Tax Audits Ceiling Limit – ICAI Clarification

Ceiling on Tax Audits – ICAI Clarification

The ICAI has clarified various issues, from time to time, relating to ceiling limits applicable for number of tax audits that can be conducted by practising chartered accountants, as under:

a) Tax Audits limit of 60 relate to an assessment year (02-07-2014)

The ICAI has clarified that the specified tax audits limit of 60 would relate to an assessment year as against the existing stipulation of a financial year.

b) Tax Audit Limit Increased From 45 to 60 (11-02-2014)

In view of the enhancement of professional competence of ICAI’s members to perform quality services in an IT-enabled environment, the ICAI has increased the “specified number of tax audit assignments” for practicing Chartered Accountants, as an individual or as a partner in a firm, from 45 to 60. The said limit will be effective for the audits conducted during the financial year 2014-15 and onwards.

c) Specified number of Tax Audit assignments (13-12-2011)

Clarification for reckoning the “specified number of tax audit assignments” conducted under section 44AB of the Income-tax Act, 1961

Various statutes prevailing in India like DVAT,2004 requires the assessee to furnish an audit report in a form duly signed and verified by such particulars as may be prescribed under section 44AB of the Income-tax Act, 1961 i.e. Form 3CB/3CD. This had lead to the doubts as to whether such audits would be included in the ceiling of “specified number of tax audit assignments”.Considering the same, the ICAI had clarified that audit prescribed under any statute which requires the audit report in the form as prescribed under section 44AB of the Income-tax Act, shall not be considered for the purpose of reckoning the specified number of tax audit assignments if the turnover of the auditee is below the turnover limit specified in section 44AB of the Income-tax Act, 1961. For instance audit under section 44AD, audit under DVAT, 2004 (for turnover between 40 to 60 Lakhs) etc. will not be considered for inclusion in the present limit of 45 audits.

d) Non-inclusion of S.44AD, 44AE and 44AF Audits (23-08-2011)

In order to clarify the doubt raised by majority of members in respect of inclusion of audits conducted under sections 44AD, 44AE and 44AF of the Income-tax Act, 1961 in the specified number of tax audit assignments, the ICAI has clarified that:

“The audits conducted under section 44AD, 44AE and 44AF of the Income-tax Act, 1961 shall NOT be taken into account for the purpose of reckoning the “specified number of tax audit assignments”.

e) Tax Audits Limit Increased From 30 to 45 (11-05-2007)

The maximum limit of Tax Audit for a ICAI members in practice, as individual or as a partner in a firm, was fixed at 30 as back as in 1989 with the objective of ensuring quality and equitable distribution of work. In view of fast expanding economy and increase in number of such assignments coinciding with enhancement of professional competence of members to perform quality services in an IT-enabled environment, the ICAI had increased the Tax Audit limit for practising Chartered Accountants, as individual or as a partner in a firm, from 30 to 45.

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