Last few days speculations have caught attention about government moving towards abolishing Income Tax Audit u/s 44AB. One online portal broke this news in public domain causing sense of fear and unease among Chartered Accountants.
As we all know that Tax Audit helped Chartered Accountant firms to be revenue rich firms. Most of the CA firms are mainly targeting their revenue from Tax Audits. Tax Audit u/s 44AB not only gave CA firms an edge over other accounting professionals like CS and CMA but it took away major business of Tax Advocates.
Now speculations are that Finance Ministry led by Nirmala Sitraraman has finalized budget which will bury Income Tax audit u/s 44AB forever. Budget is expected to to give away with the requirement of other major compliances too. Last month, PM Modi and his team had discussions with various business groups.
Currently, Audit provision of 44AB makes it mandatory to get books of accounts audited if Turnover of business exceeds INR 2 Crores, INR 1 Crore for companies registered under companies act and professionals crossing turnover of INR 50 Lakhs. Few years back government came up with the provisions of presumptive taxation to help assessees but those came up with the help of limits and audit consequences if profit declared below specified percentages.
Moreover officials from Ministry of Finance are of view that these audit provisions are doing no good to revenue and assessees. Last 5 years we saw extension of deadline to file Tax Audits.
Reasons to abolish Income Tax Audit are as follows:
1. The required information can be furnished by the assessee himself in the ITR. There are enough penal consequences if the taxpayers do not comply with the provisions of the Income Tax Act or submit the false or wrong information. Taking the information from the auditor can be compensated by the same information from the assessee himself.
2. The most of the column in the audit reports are just compilation of the information only which assessee is otherwise also required to furnish in the ITR.
3. Audit is an additional compliance burden on the assessee.
4. That the quality of audit reports have been degrading and section 271J was introduced to ensure that the audit report do not contain wrong information and errors.
5. Audit provision u/s 44AB was introduced when the accounting system was manual and the third party audit was ensuring the authenticity of the books of accounts and records thereto. Now, the books mostly are computerized and the third party information is also available in digitized format.
If the said speculations are true then it will be major setback to the Chartered Accountants and their firms. It will take away their edge over other professionals in public accounting practice.
As of now we have no other source to confirm if these speculations are true but when we spoke to a few Professional accountants then they told us that ministry was thinking of giving away these kind of compliances since last 5-6 years. A retired officer from Finance Ministry told us that ministry had made its mind way back in 2015, but due to Notebandi and GST, these changes were put on hold.