Form 3CB - 3CD

Introduction

Forms 3CB and 3CD are reporting formats that an auditor should use while auditing the books of accounts of taxpayers who are subject to tax audits. The Income Tax Act’s requirements governing a tax audit require a Chartered Accountant to submit an audit report in a specific format. This page provides a brief overview of Forms 3CB and 3CD, which were created to establish a standardized audit report reporting format for audits undertaken to meet Section 44AB requirements. This article focuses on “What is Form 3CD?”, “What is Form 3CB?”, And the difference between Form 3CD and 3CB.

What is Form 3CD?

Form 3CD is a statement of particulars that must be filed with Form 3CA/3B, as appropriate, in compliance with Rule 6G and Section 44AB.

• In total, there are 41 clauses in Form 3CD (split into Part A and Part B) that contain disclosures on deductions, loans, and TDS (Tax Deducted at Source) paid, among other things.
• Finally, the Form specifies the auditor’s, membership number, FRN (Firm Registration Number), and signature with stamp/seal.

What is Form 3CB?

This form is required when a taxpayer who works as a professional or runs a business does not have to have their books audited by the IT (Income Tax) Department. Apart from the Income Tax Act, no audit of books of account is required when an individual, partnership firm, or proprietorship entity has a turnover of over INR 1 crore and has not opted for the presumptive taxation scheme. They must submit Form 3CB in order to do so. The tax auditor can also provide Form 3CD in addition to Form 3CB.

Components of Form 3CB

• The chartered accountant is required to specify the following components in the forms after conducting the audit under Section 44AB:
• Personal details of the taxpayer.
• Observations and comments of the audit, including any discrepancies or consistencies.
• A declaration specifying that the statement of accounts such as Balance Sheet, Profit and Loss Account and Income and Expenditure Statement are in accordance with the books of accounts maintained at the head office of the entity.
• A declaration stating that the furnished information depicts a fair and accurate outline of the balance sheet and other aspects of the entity.
• A declaration stating that the details specified in the audited report are included in Form 3CB.
• Declarations of the chartered account stating that the balance sheet, profit and loss account or income and the expenditure account has been examined.
• Chartered Accountant’s declaration on the proper maintenance of the books of accounts.
• Annexure of Form 3CD.
• Name, address and signature of the chartered accountant.

Components of Form 3CD

Form 3CD is divided into two parts. Its components, which are quite extensive, are listed below:

Part A

• Name of the taxpayer
• Address
• Permanent Account Number (PAN)
• The taxpayer’s liability to pay indirect tax like excise duty, service tax, sales tax, customs duty, etc. if any.
• Status of the Return
• The relevant previous year
• Assessment year
• The relevant clause of section 44AB under which the audit has been conducted

Part B

• If the entity is a firm or association of persons, specification of the names of partners/members and their profit-sharing ratios.
• In case of any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change.
• Nature of business or profession. If there is any change in the nature of business or profession, the particulars of such change.
• Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed.
• List of books of account maintained and the address at which the books of accounts are being maintained.
• List of books of accounts and nature of relevant documents examined.
• Whether the profit and loss account includes any profits and gains assessable on a presumptive basis, if yes, indicate the amount and the relevant section.
• Method of accounting pursued in the previous year
• Whether there had been any change in the method of accounting employed. If yes, the effect thereof on the Profit or loss.
• Method of valuation of closing stock utilized in the previous year.
• The particulars of the capital asset converted into stock-in-trade.
• Amounts not credited to the profit and loss account.
• Land or building being transferred during the previous year for a consideration less than the value adopted, assessed or assessable by any authority of a State Government referred to in section 43CA or 50C.
• Particulars of depreciation permissible as per the Income-tax Act, 1961 in respect of each asset or block of assets.
• Amounts permissible under Section 32AC, 33AB, 33ABA, 35(1)(1), 35(1)(2), 35(1)(2a), 35(1)(3), 35(1)(4), 35 (2AA), 35 (2AB), 35ABB, 35AC, 35AD, 35CCA, 35CCB, 35CCC, 35CCCD, 35D, 35DD, 35DDA, 35E.
• Bonus or commission paid to an employee for services rendered, where such sum was otherwise payable to him/her as profits or dividend.
• Particulars of contributions received from employees for various funds as referred to in section 36(1)(va).
• The particulars of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure, etc.
• Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.
• Particulars of payments made to persons specified under section 40A(2)(b).
• Amounts deemed to be profits and gains under section 32AC or 33AB or 33ABA or 33AC.
• Any amount of profit chargeable to tax under section 41 and computation thereof.
• The specified liabilities pertaining to any sum referred to in clauses (a),(b), (c), (d), (e) or (f) of section 43B.
• Sum of Central Value Added Tax credits availed of or utilized during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the accounts.
• Particulars of income or expenditure of prior period credited or debited to the profit and loss account.
• Whether during the previous year the assessee has received any property, being a 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, the details of the same.
• Whether during the previous year the assessee received any consideration for issue of shares which exceeds the fair market value of the shares as referred to in section 56(2)(viib), if yes, please furnish the particulars of the same.
• Details of any amount borrowed on hundi or any amount due thereon, which is repaid otherwise than through an account payee cheque
• Particulars of loans or deposits taken or accepted during the previous year which exceeds the limit specified in Section 269SS.
• Details of brought forward loss or depreciation allowance.
• Section-wise details of deductions, if any, admissible under Chapter VIA or Chapter III.
• Whether the assessee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB, if yes, the requisite details.
• Whether the assessee has furnished the statement of tax deducted, or tax collected within the prescribed time. If not, the requisite details.
• Whether the assessee is liable to pay interest under section 201(1A) or section 206C (7). If yes, the requisite details.
• In the case of trading concerns, quantitative details of principal items of goods traded.
• In the case of a manufacturing concern, quantitative details of the principal items of raw materials, finished products and by-products.
• In the case of a domestic company, details of tax on distributed profits under section 115-O.
• Whether any cost audit was carried out, if yes, the details of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the cost auditor.
• Whether any audit was conducted under the Central Excise Act, 1944, if yes, the details of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor.
• Whether any audit was conducted under section 72A of the Finance Act,1994 in relation to the valuation of taxable services, if yes, give the details, if any, of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor.
• Details pertaining to turnover, gross profit, etc., for the previous year and preceding previous year.
• The details of demand raised, or refund issued during the previous year under any tax laws other than the Income-tax Act, 1961 and Wealth-tax Act, 1957 along with details of relevant proceeding.

Prerequisites for availing this service.

• Taxpayer and CA are registered on the e-Filing portal with valid user ID and password.
• Status of PAN of taxpayer and CA is active.
• Taxpayer has assigned CA for form 3CB-CD.
• CA and Taxpayer have a valid and active Digital Signature Certificate.
• In case of Individual Taxpayer PAN of the Taxpayer is linked with the Aadhaar (Recommended)

How to Access and Submit Form 3CB-CD