Tax Audit & Assessment

Tax Audit & Assessment – Key Highlights

Tax Audit (Under Section 44AB)

• Mandated under the Income Tax Act for businesses and professionals crossing specified turnover limits.

• Required if:

  • Business turnover exceeds ?1 crore (?10 crores if cash transactions are within 5%)

  • Professional receipts exceed ?50 lakhs in a financial year

• Conducted by a Chartered Accountant to verify the correctness of books of accounts, income, deductions, and compliance.

• Involves preparation and filing of Form 3CD along with the audit report.

• Ensures accurate tax reporting, proper classification of expenses, and identification of non-compliances.

• Helps in reducing the risk of tax disputes and penalties.

• Must be completed and filed before the due date of ITR filing to avoid penalties under Section 271B.

Tax Assessment

• Carried out by the Income Tax Department to verify the accuracy of the income declared by the taxpayer.

• Types of assessments include:

  • Self-Assessment – Filed voluntarily by the taxpayer.

  • Summary Assessment – Automated processing without human intervention.

  • Scrutiny Assessment – Detailed verification of income, deductions, and compliance.

  • Best Judgment Assessment – Done when returns are not filed or information is incomplete.

• Taxpayers may receive notices under Sections 143(1), 143(2), or 147 for assessment purposes.

• Requires submission of explanations, records, and computations when demanded.

• Professional representation is often recommended for scrutiny or reassessment cases.

• Timely compliance and accurate record-keeping help in smooth closure of assessments.