Tax audit refers to the examination of an person’s tax return. It is carried out by a tax collecting agency with the objective to determine if a taxpayer paid the correct amount of tax. Taxpayers are chosen for audits if they have suspiciously high claims for deductions or credits, or if their reported income is suspiciously low, but an audit may be done simply as part of a random sampling. If the auditor finds a tax deficiency, the taxpayer has to pay back-taxes, as well as interest and penalties. In our case, an assessee is liable to get his Tax Audit done by a Chartered Accountant if in the previous year the person is –
a) Carrying on business and his turnover(total sales) is exceeding 1 crore.
b) Carrying on profession and his gross receipts is exceeding 25 lakhs.
c) Carrying on business or profession and is covered under the provisions of sections 44AD, 44AE, 44AF, 44BB and claims that his income from the said business is lower than the deemed profits and gains computed under the relevant section.