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Unit 13: Tax and Cost Audit

Notes
Team JNC has consists of professionals having in totality more than 100 years of experience
in the field of Costing System Installations, conducting Reviews of Costing related modules
in various ERP Software like SAP, BAAN, Navision etc. Preparation of GAP Analysis
Reports in respect of costing, Cost Consultancy, Cost Audits, Indirect Taxes Consultancy,
Special Audits, Investigative Audits.
With innovative ideas and clear understanding of organization’s and statutory needs,
Team JNC provides the better solutions and highly dependable services to its clientele.
As a result of a well-thought strategy, our organization started diversifying in some
essential service areas like Inventory Valuation, Indirect Taxation, Corporate Consultancy,
Maintenance of Cost Records Certification of Records, Auditing, Special Audit, Budgeting,
and Business Process Re-engineering. The indispensable values, sense of community, the
shared goals, the pride of achievement, the spirited exchange of ideas and the skills, binds
the team in a web of loyalty and mutual responsibility. When skills are combined, the
effort is easier.

Source: http://costaudit.org/

13.1.2 Audit of Accounts in Connection with the claim for Deduction
under Sections 35D and 35E

The conditions under which certain specified preliminary expenditure incurred before the
commencement of business and once the business is commenced on expanding an industrial
undertaking or in connection with setting up a new industrial unit can be amortised are stated
in Section 35D of the Act. The manner in which deductions are allowed in respect of expenditure
on any prospecting operations relating to certain specified minerals listed in the Seventh Schedule
to the Act are stated in Section 35E of the Act. In respect of assessees other than a company or a
co-operative society, these deductions are admissible only if the accounts for, the year or years
in which the above specified expenditure is incurred are audited by an “accountant” as defined
in explanation below sub-section (2) of section 288 of the Income-tax Act, 1961 and the report of
such audit is furnished by the assessee along with the return of income. Rule 6AB of the Income-
tax Rules 1962 provides that the report of audit required to be furnished by the above-mentioned
assessees under sections 35D and 35E should be in Form No.3B. While doing the audit the
auditor is expected to follow general principles of auditing as mentioned in Auditing and
Assurance Standards.

13.1.3 Tax Audit under section 44AB

Section 44AB provides for the compulsory audit of accounts of certain persons carrying on
business or profession. Section 44AB reads as under:
Audit of accounts of certain persons carrying on business or profession – Every person -
(a) Carrying on business shall, if his total sales turnover or gross receipts, as the case may be,
in business exceed or exceeds forty lakhs rupees in any previous year.
(b) Carrying on profession shall, if his gross receipts, in profession exceed ten lakhs rupees in
any previous year,

(c) Carrying on the business shall, if the profits and gains from the business are deemed to be
the profits and gains of such person under section 44AD or section 44AE or section 44AF or
section 44BB or section 44BBB as the case may be, and he has claimed his income to be
lower than the profits or gains so deemed to be the profits and gains of his business, as the
case may be, in any previous year, get his accounts of such previous year audited by an

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