Tax Audit Services under Section 44AB in Bangalore

A tax audit is the income tax department's window into your books. Done well, it reconciles your GST, TDS and financial records into a single coherent picture; done as a last-minute formality, it invites questions. Krishna & Associates approaches Section 44AB audits as a reconciliation exercise first and a reporting exercise second, which is why our Form 3CD rarely surprises the taxpayer at assessment.

Who Is Subject to Tax Audit

Under Section 44AB, a business is liable to tax audit when turnover exceeds ₹1 crore — raised to ₹10 crore where both cash receipts and cash payments are within 5% of their respective totals, a relief designed to reward digital transactions. A profession is liable when gross receipts exceed ₹50 lakh. Audit can also be triggered by the presumptive provisions described below.

Form 3CA vs Form 3CB

Form 3CA is used where the accounts are already required to be audited under another law — most commonly a company audited under the Companies Act. Form 3CB is used in every other case, where the tax audit is the only statutory audit of the accounts. Both are accompanied by Form 3CD, the detailed statement of particulars.

Form 3CD — What It Reports

Form 3CD runs to more than forty clauses. In practice the clauses that draw attention are payments disallowable under Section 40(a) for TDS defaults, amounts disallowed under Section 43B (including the Section 43B(h) disallowance for delayed MSME payments), loans and deposits under Sections 269SS and 269T, and the reconciliation of turnover with GST returns. We populate each clause from the underlying records, not from estimates.

Presumptive Taxation Interplay

Schemes under Sections 44AD, 44ADA and 44AE ordinarily remove the audit requirement. But under Section 44AB(e), a taxpayer eligible for 44AD who declares profit lower than the deemed 8%/6% and whose total income exceeds the basic exemption limit must get a tax audit. Spotting this trigger early avoids an unplanned audit late in the season.

Penalty for Non-Compliance

Failure to obtain or furnish the audit report attracts a penalty under Section 271B of 0.5% of total sales, turnover or gross receipts, capped at ₹1,50,000. No penalty applies where there is reasonable cause under Section 273B — but reasonable cause is narrowly construed, so the safe course is timely compliance.

Our Audit Approach

We begin with a preliminary reconciliation of books to bank, GST and TDS, assess the internal controls around purchases, sales and cash, and report related-party transactions accurately. Before forming the opinion we confirm that the books of account required under Section 44AA are complete, and every report we file carries a UDIN generated on the ICAI portal so its authenticity can be verified by the department. Where the audit reveals process gaps, we can extend the engagement into a full internal audit; where GST reconciliation throws up issues, we resolve them through our GST practice. The completed audit then flows into the income tax return for audit cases.