What are 3CB and 3CD Form? And components of form 3CD and 3CB
3CB and 3CD Form – What is it? And components of form 3CD and 3CB
Table of Content
Forms 3CB and 3CD are reporting formats that should be used by auditors who are auditing the books of accounts of taxpayers who are subject to tax audits. The provisions of the Income Tax Act that govern tax audits require a Chartered Accountant to provide an audit report in the specified format. This article provides a brief overview of the 3CB and 3CD Forms, the purpose of which is to introduce a standardised audit report reporting format for audits conducted to meet the requirements of Section 44AB and the components under Form 3CB.
Form 3CB and 3CD
To discourage tax avoidance and evasion, the Finance Act of 1984 mandated a tax audit beginning with Assessment Year 1985-86 by inserting a new section 44AB. A person who is not required by or under any other law to have their accounts audited is required to submit a report of the audit of the accounts on Form 3CB along with the required particulars in Form 3CD under Section 44AB.
Components of Form 3CD and 3CB
Below are the components for form 3CD:
Form 3CD is divided into 2 parts:
- Part A:
- Address of the taxpayer
- Permanent Account Number (PAN)
- If applicable, the taxpayer’s obligation to pay indirect taxes such as excise duty, service tax, sales tax, customs duty, and so on.
- The Return Status
- Relevant previous year
- AY (Assessment Year)
- The relevant section 44AB clause under which the audit was carried out
- Part B:
- If the entity is a corporation or a group of individuals, the names of the partners/members and their profit-sharing ratios must be specified.
- The particulars of any change in the partners or members or their profit-sharing ratio since the last date of the preceding year.
- The nature of one’s business or profession. If the nature of a business or profession changes, the specifics of that change.
- Whether or not books of account are required under section 44AA, and if so, what books are required.
- List of books of accounts kept and the address where the books of accounts are kept.
- List of books of accounts examined and nature of relevant documents.
- If the profit and loss account contains any profits and gains that can be assessed on a presumptive basis, indicate the amount and the relevant section.
- An accounting method used the previous year
- Whether there had been any changes in the accounting method used. If so, what effect does it have on profit or loss?
- The previous year’s closing stock valuation method was used.
- The specifics of the capital asset that was converted into stock-in-trade.
- Amounts that have not been credited to the profit and loss account.
- Land or building transferred during the previous year for less than the value adopted, assessed, or assessable by any State Government authority referred to in sections 43CA or 50C.
- Quantitative details of major items traded in the case of trading concerns.
- Quantitative details of the main items of raw materials, finished products, and by-products in the case of a manufacturing concern.
- Details of tax on distributed profits under section 115-O in the case of a domestic company.
- If a cost audit was performed, the details of any disqualification or disagreement on any matter/item/value/quantity as reported/identified by the cost auditor.
- Whether or not an audit was conducted under the Central Excise Act of 1944, and if so, the details of any disqualification or disagreement on any matter/item/value/quantity reported/identified by the auditor.
Components under Form 3CB:
Section 44AB requires the chartered accountant to specify the following components under Form 3CB conducting the audit:
- Personal information about the taxpayer
- Audit observations and comments, including any discrepancies or consistency.
- A declaration stating that the balance sheet, profit and loss account, and income and expenditure statement are in accordance with the books of accounts kept at the entity’s head office.
- A declaration stating that the provided information depicts a fair and accurate outline of the entity’s balance sheet and other aspects.
- Form 3CB includes a declaration stating that the details specified in the audited report are included.
- Declarations of chartered accounts indicating that the balance sheet, profit and loss account, or income and expenditure account, have been reviewed.
- A Chartered Accountant’s declaration on proper accounting bookkeeping.
- Form 3CD annexure
- The chartered accountant’s name, address, and signature
A quick look at Forms
Before submitting Form 3CB-3CD, two sections must be completed. They are as follows:
- No. 3CB Form
- No. 3CD Form
Here’s a quick run-down of Form 3CB-3CD’s sections.
- The first page directs you to Forms 3CB and 3CD.
- The CA enters information on the audit of a person’s business or profession on the Form No 3CB page.
- Form No 3CD has five additional sections in which the CA enters the information required by Section 44AB of the Income Tax Act.
- Part A (Clauses 1–8) of Form 3CD requires the CA to provide the assessee’s basic information. Only after Part A of the form has been completed and saved can the user proceed.
- Part B of Form 3CD contains additional divisions based on Sections 9 to 44 of the Income Tax Act of 1961. This section must be filled out with the specifics of all clauses.
Form 3CB is an audit report prepared by a Chartered Accountant on behalf of assesses who run a business or practise, and Form 3CD is prepared by a Chartered Accountant on behalf of assesses who have their accounts audited. In simple terms, the basic purpose of the forms is to specify the details of the audit report in any of the forms specified in Section 44AB.
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