clause-21(b): Amounts inadmissible under section 40(a)
(i) as payment to non-resident referred to in sub-clause (i)
o U/s 40(a)(i): Any interest (not being interest on a loan issued for public subscription
before 01.04.1938), royalty, fees for technical services or other sum, which is payable:
A. Outside India; or
B. In India to a Non-Resident, not being a company or to a Foreign Company
o Details of payments with full particulars needs to be reported in following two cases:
a. TDS is not deducted
b. TDS is deducted but has not been paid during the P.Y. or in the subsequent year
before the expiry of time prescribed u/s 200(1) of the Income Tax Act
Key point:
 Certain amendment by Finance (No. 2) Act, 2014 applicable w.e.f. 01.04.2015
 If the assessee has claimed exemption under the treaty
 Business Income Vs FTS
Clause-21(b): Amounts inadmissible under section 40(a) (continued…..)
(ii) Under sub-clause (ia)
o U/s 40(a)(ia): Any interest, commission or brokerage, rent, royalty, fees for professional
services or fees for technical services payable to a resident, or amounts payable to a
contractor or sub contractor
o Details of payments with full particulars needs to be reported in following two cases:
a. TDS is not deducted
b. TDS is deducted but has not been paid during the P.Y. or in the subsequent year
before the expiry of time prescribed u/s 139(1) of the Income Tax Act
(iii) Under sub-clause (ic) [Wherever Applicable]
o U/s 40(a)(ic): Any sum paid on account of Fringe Benefit Tax under Chapter XIIH
• Applicable to assessee who pay such tax on demand of Income Tax Department
and claim deduction during the previous year.
Clause-21(b): Amounts inadmissible under section 40(a) (continued…..)
(iv) Under sub-clause (iia)
o U/s 40(a)(iia): Any sum paid on account of wealth-tax u/s 40a(iia)
• Applicable to Individual, HUF and Company whose Net Wealth exceeds 30 Lakhs.
• Reporting of Wealth Tax Assessment details as per New Schema
(v) Under sub-clause (iib)
o U/s 40(a)(iib): Any amount paid by way of royalty, license fee, service fee, privilege fee,
service charge or any other fee or charge, by whatever name called, which is levied
exclusively on or which is appropriated directly or indirectly from a State Government
undertaking by the State Government
• Reporting of details as per New Schema
Clause-21(b): Amounts inadmissible under section 40(a) (continued…..)
(vi) Under sub-clause (iii)
o U/s 40(a)(iii): Any payment which is chargeable under the head “Salaries”, if it is
payable outside India or to a non-resident and if tax has not been paid thereon nor
deducted there from under Chapter XVII-B.
o Applicable in cases where assessee has paid salaries to Non-Resident.
o Reporting of details regarding the date of payment, amount of payment and name,
PAN(Optional) and address of the payee.
(vii) Under sub-clause (iv)
o U/s 40(a)(iv): Any payment to a provident or other fund established for the benefit of
employees of the assessee, unless the assessee has made effective arrangements to
secure that tax shall be deducted at source from any payments made from the fund
Clause-21(b): Amounts inadmissible under section 40(a) (continued…..)
(viii) Under sub-clause (v)
o U/s 40(a)(v): Any tax actually paid by an employer referred to in section 10(10CC), i.e.
Tax paid by Employer on perquisite referred u/s 17(2).
Clause-21(d): Disallowance/deemed income under section 40A(3) / 40A(3A)
(A) On the basis of the examination of books of account and other relevant
documents/evidence, whether the payment referred to in section 40A(3) / 40A(3A)
read with rule 6DD were made by account payee cheque\bank draft, If not, please
furnish the details of amount deemed to be the profits and gains of business or
profession under section 40A(3) / 40A(3A)
(B)
U/s 40A(3A): Where an allowance has been made in any year for any expenditure
subsequently incurred during P.Y. and makes payment in Cash exceeding Rs. 20,000
or 35,000.
Sr.
No.
Date of
payment
Nature of
payment
Amount
Name and Permanent Account
Number of the payee, if available
Key point:
 Responsibility of the auditors to unearth such transaction.
 No need to obtain certificate from the assessee
 How to judge the transaction under Rule 6DD
Clause-28: Property received without/inadequate consideration as referred to in section
56(2)(viia)
Whether during the previous year the assessee has received any property, being share of
a company not being a company in which the public are substantially interested, without
consideration or for inadequate consideration as referred to in section 56(2)(viia) of the IT
Act, if yes, details of the same to be furnished.
o Applicable to Firm and Company (Public are not substantially interested) only.
o Receives from any one on or after 01.06.2010 in two modes, subject to certain clauses
of Section 47:
a. Without consideration, then Whole Aggregate FMV of such property
b. For a consideration less than Aggregate FMV, then Whole Aggregate FMV minus
consideration paid for such property.
