Tax Audit under Section 44AB of the Income-tax Act requires specified entities to have their accounts audited by a Chartered Accountant. The objective is to ensure that the books of account and the return of income correctly reflect the financial transactions and comply with the provisions of the Act.
Scope of Tax Audit
The audit covers:
Verification of books of account and supporting documents
Examination of deductions, allowances and exemptions claimed
Review of tax computation and reporting under various heads
Compliance with provisions relating to tax deduction and collection
Preparation and certification of Form 3CA/3CB and Form 3CD
Key Procedures
Procedures include:
Reconciliation of financial statements with tax records
Verification of quantitative details and closing stock
Examination of related-party transactions and payments
Assessment of applicability of specific sections of the Act
Outcomes
The tax audit report provides the prescribed particulars and forms the basis for assessment proceedings and compliance verification by the tax authorities.