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August 25, 2022

Follow up on inapt amendments in tax audit report form no.3CD

by CA Shivam Jaiswal in Income Tax

Follow up on inapt amendments in tax audit report form no.3CD

Date: 24/08/2022

Ref: CAAS/Representations/2022-23/02 Date: 24/08/2022

To,

The Chairman,

Central Board of Direct Taxes,

North Block,

New Delhi – 110001

Respected Sir,

Subject: Re: Follow up on Inapt Amendments in Tax Audit Report Form No.3CD

Ref: Our earlier Representation No.CAAS/Representations/2018-19/02 dt.31/07/2018 titled

“Inapt Amendments in Tax Audit Report for AY 2018-19”

 We are a non-profit organization engaged in activities for the benefit of our Chartered Accountant members. Our present representation is a follow up with respect to the information sought from Tax Auditors under Clause 44 of Form 3CD under Income Tax Act. Your office may refer to Para 3 i.e. “GST Reconciliation of Total Expenditure” of our earlier Representation No.CAAS/Representations/2018-19/02 dt.31/07/2018 titled “Inapt Amendments in Tax Audit Report for AY 2018-19“. For the intervening assessment years, the requirements of Clause 44 under Form 3CD was kept in abeyance till 31-03-2022.

In this regard, it may be noted that our Association is more than willing to help the progressive steps of the Finance Ministry for reporting and disclosure by use of more meaningful analysis which yields productive results. However, in case of newly operational Clause 44 of Form 3CD,

which was kept in abeyance for couple of years, The following challenges have arisen out of absurdity:

1. Existing Income Tax Act and Rules does not prescribe maintenance of Books of Accounts in a manner, so as to produce precise results expected by Clause 44.

2. Existing GST law also does not mandate maintenance of Books of Accounts in a manner, so as to produce precise results expected by Clause 44.

3. Section 44AA read with rule 6F mandates only maintenance of books of accounts as may enable the Assessing Officer to compute the total income of the assessee. Form No. 3CD is nicely designed in such a way that most of clauses in Form No. 3CD have direct impact on the total income of the assessee as per mandate of the Act, accordingly assessee is statutorily obliged to provide details in 3CD, but contents of clause 44 does not represent any violation of any section which may have direct impact on the total income of the assessee and is purely of statistical nature, accordingly calling of details in certain format is devoid of any statutory backing.

It is well understood fact, that your office does not intend such a futile exercise by making the Auditors verify a dataset not compliable by the assessee, and which the later reports as a disclaimer. At present, in absence of statutory obligation on the assessee, this requirement is causing conflicts between the Auditor and the Assessee, where the Auditor is not able to justify the legal basis for asking such information which is not required to be maintained under any law by the assessee.

Hence, we demand that, the requirements of reporting under Clause 44 may be abolished altogether in line with the mandate of the Citizens’ Charter as well as the “Ease of Doing Business”, which is the success mantra given by our Prime Minister to the business community.

We hope that our demands are very much clear, and suitable actions may be taken at the earliest

before the end of statutory deadlines, so that we may become obligated to your good office.

Thanks & Regards,

For Chartered Accountants Association, Surat.

President | Secretary

Copy to: –

(1) Finance Minister,

Ministry of Finance,

134, North Block, New Delhi – 110011.

(2) Secretary (Revenue),

128/A, North Block, New Delhi – 110001

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