Only if, Aggregate FMV is exceeding Rs. 50,000 or consideration less by the amount or
more.
Key point:
 If the Shares have been issued as bonus or right shares
 Impact of qualification on audit report
Clause-29: the assessee received any consideration for issue of shares which exceeds the
fair market value of the shares as referred to in section 56(2)(viib),
Whether during the previous year the assessee received any consideration for
issue of shares which exceeds the fair market value of the shares as referred to
in section 56(2)(viib), if yes, please furnish the details of the same:
o Applicable to Company (Public are not substantially interested) only.
o Receives from any resident and Aggregate consideration exceeds the FMV of the
Shares, but not apply to Venture Capital Undertaking or Venture Capital Fund.
Clause-32(c): Whether the assessee has incurred any speculation loss referred to in
section 73 during the previous year, If yes, please furnish the details of the same.
o Applicable to Assessee involved in Speculative Business activity.
Key point:
 Duty of the auditor to find out the speculative nature of transaction
Clause-32(d): Whether the assessee has incurred any loss referred to in section 73A in
respect of any specified business during the previous year, if yes, please furnish details of
the same
o Applicable to Assessee involved in Specified Business u/s 35AD i.e. Cold Chain Facility,
Hotel of 2 Star or above, Hospital with at least 100 beds, etc “Specified Businesses”.
Clause-32(e):Explanation to section 73
o In case of a company, please state that whether the company is deemed to be carrying
on a speculation business as referred in explanation to section 73, if yes, please furnish
the details of speculation loss if any incurred during the previous year.
o Applicable to the part of the business of the company consist purchase and sales of
shares of other company.
o Excludes
o Company having GTI include mainly Interest on Securities, Income from HP, Capital
Gains and Other Income or a company involve in trading of shares.
o Banking Company Business of granting of loans and advances.
o Trading of shares- Amended in Finance (No.2) Act 2014
Clause-34(a): Detail of TDS compliance
o Whether the assessee is required to deduct or collect tax as per the provision of
Chapter XVII-B or Chapter XVII-BB, if yes please furnish:
TAN
Section
Nature of
payment
1
2
3
Total amount of
payment or receipt of
the nature specified in
column (3)
Total amount on which
tax was required to be
deducted or collected
out of (4)
4
5
Total amount
on which tax
deducted or
collected at
specified rate
Amount of
tax
collected or
deducted
out of (6)
Total amount on
which tax was
deducted or collected
at less than specified
rate out of (7)
Amount of
tax deducted
or collected
on (8)
Amount of tax
deducted or
collected not
deposited to the
credit of CG out
of (6) & (8).
6
7
8
9
10
Clause-34(b): Information of furnishing TDS / TCS statements in time
o Whether the assessee has furnished the statement of tax deducted or tax collected
within the prescribed time. If not, please furnish the details:
Type of
Form
TAN
1
2
Due date of
furnishing
3
Whether the statement of tax
collection or deducted
Date of
contains information about all
furnishing, if transactions which are
furnished
required to be reported
4
5
Clause-34(c): Information related to liability to pay interest under section 201(1A)/
206C(7)
o Whether the assessee is liable to pay interest under section 201(1A) or section 206C(7)
of the IT Act. If yes, furnish the relevant details.
TAN
1
Amount of interest under
Amount paid out of column
section 201(1A) / 206C(7) is (2) along with date of
payable
payment
2
3
Key point:
 Role of Tax Auditor for reporting of Interest along with payment dates.
Clause-36: Dividend Distribution Tax under section 115-O
o In the case of a domestic company, details of tax on distributed profits under section
115-O in the following form:
o Details to be reported include
o Total amount of Distributed profit,
o Amount of reduction as referred to in section 115-O(1A)(i) - (domestic subsidiary
co)
o Amount of reduction as referred to in section 115-O(1A)(iI) - (foreign subsidiary
company taxed at 15% under 115BBD)
o Total Tax paid and date of payments with amounts.
Key point:
 Role of Tax Auditor to confirm the relationship of holding and subsidiary co.
