Master Note for Non-Corporate Entities (Form 3CB Context)

This document is a master note prepared to accompany the financial statements and auditor’s report of a non-corporate assessee (such as a partnership firm or sole proprietorship) in India. It is specifically structured to align with Section 44AB of the Income-tax Act, 1961, and is presented under a Special Purpose Framework (SPF).

The document includes:

  1. A preparer’s note explaining the basis of accounting used.
  2. A note for the auditor’s report, highlighting key audit observations and limitations.

It serves both a declarative and compliance-focused function, ensuring that users of the financial statements understand the nature and limitations of the financial reporting framework adopted.

FOR NON-CORPORATE ASSESSEE – Note on the preparation and presentation of Financial Statements under the Special Purpose Framework

  1. We have prepared and presented the financial statements, namely the Balance Sheet and the Statement of Profit and Loss, in the form and contents as prescribed by the Guidance Note on Financial Statements of Non-Corporate Entities issued by the Institute of Chartered Accountants of India.
  2. We have prepared and presented the financial statements by broadly following the tax basis of accounting policies concerning recognition and measurement principles following the various provisions of income tax Act and Income Computation and disclosure standards hence not followed the Accounting Standards issued by The Institute of Chartered Accountants of India where these income tax provisions are inconsistent with the Accounting Standards. For instance, depreciation has been provided as per the provisions of Section 32 of the Income Tax Act 1961 {“The Act”], following the block of assets system as defined under Section 2(11), and the written down value method in accordance with Section 43(6) read with ICDS V – Tangible Fixed Assets, instead of Accounting Standard – 10 on Property, Plant and Equipment.  Hence keeping in of the foregoing facts, these financial statements have been prepared under a special purpose framework primarily meant for use under the provisions of the Income Tax Act, 1961. 

FOR AUDITOR’S REPORT – NOTE UNDER POINT NO. 3 (a) to 3CD – We report the following observation

Emphasis of Matter
We draw attention to Note No. 1 in the Basis of Preparation of Financial Statements and Significant Accounting Policies, which describes that the financial statements have been prepared and presented under a special purpose framework, primarily in accordance with the recognition and measurement principles prescribed under the provisions of the Income-tax Act, 1961.

Accordingly, these financial statements may not be considered fully compliant with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India, as certain requirements of the relevant standards do not appear to have been fully met under this framework.

Our opinion is not modified in respect of this matter.

We have conducted the audit keeping in view the requirements of Section 44AB of the Income-tax Act, 1961, and have considered the relevant provisions of the Act, including applicable rules, notifications, and circulars. However, any deviations, if any, from other statutory laws, rules, regulations, agreements, or contractual obligations applicable to the assessee—and their potential impact on the financial statements—are generally outside the scope of an audit conducted under Section 44AB of the Income-tax Act, 1961.

Based on the information and explanations provided to us and on our examination of the records, the financial statements present a true and fair view for compliance with the Income-tax Act, 1961.