Tax Audit Checklist on Clause 23 of Form 3CD Under the Income Tax Act, 1961

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Last Updated on 20 August, 2024

Under clause 23 of Form 3CD the tax auditor is required to report the particulars of payments to persons specified in section 40A(2)(b) of the Income Tax Act 1961. i.e. Name of related person, PAN of related person etc. Only actual payment made to the related person (persons specified in Section 40A(2)(b) need to be reported, not the amounts outstanding to these persons or the amounts claimed/debited in the P&L account).

Tax Auditor is not required to give his opinion on the unreasonability/ excessiveness of the payments to the related persons. Determining the unreasonability/excessiveness of the payments to the related persons is the assessing officer’s (AO) prerogative. The tax auditor has to merely report the payments so that AO can scrutinize them and determine whether they are unreasonable/excessive and are to be disallowed to the extent they are unreasonable/excessive.

This story offers a comprehensive tax audit checklist focused on Clause 23 of Form 3CD

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