Form 3CD Latest Changes in Tax Audit Report – Clause Wise For 2017-18

Form 3CD Latest Changes in Tax Audit Report – Clause Wise Discussion. Form 3CD Clause Wise Discussion and Changes in 3CD,Tax audit of the FY (financial year) 2016-17, i.e. AY (assessment year) 2017-18. Let us start with some of the important changes/ new points that took place in the Tax Audit Report with effect from 25th July 2014. These are a few small but important and interesting changes that took place in the various clauses of Form No. 3CD with effect from 25th July 2014. Now check more details about “Form 3CD Latest Changes in Tax Audit Report – Clause Wise” from below

Form 3CD Latest Changes in Tax Audit Report – Clause Wise

Amendment to Form 3CD clause 31 wef 19^th July 2017.

Clause 31 of FORM NO. 3CD – 1. (a) Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year :—

• name, address and Permanent Account Number (if available with the assessee) of the lender or depositor;
• amount of loan or deposit taken or accepted;
• whether the loan or deposit was squared up during the previous year;
• maximum amount outstanding in the account at any time during the previous year;
• whether the loan or deposit was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account;
• in case the loan or deposit was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank

(b) Particulars of each specified sum in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year:—

• name, address and Permanent Account Number (if available with the assessee) of the person from whom specified sum is received;
• amount of specified sum taken or accepted;
• whether the specified sum was taken or accepted by cheque or bank draft or use of electronic clearing system through a bank account;
• in case the specified sum was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank

(Particulars at (a) and (b) need not be given in the case of a Government company, a banking company or a corporation established by the Central, State or Provincial Act.)

(c) Particulars of each repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T made during the previous year:—

• name, address and Permanent Account Number (if available with the assessee) of the payee;
• amount of the repayment;
• maximum amount outstanding in the account at any time during the previous year;
• whether the repayment was made by cheque or bank draft or use of electronic clearing system through a bank account;
• in case the repayment was made by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank

(d) Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T received otherwise than by a cheque or bank draft or use of electronic  clearing system through a bank account during the previous year:—

• name, address and Permanent Account Number (if available with the assessee) of the lender, or depositor or person from whom specified advance is received;
• amount of loan or deposit or any specified advance received otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year.

(e) Particulars of repayment of loan or deposit or any specified advance in an amount exceeding the limit specified in section 269T received by a cheque or bank draft which is not an account payee cheque or account payee bank draft during the previous year:—

• name, address and Permanent Account Number (if available with the assessee) of the lender, or depositor or person from whom specified advance is received;
• amount of loan or deposit or any specified advance received by a cheque or a bank draft which is not an account payee cheque or account payee bank draft during the previous

(Particulars at (c), (d) and (e) need not be given in the case of a repayment of any loan or deposit or any specified advance taken or accepted from the Government, Government company, banking company or a corporation established by the Central, State or Provincial Act)”.

[SUBSTITUTE VIDE Notification No. 58/2017/F. No. 370142/10/2017-TPL]

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Updated on 20th July 2016

Clause 4 of FORM NO. 3CD >

‘Whether the assessee is liable to pay indirect tax like excise duty, service tax, sales tax, customs duty, etc. if yes, please furnish the registration number or any other identification number allotted for the same’> Here, auditors are supposed to report the particulars of registration under excise duty, service tax, sales tax, customs duty etc. Thus, now do not forget to collect registration number or any other identification in respect of all other types of tax liabilities which assessee/client is liable to pay. Auditors may also obtain such list from the client duly certified from them

Clause 8 of FORM NO. 3CD > ‘Indicate the relevant clause of section 44AB under which the audit has been conducted’ > Here, Auditors are supposed to report under which clause of Tax Audit the Audit is being conducted. Basically, it includes information if the Audit is of Business or Profession or under Presumptive taxation scheme

Clause 11(b) of FORM NO. 3CD > ‘List of books of account maintained and the address at which the books of accounts are kept. (In case books of accounts are maintained in a computer system, mention the books of accounts 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.)’ > Auditor is required to report the address(s) of place(s) where the books of accounts are kept by the client. If the books of accounts are not kept at one location, auditors are supposed to furnish the addresses of all such locations along with details of books of accounts maintained at each of the locations therein

Clause 17 of FORM NO. 3CD > ‘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 the Section 43CA or 50C, please furnish’ > Now, we as the auditors have to report if any land or building or both is/are transferred during the previous year for a consideration less than the value adopted or assessed or assessable by any authority of a State Government referred to in the Section 43CA or 50C. Thus, note down this observation separately in your audit papers if you find the same so that you will not forget to report the same in your Tax Audit Report under the Clause 17

Clause 21(a) of FORM NO. 3CD > ‘Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc’ > Auditors are supposed to report the detailed information on amount debited to Profit & Loss Account. However the same are in nature of capital expenditure, personal expenditure, advertisement expenditure in any souvenir, brochure, tract, pamphlet or the like published by a political party, expenditure by way of penalty or fine for violation of any law for the time being 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, etc.