(Holding more than half of the nominal value of the equity shares)
Clause-39: Information about Service Tax audit and qualifications
Whether any audit was conducted under section 72A of the Finance Act,1994 in relation
to valuation of taxable services. If yes, give the details, if any, of disqualification or
disagreement on any matter/item/value/quantity as may be reported/identified by the
auditor.
o Applicable to Service Provider/Receivers.
o Identification of such disqualification or disagreement.
o Reporting of details as per New Schema, observations in 500 words.
Key point:
 Role of the tax auditor on the qualification / disagreement
 Commenting on the work of the other auditor
Clause-41: Details of any tax demand raised or refund issued
Please furnish the details of demand raised or refund issued during the previous year
under any tax laws other than Income Tax Act, 1961 and Wealth tax Act, 1957 along with
details of relevant proceedings
o Demand or Refund issued by Departments related to Sales Tax/VAT, Excise, Custom,
Service Tax needs to reported.
o Copy Demand Notice or Refund advice needs to be kept on record for furnishing the
details with Tax Audit Report.
o Demand or Refund related to Direct Taxes are excluded from the reporting.
Key point:
 Documentation of the audit
 Relevance of the management representation letter
 Scope is increasing more on legal compliance then the Financial audit
Amendments to the existing clauses:
Clause-11(b): List of books of accounts and address
List of books of account maintained and the address at which the books of accounts are
kept.
(In case books of account are maintained in a computer system, mention the books of
account generated by such computer system. If the books of accounts are not kept at one
location, please furnish the addresses of locations along with the details of books of
accounts maintained at each location. )
o Location of Books of Accounts is additional information sought in this clause.
Key point:
 What is the mean by location of books of accounts
 Relevance of the management representation letter
Clause-13: Change in accounting method
o Give details of such change and the effect thereof on the profit or loss
Sr. No.
Particulars
Increase in
profit (Rs.)
Decrease in
profit (Rs.)
Clause-14: Change in valuation of closing stock
o In case of deviation from the method of valuation prescribed u/s 145A, and the effect
thereof on the profit or loss, please furnish:
Sr. No.
Particulars
Increase in
profit (Rs.)
Decrease in
profit (Rs.)
Clause-21(a): Amount debited to Profit and Loss account
(i) Please furnish details of amount debited to the profit and loss account, being
in the nature of capital, personal, advertisement expenses etc.
Nature
Expenditure incurred at club being cost of
club service and facility being used
Expenditure by way of penalty or fine for
the violation of law for the time being in
force
Expenditure by way of any other penalty or
fine not covered above
Expenditure incurred for any purpose which
is an offence or which is prohibited by law.
Serial
number
Particulars
Amount in
Rs.
Clause-33: Section-wise details of deductions, if any, admissible under Chapter VIA or
Chapter III (Section 10A, Section 10AA)
o Section-wise details of deductions and admissible under Chapter III (section 10A,
section 10AA of the IT Act) are added to clause.
Amount admissible as per provision of the Income-tax Act, 1961
and fulfils the conditions, if any, specified under the relevant
Section under which provisions of Income-tax Act, 1961 or Income-tax Rules,1962 or
deduction is claimed any other guideline, circular etc. issued in this behalf
Clause-33: Section-wise details of deductions, if any, admissible under Chapter VIA or
Chapter III (Section 10A, Section 10AA) (Continued…)
o U/s 10A: In case of Newly established undertaking in Free Trade Zone involved in
manufacturing or produce of computer software :
 100% deduction of Profit & Gains for computing Total Income of the Undertaking for
10 Consecutive Assessment Year.
o U/s 10AA: In case of unit of entrepreneur referred u/s 2(j) of Special Economic Zones
Act, 2005 involved in manufacturing, producing articles or providing services on or
after 01.04.2006:
 100% deduction of Profit & Gains derived from export for 5 Consecutive Assessment
Year.
 50% deduction of Profit & Gains derived from export for further 5 Assessment Year
Key point:
 Separate audit report is required in certain cases
 In case of difference of opinion by the auditors
Clause-37: Cost Auditor Report
Whether any cost audit is carried out, if yes, give the details if any, of disqualification or
disagreement on any matter/item/value/quantity as may be reported/identified by the
cost auditor:
o Instead of submitting Cost Auditor Report, now this clause requires submission of
disagreement on any matter/item/value/quantity as reported/identified by the cost
auditor.
o Mandatory in the case of the Companies which are required to be audited by the Cost
Auditor under the provision of the Companies Act, 2013.
o Copy of Cost Audit must be obtained even in case of voluntary cost audit carried out by
the assessee.
o Complete verification of such report for reporting of disqualification or disagreement
reported by Cost Auditor.
