Tax Audit | Detailed Analysis of Clause 39 to Clause 41 | As per the Guidance Note issued by the ICAI
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- Last Updated on 25 September, 2023
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1. Clause 39
Whether any audit was conducted under section 72A of the Finance Act,1994 in relation to 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.
This clause requires disclosure of any disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor if audit was conducted under section 72A of the Finance Act, 1994 in relation to valuation of taxable services.
Under this clause, an auditor need not report on the applicability even if the audit under section 72A of the Finance Act, 1994 is not carried out. But if audit is carried, then the details of audit conducted during the year should be obtained from the management and TY] details of disqualification or disagreement on any matter/item/value/quantity, if any, reported/identified by the auditor, shall be duly reported.
In case, where audit under section 72A is not completed, then the tax auditor shall state this fact in the report that such audit is not completed and the audit report is not available with the assessee.
The auditor should provide information only in respect of such time period that falls within the relevant previous year.
2. Clause 40
Details regarding turnover, gross profit, etc., for the previous year and preceding previous year:
For reporting under this clause, following ratios are required to be given for business as a whole and not product-wise related to the assessee engaged in manufacturing or trading activities only.
|
Particulars |
Previous Year |
% |
Preceding previous Year |
% |
|
Total turnover of the assessee |
Total Turnover (Revenue from operations) |
|||
|
Gross profit/turnover |
Total turnover – Cost of goods sold (COGS= Cost of material consumed + change in inventory + direct expenses) |
|||
|
Net profit/turnover |
Net profit (Net profit or loss before tax) |
|||
|
Stock-in-trade/turnover |
Stock-in-trade (Closing stock of finished goods) |
|||
|
Material consumed/finished goods produced |
Material consumed (Inventory at the beginning of the year + Purchases – Inventory of Raw Material at the end of the year) (include stores, spare parts, and loose tools) Finished goods produced (Raw material and consumables consumption + Direct labour + Other manufacturing expenses excluding depreciation other than on office assets +/- change in stock of WIP) This ratio need not be given for trading concern or service provider |
For the preceding previous year, tax audit figures of that year shall be used, if no tax audit was applicable in the preceding previous year, then nothing should be mentioned in that column.
3. Clause 41
Please furnish the details of demand raised or refund issued during the previous year under any tax laws other than Income-tax Act, 1961 and Wealth tax Act, 1957 along with details of relevant proceedings.
This clause requires details of demand raised or refund issued during the previous year under any tax laws other than Income-tax Act, 1961 and Wealth tax Act, 1957 along with details of relevant proceedings in the below provided format:
|
Financial year to which demand/refund relates to |
Name of other Tax law |
State |
Other |
Type (Demand raised/Refund received) |
Date of demand raised/refund received |
Amount |
|
Mention the financial year to which refund relates Even though the demand/refund order is issued during the previous year, it may pertain to a period other than the relevant previous year. In such cases also, reporting has to be done under this clause |
Like GST/VAT refund or refund under any other tax law. However, cess or duty like Marketing Cess, Cess on Royalty, Octroi Duty, Entry Tax etc. would not be covered as other tax laws |
|
|
|
|
The auditor should obtain a copy of all the demand/refund orders issued by the governmental authorities during the previous year under any tax laws other than Income Tax Act and Wealth Tax Act and verify books of accounts to ascertain whether any such demand has been raised or refund order has been issued under any other tax law and accordingly report the same. Demands raised or refunds issued in respect of Marketing Cess, Cess on Royalty, Octroi Duty, Entry Tax etc. also have to be reported under Clause 41.
The auditor should verify the details from online portals of the departments too if the details are available thereon about the refund or demand raised.
The auditor should report under this clause, if there is any adjustment of refund against any demand.
Note
This document is prepared as per the guidance note provided by ICAI
Dive Deeper:
Detailed Analysis of Clause 9 to 12
Detailed Analysis of Clause 13 and Clause 14
Detailed Analysis of Clause 15 and Clause 16
Detailed Analysis of Clause 17 to Clause 19
Detailed Analysis of Clause 20 and Clause 21
Detailed Analysis of Clause 22 to Clause 25
Detailed Analysis of Clause 26 to Clause 29
Detailed Analysis of Clause 30 to Clause 30C
Detailed Analysis of Clause 31
Detailed Analysis of Clause 32 to Clause 34
Detailed analysis of Clause 35 to Clause 38
Detailed Analysis of Clause 42 and Clause 43
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