Clause 21(b) of FORM NO. 3CD > ‘Amounts inadmissible under section 40(a)’ > Sub-Clause (i) deals with Details of payment on which tax is not deducted OR tax has been deducted but has not been paid during the previous year or in the subsequent year before the expiry of time prescribed under the Section 200(1) with respect to the PAYMENT TO NON-RESIDENT. On the other hand, Sub-Clause (ia) deals with payment to resident deductees/payee on which tax is not deducted or details of payment on which tax has been deducted but has not been paid on or before the due date specified in Sub-Section (1) of Section 139. Further, auditors need to report the Name, Address, and PAN of the payee along with Date; Amount & Nature of Payment in respect of whom default has been committed by the auditee client.

Clause 21(d) of FORM NO. 3CD >‘Disallowance/ deemed income under section 40A(3)’ > Till 25th July 2014, auditors had to report only the cash payment for expenses incurred ‘during the year’ in excess of prescribed limit. But now it is our additional responsibility as an auditor to report the cash payment made during the year in respect of expenses incurred in ‘earlier years’ exceeding the prescribed limit under the Section 40A(3A). Thus, auditor now has to verify all the cash payments in excess of prescribed limits to report under the Sections 40A(3) and 40A(3A). Further, clause mentioning if certificate has been obtained by the Auditor from the Assessee/client under the Section 40A(3) has been removed from the Revised Form No. 3CD.

Clause 27(a) of FORM NO. 3CD > ‘Amount of Central Value Added Tax credits availed of or utilised during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the accounts’ > Here, in this clause, ‘Cenvat’ (Central Value Added Tax) word has been used in place of Modvat

Clause 33 of FORM NO. 3CD > ‘Section-wise details of deductions, if any admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA)’ > In addition to deduction claimed under chapter VIA, auditors are now required to report deduction claimed under the Sections 10A and 10AA, i.e. under Chapter III as well.

Clause 34(a) of FORM NO. 3CD > ‘Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB’ > Here, auditors need to report Section wise details of TDS/TCS deducted/collected and paid. Further, auditor also has to report TAN of the Assessee, Section, Nature of Payment, TotalAmount of Payment/Receipt (on which TDS/ TCS deducted/collected), TDS/TCS deducted/ collected at less than specified rate, amount of TDS/TCS not deposited to the credit of Central Government by the Assessee, etc. Earlier reporting was restricted only with respect to TDS but now the same been extended to TCS as well

Clause 34(b) of FORM NO. 3CD > ‘Whether the assessee has furnished the statement of tax deducted or tax collected within the prescribed time’ > Here, auditors are supposed to report the details like TAN, Type of Form, Due Date for furnishing, Actual Date of furnishing the return (if furnished), Whether the statement of tax deducted or collected contains information about all transactions that are required to be reported. Late submission of TDS/ TCS returns was not required to be reported in Form No. 3CD before this amendment/ change

Clause 34(c) of FORM NO. 3CD > ‘Whether the assessee is liable to pay interest under section 201(1A) or section 206C(7)’ > In old Form No. 3CD, auditor was not required to report detail of Interest payable for delay in payment of TDS/ TCS. But now onwards, auditors will have to report the details regarding the interest payable/ paid under the Section 201(1A)/ 206C(7) as well. Thus, we can see that CBDT/ITD has really given a huge responsibility on the shoulders of Tax Auditors to report various kinds of details regarding TDS/TCS in order to make sure that the provisions related to TDS/TCS are followed/ complied by the client/assessee properly

Clause 37 of FORM NO. 3CD > ‘Whether any cost audit was carried out?’ > Revised Form No. 3CD now requires reporting requirement of cost audit even when the same has been carried out voluntarily along with statutory cost audit carried out as per the provisions of Section 233A of the Companies Act, 1956 (which was the only requirement in old Form No. 3CD). Further, auditor has to do reporting of ‘qualifications’ made in the cost audit report. The requirement of attaching a copy of cost audit report along with Form has now been removed in the Revised Form No. 3CD. The same thing is applicable for audit (if any) conducted under the Central Excise Act, 1944 which is supposed to get reported by the tax auditors in the Clause 38 of Revised Form No. 3CD

Clause 39 of FORM NO. 3CD > ‘Whether any audit was conducted under section 72A of the Finance Act,1994 in relation to valuation of taxable services as may be reported/identified by the auditor?’ > Auditor has to report whether any audit was conducted under section 72A of the Finance Act, 1994 (Service Tax). If yes, auditors need to give the details, if any, of disqualification or disagreement on any matter/item/value/ quantity as may be reported/identified by the auditor.

Clause 40 of FORM NO. 3CD >‘Details regarding turnover, gross profit, etc., for the previous year and preceding previous year’ > Now, auditors need to disclose ratios of preceding financial year also. Earlier, auditor was supposed to report ratios of current year only. Further, auditors have to report total turnover for the previous year as well as for preceding financial year as well now

Clause 41 of FORM NO. 3CD > ‘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’ > Auditors now will have to report 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. It includes details like Financial Year to which Demand or Refund related to, Name of that other Tax Law (For example VAT, Service Tax etc.), Type, i.e. whether demand or refund, Date and Amount. Auditor may also mention his/ her notes (if any) in the Remarks column. For example, if your client has received VAT Refund of one of the previous years, do not forget to report the details of the same in this clause.

Next Article – Maximum Allowable Number of Tax Audits

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