Clause-38: Central Excise Report
Whether any audit conducted under the Central Excise Act, 1944, if yes, give details, if
any, of disqualification or disagreement on any mater/item/value/quantity as may be
reported /identified by the auditor:
o Instead of submitting Cost Auditor Report, now this clause requires submission of
disagreement on any matter/item/value/quantity as reported/identified by the cost
auditor.
o Copy of Cost Audit must be obtained and reported disqualification or disagreement
needs further reported in Tax Audit Report even in case of voluntary cost audit carried
out by the assessee.
o Complete verification of such report for reporting of disqualification or disagreement
reported by Cost Auditor.
Clause-40: Details regarding turnover, gross profit, etc
Details regarding turnover, gross profit, etc., for the previous year and preceding previous
year:
Sr. No. Particulars
1
Total turnover of the assessee
2
Gross Profit / Turnover
3
Net Profit / Turnover
4
Stock-in-trade / Turnover
5
Material Consumed / Finished Goods
Previous Year
Preceding P.Y.
o Reporting of ratios pertains to preceding previous year is now added in this clause.
o Even ratios of the unaudited books of accounts needs to reported in case of
business/profession existed in previous year.
o Tax Audit Report or books of accounts, needs to verified for report such ratio as
applicable to the asseesee.
Deleted Clauses:
Reporting requirement in case of whether Certificated obtained in the respective clauses
has been removed:
o Old Clause 17(h)(a): whether a certificate has been obtained from the assessee
regarding payments relating to any expenditure covered under section 40A(3) that the
payments were made by account payee cheques drawn on a bank or account payee
bank draft, as the case may be.
o Old Clause 24(a)(c): Whether a certificate has been obtained from the assessee
regarding taking or accepting loan or deposit, or repayment of the same through an
account payee cheque or an account payee bank draft.
o In New Form 3CD, there is no reporting requirement of obtaining any certificates from
the client.
Form 3CA/ 3CB
Qualifications
Qualification
All the information and explanations which
to the best of my/our knowledge and belief
were necessary for the purpose of my/our
audit has not been provided by the assessee.
Amount of expense related to exempt
income u/s 14A of Income-tax Act, 1961
could not be ascertained.
Remarks
Qualifications
Creditors under Micro, Small and Medium
Enterprises Development Act, 2006 are not
ascertainable.
Documents necessary to verify the
reportable transaction were not made
available.
Fair market value of shares u/s56 (2)
(viia)/(viib) is not ascertainable.
GP ratio is not ascertainable from the
financial statements prepared by the
assessee.
Form 3CA/ 3CB
The information regarding applicability of
MSMED Act, 2006 to the various
suppliers/parties is not available with the
assessee, hence information as required vide
Clause 22 of Chapter V of MSMED Act, 2006
is not been given.
Qualifications
Form 3CA/ 3CB
Prior period expenses are not ascertainable
from books of account.
Proper books of account, to enable reporting
in form 3CD, have not been maintained by
the assessee.
Proper stock records are not maintained by
the assessee.
Records necessary to verify personal nature
of expenses not maintained by the assessee.
Yield/percentage of wastage is not
ascertainable.
As explained to us, it is not possible to
maintain stock record.
Qualifications
Form 3CA/ 3CB
Records produced for verification of
payments through account payee
cheque were not sufficient.
The assessee has not made any payments exceeding
the limit in section 40A(3)/269SS/269T in Cash.
However, it is not possible for us to verify whether the
payments in excess the specified limit in section 40A(3)
/269SS/269T have been made otherwise than by
crossed cheque or bank draft, as the necessary
evidence are not in possession of the assessee.
Reports of audits carried by
Excise/Service tax Department were
not made available.
TDS returns could not be verified
with the books of account.
Valuation of closing stock is not
possible
Valuation has been taken as certified by the partner.
Challenges
 The detailed information is required to
provide under the new format
 The report is to be submitted on line
with the specified schema. Notes are not
uploaded in the report.
 Certain verification needs audit of the
auditors who may or may not be CA
 The primary responsibility to compile
the information for the verification is of
the management
 Audit more of legal compliance then the
financial analysis
Matching Concept: Unclaimed TDS/TCS of earlier year can be claimed in current year
Questions??????
609/A, Atlantis Heights,
Sarabhai Main Road,
Near Genda Circle,
Vadodara. 390 023
14 September 2014
91 265 2329099 | 91 9099977868
[email protected]