What to expect if you fail to meet the guidelines set for tax audit

For every legal procedure, government prescribes a specific set of rules to follow. Similar is the case with tax audit process in India. The Income Tax Act of 1961, states all guidelines for maintaining the books of accounts for proper tax evaluation. All these guidelines are described under section 44AA, 44AB, and Rule 6F.

One has to mandatory maintain the book of accounts .Following book of accounts are specified as per Rule 6F –

  • A cashbook showing a record of day to day receipts and payments.
  • A journal or a log of daily transactions.
  • A ledger that can be used to prepare all financial statements.
  • Original bills of all expenditures incurred and claimed by you.etc

Failure to do so can charge a penalty of Rs 25000.In cases of international transactions, 2% of each transaction amount is incurred as a penalty. There are cases where the book of accounts is not required .All those cases are covered under section 44AD and  44AE.

Let’s discuss other penalties for not meeting the guidelines as below.

The penalty under Section 271A: It is levied for cases where tax payer fails to present the book of records as per 44AA. The defaulter is liable for a maximum penalty of Rs. 25,000. No penalty is levied if the assessee brings valid prove or a reasonable cause for failure to maintain accounting records.

Penalty under Section 271B: It is applicable to cases where an assessee is unable to get his accounts audited for any previous year or any year relevant to the financial year .As per section 44AB, tax payer must submit an audit report to the investigating officer or Chartered Accountant. Penalty for such cases is lesser of the below amount –

  • A sum equal to one-half per cent of the total turnover or total sales
  • Half of the professional’s gross income for the assessment year.
  • A sum of rupees one hundred fifty thousand.

Here also, no penalty is levied for reasonable causes.

Exceptions to penalties under section 271A and section 271B are described in section 273B.It clarifies the reasonable clauses to be considered by inspecting officer .Below are few of them –

  • The sudden demise of accounts heads
  • Loss or damage of financial evidence in the case of fire, theft etc.
  • Cases of Income Tax Auditor’s resignation
  • In any kind of natural calamities
  • Labour strike cases.

Keeping in mind all the above causalities for being a defaulter, we should keep all our documents handy. One should get the documents properly scrutinized by a professional people. So, get help online or offline from trusted people.

Due date for the assessment year, 2016-17 has been  extended from 30th September to 17th October 2016.If you are missing any document either arrange it or get the duplicates ready. Why to panic at the last moment, when you are just one click away from getting hassle free service.