Revisions in the forms have come at a time when tax professionals are busy with filing returns by July 31, making it more onerous for them, an expert says.

The Central Board Direct Taxes (CBDT) has revised the mandatory tax audit report, also known as Form 3CD, which is to be filed by certain taxpayers, to expand the scope of the exercise.

An auditor will now have to furnish details related to GST sales, information on transactions covered by transfer pricing provisions, cash transactions and transaction involving tax deducted at source (TDS).
According to income tax rules, non-salaried professionals reporting income of over Rs 50 lakh annually and businesses with a turnover of over Rs 1 crore – or `2 crore in case of presumptive taxation – will have to get their accounts audited. Auditors are then required to file the Form 3CD by September 30.

One of the amendments requires reporting on separate expenditure incurred on entities registered under the GST and those that are outside the ambit. For the first case, the form mandates further details on exempt goods and services along with entities falling under the composition scheme.

Further, the changes mean that the onus on providing correct details has fallen on auditors, experts said. Additional details include reporting of deemed income which is chargeable to tax under section 56(2)(x) of the Act, amount of primary adjustment under transfer pricing provision and impermissible transaction in accordance with the General Anti Avoidance Rule (GAAR).

“Additional reporting on GAAR is complex and require through investigation. Tax auditor would find it difficult to opine whether a particular transaction lacks commercial substance and entered mainly for the purpose of obtaining tax benefit,” Gopal Bohra, partner, NA Shah Associates LLP, said. He added that revisions in the forms have come at a time when tax professionals are busy with filing returns by July 31, making it more onerous for them.

Additionally, auditors will now also need to furnish details of each cash transaction. The revised form contains clauses related to reporting on transactions falling under Section 269ST. Section 269ST restricts business transactions involving cash receipts for more than `2 lakh aggregate from a person in a day.

“All taxpayers need to understand the applicability of these procedures and also need adequate planning including compilation of required information before reporting. We also expect that the Institute of Chartered Accountants of India will issue the guidance to auditors on performing the procedures on these additional requirements very soon,” Rakesh Nangia, managing partner, Nangia Advisors, said.

Vijay Iyer, national leader, transfer pricing, EY India, said: “The revisions to Form 3CD are meant to collect information regarding some key transfer pricing changes that have happened since 2016. The information on the secondary adjustment would help tax authorities to verify the quantum of tax on notional income arising due to secondary adjustment. This makes the role of a tax auditor more intensive given that additional verifications need to be performed.”