Tax Audit Checklist on Clause 24 of Form 3CD under the Income Tax Act, 1961
Clause 24 of Form 3CD requires the tax auditors to report amounts deemed to be profits and gains under Sections 32AC, 32AD, 33AB, 33ABA, and 33AC. Only facts/data are to be reported in this Clause. However, the tax auditor will have to exercise his professional judgment based on the facts of the case to form an opinion on whether any specified violations of the sections that give rise to deemed profits occurred during the previous year.
This provision applies to assesses who:
(a) Are engaged in manufacturing or production in notified backward areas of Andhra Pradesh, Bihar, Telangana or West Bengal having acquired and installed new plant and machinery between 01-04-2015 and 31-03-2020 and availed of deductions under Section 32AD.
(b) Are involved in growing and manufacturing tea, coffee or rubber in India or
(c) Are engaged in petroleum or natural gas exploration under an agreement with the Central Government.
The tax auditor is not required to report any capital gains arising from the transfer of assets for which a deduction has been claimed or from the transfer of assets acquired from deposits for which a deduction has been claimed.
The tax audit checklist on Clause 24 of Form 3CD is as below:
Tax Audit Checklist for Clause 24 for deemed profit under Section 32AD
| S. No. | Particulars | Yes/No/N/A | Comment |
| (1) | Has the assessee set up any undertaking or enterprise for the manufacture or production of any article or thing in any backward area notifiedby the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal? | ||
| (2) | If the answer to (1) is “Yes”, has the assessee acquired and installed any new plant or machinery in such undertaking or enterprise in the previous year, 2018-19 or 2019-20? | ||
| (3) | If the answer to (2) above is “Yes” ” has the assessee transferred such new plant or machinery by sale or otherwise during the previous year 2023-24? | ||
| (4) | (a) If the answer to (3) above is “Yes”, have you verified the amount of deduction allowed under sub-section (1) of Section 32AD in respect of such a new asset in the previous year in which it was acquired and installed(2018-19/2019-20) with reference to ITR filed, tax audit reports and IT assessment order for the relevant previous year (2018-19/2019-20)?(b) Have you reported the amount of deduction claimed and/or allowed in respect of the transferred asset as deemed profits in Clause 24? |
Tax Audit Checklist for Clause 24 for deemed profit under Section 33AB
| S. No. | Particulars | Yes/No/N/A | Comment |
| (1) | Is the assessee engaged in the business of growing and manufacturing Tea, Coffee or Rubber in India? | ||
| (2) | If yes, check whether the assessee has claimed deduction under section 33AB in earlier years by depositing the amount in a special account or deposit account with NABARD or Tea/Coffee/Rubber Board. | ||
| (3) | If yes, ascertain whether any amount is withdrawn from a special account or deposit account during the year except in the circumstances specified in clause (a) or clause (d) of sub-section (3) of section 33AB. | ||
| (4) | If yes, report under this clause the amount which is relatable to the deduction claimed earlier. | ||
| (5) | Check whether the amount released/withdrawn has been utilized for the purchase of assets specified under clauses (a), (b), (c) or (d) of section 33AB(4). | ||
| (6) | If yes, report against this clause the amount that is relatable to the deduction claimed earlier. | ||
| (7) | Is any asset sold during the year that was acquired with the amount standing in the special account/deposit account within the preceding eight years in accordance with the specified scheme? | ||
| (8) | If yes, report against this clause the amount which is relatable to the deduction claimed earlier under section 33AB(1). | ||
| (9) | Is there any amount that was released/withdrawn from a Special Account or deposit account during the year and remained unutilized as of year-end? | ||
| (10) | If yes, report against this clause the amount which is relatable to the deduction claimed earlier. | ||
| (11) | Obtain a copy of the audit report obtained by the assessee in Form No. 3AC. | ||
| (12) | (a) Ascertain from clause 11 of Part III of Form No. 3AC whether any amounts withdrawn from the special account is not utilized for the specified purposes within the same year or is misutilised.(b) If so, report the amount of such deemed profits under clause 24 of Form No. 3CD. | ||
| (13) | (a) Ascertain from clause 11 of Part III of Form No. 3AC whether any assets acquired per the scheme from money withdrawn from the special account have been transferred within 8 years from the end of the previous year in which the asset was acquired.(b) If so, report the deemed profits against clause 24 of Form No. 3CD. |
Tax Audit Checklist for Clause 24 for deemed profit under Section 33ABA
| S. No. | Particulars | Yes/No/N/A | Comment |
| (1) | Is the assessee engaged in the business of prospecting for, extracting, or producing petroleum, natural gas, or both in India? | ||
| (2) | If yes, has the assessee claimed a deduction under section 33ABA in earlier years (by depositing the amount in a special account)? | ||
| (3) | If yes, report against this clause whether the amount is relatable to the deduction claimed earlier. | ||
| (4) | Has the amount released/withdrawn been utilised for the purchase of assets specified under clause (a), (b), (c), or (d) of section 33ABA(4)? | ||
| (5) | If yes, report against this clause, such an amount relatable to the deduction claimed earlier. | ||
| (6) | Is any asset sold during the year that was acquired with the amount standing in the special account within the preceding eight years in accordance with the specified scheme? | ||
| (7) | If yes, report against this clause the amount which is relatable to the deduction claimed earlier. | ||
| (8) | Is there any amount that has been released/withdrawn from the Special Account during the previous year and has remained unutilised as the end of the previous year? | ||
| (9) | If yes, report against this clause, such an amount that is relatable to the deduction claimed earlier. | ||
| (10) | Obtain a copy of the audit report obtained by the assessee in Form No. 3AD (if the auditor issuing Form No. 3AD is different from the tax auditor). | ||
| (11) | (a) Ascertain from clause 12 of Part III of Form No. 3AD whether any amounts withdrawn from the account are not utilised for the specified purposes within the same year or are misutilised. This can also be verified from a certificate obtained from CA under Para 10(2) of the Scheme.(b) If so, report the amount of such deemed profits under clause 24 of Form No. 3CD. | ||
| (12) | (a) Ascertain from clause 13 of Part III of Form No. 3AD whether any assets acquired in accordance with the scheme from money withdrawn from the special account have been transferred within eight years from the end of the previous year in which the asset was acquired.(b) Have you prepared/obtained a statement reconciling the list of assets sold with the deletion of assets reported in clause 18 of Form No. 3CD?(c) Report the deemed profits against clause 24 of Form No. 3CD. |