Tax Audit Guidance Note

For Attention of members carrying out tax audit u/s 44AB of the Income-tax Act,1961. - (10-09-2010)

Attention of members is invited towards the changes in the Guidance Note on tax Audit under section 44AB of the Income-tax Act, 1961 approved subsequent to the publication of the Supplementary Guidance Note, issued by the erstwhile Fiscal Laws Committee, as a part of the publication "Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961" in 2006. The Fifth Edition of the Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 incorporating the law as amended by the Finance Act, 2005 was published in September, 2005. Subsequently, a supplementary Guidance Note has been published on the amendments made by the notification No. 208/2006 dated 10th August, 2006 issued by the Central Board of Direct Taxes in Form No. 3CD. Subsequent to the publishing of the above Supplementary Guidance Note, the Finance Act, 2007 has made amendments in section 40A(3). New Rule 6DD was inserted in the Income-tax Rules by notification No. 208/2007 dated 27.6.2007 w.e.f. A.Y. 2008-09. The Council thereupon approved some more changes subsequent to the publication of the Supplementary Guidance Note. These may be taken into consideration while reading in the Guidance Note on Tax Audit [2005 Edition] and the Supplementary Guidance note on Tax Audit [2006 Edition published along with the Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961]. For convenience of members the clauses wherein there have been changes are listed hereunder and the full text which forms part of the Guidance to members is available at http://220.227.161.86/20408announ11236a.pdf. Please note that some changes approved relating to fringe benefits have not been given here since they are no longer relevant. Clause No. 12(a) and (b) of Form 3CD Para No. 23 of the Guidance Note[2005 Edition] Clause 17(h) of Form 3CD Para 35 of the Guidance Note (Subsequent changes have been made in section 40A(3) by the Finance Act, 2008 and Finance (No. 2) Act, 2009 and also in Rule 6DD.These changes may have an effect on the computation of the amount to be reported but no further guidelines in this regard is considered necessary) Clause 17(l) of Form 3CD Clause 17A in Form 3CD – Amount inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006. Select issues in accounting for state level VAT. (These do not represent the views of the Council but are based on the original draft prepared by Indore Branch of the CIRC of the Institute.) In this connection, we would also like to invite the attention of members towards the announcement dated 12.12.2008, in the light of which from the A.Y.2010-11, an internal auditor of an assessee cannot be appointed as his tax auditor.Click here for Announcement and further clarification regarding non- applicability of the same only for tax audit relating to financial year ending 31st March,2009 in certain cases.

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Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
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