3CD Report & IT Act, 1961 Flashcards
ABC Pvt. Ltd. and XYZ Pvt. Ltd. are the companies in which public are not substantially interested. During the PY 2021-22, ABC Pvt. Ltd. received some property, being shares of XYZ Pvt. Ltd., the details of which are provided below:
No. of Shares: 1,000
Aggregate fair market value of shares: Rs. 75,000
Consideration value: Nil
The management of the company contends that the shares need not to be furnished in Form No. 3CD. As the tax auditor of ABC Pvt. Ltd., how would you deal with the matter?
Reporting requirement in Form 3CD:
• Clause 28 of Form 3CD requires the auditor to report “Whether during the previous year the assessee has received any property, being share of a company not being a company in which the public are substantially interested, without consideration or for inadequate consideration as referred to in section 56(2)(viia), if yes, please furnish the details of the same”
• Section 56(2)(viia) provides that where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year any property being shares of a company (not being a company in which the public is substantially interested, without consideration, the aggregate fair value of which exceeds Rs. 50,000, the whole of the aggregate fair market value of such property shall be chargeable to income-tax under the head “Income from other sources”.
Finance Act, 2017 amends Sec. 56(2), in accordance with which provisions of Section 56(2)(viia) are not applicable for transactions taken place on or after 01.04.2017.
• This transaction now, falls under clause (x) of Sec. 56(2). For transactions falling u/s 56(2)(x), reporting is required as per Clause No. 29B, which provides as follow:
(a) Whether any amount is to be included as income chargeable under the head ‘income from other sources’ as referred to in clause (x) of sub-section (2) of section 56? (Yes/No)
(b) If yes, please furnish the following details:
(i) Nature of income;
(ii) Amount (in Rs.) thereof.
Mr. Yuvi is a contractor dealing in food catering, flower decorating and light decorating activities.
He has received contract in respect of food catering and flower decorating from one NGO for
holding Annual Talent evening event to celebrate completion of 25 years of their establishment.
For the said event Mr. Yuvi has received in cash t 1,75,000 for food catering and t 1,35,000 for
flower decoration. As a tax auditor how would you deal and report on the above?
Reporting of Cash receipts in Form 3CD:
• Section 269ST provides that no person shall receive sum of { 2 lakh or more
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
( c) in respect of transactions relating to one event or occasion from a person
otherwise than by an account payee cheque or an account payee demand draft or by use of
electronic clearing system through a bank account.
• Tax auditor has the responsibility to verify the compliance with the provisions of 269T of the
Income-tax Act and is required to report under Clause 31(ba) particulars of each receipt in an
amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in
respect of a single transaction or in respect of transactions relating to one event or occasion from a
person, during the previous year, where such receipt is otherwise than by a cheque or bank draft
or use of electronic clearing system through a bank account:-
(i) Name, address and Permanent Account Number (if available with the assessee) of the
payer;
(ii) Nature of transaction;
(iii) Amount of receipt (in =t);
(iv) Date of receipt;
• In the present case, Mr. YUVI, contractor dealing in food catering, flower decorating and light
decorating activities, received in cash Rs. 1,75,000 for food catering and Rs. 1,35,000 for flower
decoration from one NGO for holding one event, by way of cash which is exceeding prescribed
amount of { 2,00,000.
Conclusion: Tax auditor is required to report the cash receipts in compliance with Clause 31(ba) of
Form 3CD.
Mr. PK is conducting the Tax audit u/s 44 AB of the IT Act, 1961 of MG Ltd. for the YE 31st March 2019. There is a difference of opinion between Mr. PK and the Management in respect of certain information to be furnished in Form No. 3CD.
As a tax auditor, Mr. PK has to report whether the statement of particulars in Form 3CD are true and correct and the same is to be annexed to the report in Form No. 3CA. Advise on the matters to be considered by Mr. PK while furnishing the particulars in Form No. 3CD.
The statement of particulars given in Form No. 3CD as annexure to the audit report contains forty-one clauses.
The tax auditor has to report whether the particulars are true and correct. This Form is a statement of particulars required to be furnished under section 44AB. The same is to be annexed to the reports in Forms No. 3CA and 3CB in respect of a person who carries on business or profession and whose accounts have been audited under any other law and in respect of person who carries on business or profession but
who is not required by or under any other law to get his accounts audited respectively.
While furnishing the particulars in Form No. 3CD it would be advisable for the tax auditor
to consider the following:
(i) If a particular item of income/expenditure is covered in more than one of the
specified clauses in the statement of particulars, care should be taken to make a
suitable cross reference to such items at the appropriate places.
(ii) If there is any difference in the opinion of the tax auditor and that of the assessee in
respect of any information furnished in Form No. 3CD, the tax auditor should state
both the view points and also the relevant information in order to enable the tax
authority to take a decision in the matter.
(iii) If any particular clause in Form No. 3CD is not applicable, he should state that the
same is not applicable.
(iv) In computing the allowance or disallowance, he should keep in view the law
applicable in the relevant year, even though the form of audit report may not have
been amended to bring it in conformity with the amended law.
(v) In case the prescribed particulars are given in part or piecemeal to the tax auditor or
relevant form is incomplete and the assessee does not give the information against
all or any of the clauses, the auditor should not withhold the entire audit report.
In such a case, he can qualify his report on matters in respect of which information
is not furnished to him. In the absence of relevant information, the tax auditor would
have no option but to state in his report that the relevant information has not been
furnished by the assessee.
(vi) The information in Form No. 3CD should be based on the books of accounts,
records, documents, information and explanations made available to the tax
auditor for his examination.
(vii) In case the auditor relies on a judicial pronouncement, he may mention the fact as
his observations in clause (3) of Form No. 3CA or clause (5) provided in Form No.
3CB, as the case may be.
While conducting the tax audit of RRR Ltd. you observed that company has timely filed ETDS return
for TDS deducted on salary under section 192 of the Income Tax Act, 1961 in form 24Q in respect
of fourth quarter period from 1st January 2021 to 31st March 2021. The company has not furnished
list of details which are not reported in the statement of tax deducted at source under the pretext
that TDS statements are furnished within the prescribed time. As a Tax Auditor of RRR Ltd. how
you would deal and report?
As per Clause 34 (b) of the Form 3CD, the auditor has to report whether the assessee is
required to furnish the statement of tax deducted or tax collected. If yes, please furnish the
details:
Tax Type Due date Date of Whether the If not,
deduction of for furnishing, statement of tax please
and Form furnishing if furnished deducted or furnish list
collection collected contains of
Account information about details/trans
Number all transactions actions
(TAN) which are required which are
to be reported not reported
Accordingly, clause 34 (b) requires, a list of details/transactions which are not reported in the
statement of tax deducted at source and statement of tax collected at source are required to be
furnished. The reporting requirement is notwithstanding the fact that the assessee has furnished
the statements of tax deducted at source and tax collected at source within the prescribed time.
In the given situation, RRR Ltd., has timely filed ETDS return for TDS deducted on Salary under
section 192 of the Income Tax Act in Form 24Q in respect of 4th quarter. The company has not
furnished list of details which are not reported in the statement of tax deducted at source under the
pretext that TDS Statements are furnished within the prescribed time. Therefore, in view of above,
RRR Ltd. is required to furnish list of details which are not reported in the statement of tax deducted
at source.
