"Whether any audit was conducted under Section 72A of the Finance Act, 1994 in relation to valuation of taxable services. If yes, give the details, if any, of the disqualifications or disagreement on any matter /item/value/quantity as may be reported/identified by the auditor"
1. Whether any audit was conducted under Section 72A of the Finance Act, 1994 in relation to valuation of taxable services.
The new prescribed Form 3CD mandates reporting only where the audit is carried out under Section 72A of the Finance Act, 1994 in relation to valuation of taxable services.
Section 72A of Finance Act, 1994 envisages an audit of an assessees records in the three cases i.e.1) when there is a failure to declare or compute the value of the taxable service, 2) when the utilization of CENVAT credit in excessive of the limit permissible or by fraud etc., or 3) when the business operations of the assesse are dispersed across multiple locations.Taxpayer in most of the cases is not aware the reason for which such a special audit has been ordered.
The revised 3CD should consider all the cases where audit under sec 72A of Finance Act can be ordered.In the instant case how the tax auditor would satisfy himself regarding the reason of audit under Sec 72A.Whether the clause envisages communication of tax auditor with service tax department asking the reason for such audit?
2. "give the details, if any, of the disqualifications or disagreement on any matter /item/value/quantity as may be reported/identified by the auditor".
Special Audit under Sec 72A is carried out by a chartered accountant or cost accountant. Sec 72 A mandates that opportunity of being heard be given to the assesse in respect of any material gathered on the basis of the audit. The observation of the auditors is discussed with the assesse either by the auditor or/and the department officials. The department after going through auditor's observation and assesses' explanation decides the issues of disagreement and after that “Show cause Notice” on the issues of disagreement is served. Whether the issues where the disagreement of special auditor has been dropped by the department need to be reported? Further many a times no audit report is provided to the assesse by the auditor then in those cases what needs to be produced before the Tax auditor to substantiate the issues of disagreement between auditor and assesse?
3. "Whether any audit was conducted under Section 72A of the Finance Act, 1994".
The clause doesn't specify whether the audit conducted during the year or audit for the year needs to be reported. Special audit under Sec 72A of Finance Act 1994 is carried out for the period specified by the Commissioner. It is a general practice that the special audit is carried out once in 3-4 years for all those previous 3-4 years which sometimes may not include the current financial year.
Many times the starting of audit and completion of audit are in different financial year's i.e say the audit was carried out during Oct 2013- Feb 2014, but the “Show cause notices” pertaining to such noticewas received in the month of May 2014 then whether those cases need to be reported in the year when Show cause notice has been received although no audit has been carried out during the year. Whether the disagreement of earlier years also needs to be reported in new revised 3CD?
4. Audits under service tax are carried out i) by the Central excise officer(authorized for the purpose) or by an audit party deputed by Comptroller and Auditor General of India under Rule 5 of the service tax rules,1994 or ii)by a Chartered Accountant or Cost Accountant under sec 72A of Finance Act , 1994.
