Incometax audit is a process where the tax authorities verify the accuracy of a taxpayer’s income tax return by examine the books of accounts and other financial records of the taxpayer. The Income Tax Act, 1961, mandates that certain taxpayers, such as companies, firms, and individuals whose turnover or gross receipts exceed a specified limit, are required to get their accounts audited by a Chartered Accountant (CA).

The purpose of an IncomeTax Audit is to ensure that the taxpayer has complied with the provisions of the Income Tax Act and that there are no discrepancies or underreporting of income. During the audit, the CA examines the books of accounts, records, and other relevant documents of the taxpayer and prepares an audit report.

The IncomeTax Audit report contains details of the taxpayer’s income, deductions, and tax liability, and is submitted to the Income Tax Department. The department may use the report to assess the taxpayer’s tax liability or initiate further investigation if any discrepancies are found.

Failing to comply with the Income Tax Audit requirements can result in penalties and fines. Therefore, it is essential for taxpayers to maintain accurate and updated records and comply with the audit requirements.