Tax Audit
A Tax Audit is a systematic and detailed examination of a taxpayer’s books of account to verify the correctness of income, expenses, and statutory disclosures, while ensuring full compliance with the provisions of the Income Tax Act, 1961. It plays a crucial role in promoting transparency, reducing the risk of errors or discrepancies, and ensuring that the financial statements present a true and fair view of the taxpayer’s affairs. A properly conducted tax audit also helps in minimizing litigation and avoiding penalties by ensuring timely and accurate reporting.
At CA Shubham Sudhir Gupta & Co., we provide expert tax audit services tailored to the specific nature and scale of each business or professional entity. Our approach goes beyond mere compliance—we thoroughly analyze financial records to identify potential tax-saving opportunities and areas for improved efficiency. With our in-depth knowledge of tax laws and a proactive advisory approach, we help clients remain compliant while optimizing their tax position in a lawful and effective manner.
What is a Tax Audit?
A Tax Audit is conducted under Section 44AB of the Income Tax Act to verify that the books of account are properly maintained and present a true and fair view of the taxpayer’s financial affairs. The audit report must be submitted in Form 3CA/3CB and Form 3CD within the due date prescribed by law.
Who is Required to Get a Tax Audit?
As per Section 44AB:
- Businesses with total sales, turnover, or gross receipts exceeding ₹1 crore in a financial year (₹10 crore if cash transactions are up to 5%).
- Professionals with gross receipts exceeding ₹50 lakh in a financial year.
- Persons covered under presumptive taxation schemes (Sections 44AD, 44ADA, 44AE) who declare income lower than the prescribed limit.
- Any other cases where audit is specifically required under the Income Tax Act.
Benefits of Tax Audit
- Ensures strict compliance with Income Tax Act
- Helps avoid penalties and scrutiny
- Enhances credibility with banks, investors, and regulators
- Improves accuracy of financial statements
- Detects frauds, errors, and mismanagement
- Helps in tax planning and better financial control
- Strengthens internal controls and accounting systems
- Smoothens future assessments and inspections
Types of Tax Audit
- Statutory Tax Audit (u/s 44AB)
Mandatory when business or professional turnover crosses the prescribed limit. - Business Tax Audit
- Required if turnover exceeds ₹1 crore
- Limit increases to ₹10 crore if cash transactions are 5% or less
- Professional Tax Audit
Required when gross professional receipts exceed ₹50 lakh - Presumptive Taxation Scheme Audits
- 44AD (Business): Audit needed if declared income is less than 8%/6%
- 44ADA (Professionals): Audit needed if income is less than 50% of receipts
- 44AE (Transporters): Applies to businesses owning up to 10 goods vehicles
- Trusts & NGOs Audit (u/s 12A / 10(23C))
Mandatory when income exceeds the exemption limit. - Co-operative Societies Audit
Required under state laws + tax audit if turnover crosses limits. - Companies & LLPs
Statutory audit is compulsory; tax audit applies if turnover crosses limits. - Special Case Audits
Required for entities claiming deductions under Sections 80-IA, 80-IB, 10AA, etc.
Documents Required for Tax Audit
- Books of account – Ledger, Cash Book, Journal
- Bank statements and reconciliations
- Sales and purchase invoices
- Expense vouchers and supporting documents
- Fixed asset register and depreciation details
- GST returns and other tax-related filings
- Loan agreements and interest payment proofs
- Previous years’ audit reports and ITR filings
Consequences of Non-Compliance
- Penalties under Section 271B for failure to conduct a tax audit
- Additional scrutiny by the Income Tax Department
- Incorrect income reporting may lead to reassessments
- Disallowance of expenses and increased taxable income
- Loss of credibility with banks and financial institutions
- Risk of prosecution in severe cases
- Delay in tax filings and financial decision-making
Our Tax Audit Process
Preliminary Discussion & Data Collection
Understanding your business/profession and gathering financial data.Verification of Books & Records
Checking accuracy and compliance with accounting standards.Compliance Review
Ensuring adherence to provisions of the Income Tax Act and related rules.Detailed Reporting in Form 3CA/3CB & 3CD
Preparing the audit report with disclosures, observations, and recommendations.Filing with the Income Tax Department
Submitting the audit report before the statutory due date.Post-Audit Advisory
Providing suggestions to improve record-keeping and tax efficiency.