Revision of Tax Audit Report- Further payment of amounts referred to in section 40 and section 43B of the IT Act, 1961

Section 40 of the Income Tax Act, 1961 (Act) disallows certain expenses listed therein, if the said expense or TDS on such expense is not paid before the due of filing of Income Tax Return under section 139(1). Some of the examples of such payment are as follows:

1. Whole of any expense shall be disallowed which is paid outside India or to Non Resident, if the TDS on it is not deducted and paid before due date of return u/s 139(1) of the Act.

2. 30% of the expense amount paid to resident shall be disallowed if the TDS on it is not deducted and paid before due date of return u/s 139(1) of the Act.

3. Others, as enlisted therein

Also, section 43B of the Act deduction of certain sum of upon their actual payment only on or before the due date filing income tax return under section 139(1) of the Act. Some of the examples of such sums are:

1. tax, duty, cess or fee under any law

2. sum paid by employer  by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 

3. sum payable to the Indian Railways for the use of railway assets

4. others, as enlisted therein

In reference to the above, it may be noted that it might happen and was also happening until now, that the tax audit report in Form 3CD is filed before the due date of income tax return wherein the amounts referred to herein above are required to be filled.

However, it might happen that sums referred to in section 40 and section 43B of the Act may also be paid by any assessee after filing of tax audit report in Form 3CD but before the due date of income tax return.

Thereafter, such additional payment after filing tax audit report, is also being claimed by the assesse in the ITR since as per the provision of section 40 and section 43B they are eligible to be claimed as deduction, as payment is made before the due date of income tax return u/s 139(1) of the Act.

Due to above, there used to reflect the difference in payment of such amount as claimed in Form 3CD and the ITR filed by the assesse, which created unnecessary hurdles to both assesse and the tax officers regarding explanation of such differences.

Therefore, it is a good step taken by the Government by inserting sub rule (3) of Rule 6G of the Income Tax Rules, 1962 w.e.f. 01-402021 vide notification no. 28/2021 dated 01—4-2021, wherein it has been said that if there is any such payment made by any assessee after filing of original tax audit reportin Form 3CD which requires recalculation of disallowed amount in section 40 and section 43B of the Act to be reflect of tax audit report, the tax audit report has to be revised by the assesse before the end of the relevant assessment year. Example- last date for revising tax audit report in such cases for F.Y. 2021-22 shall be 31^st March, 2023. Putting of deadline for such revision will also prevent an unnecessary delay in revision.

Also, such revised tax audit report has to be signed and verified by the accountant.

For reference new sub rule (3) of Rules 6 read as follows:

The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub-rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.

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