Tax audit done? What taxpayers should keep in mind while filing ITR

Getting a tax audit done is only one part of filing an income-tax return. Taxpayers must ensure that the turnover, expenses, deductions and tax credits reported in the ITR match the tax audit report and other financial records. Even small discrepancies, if left unexplained, can invite queries from the Income-tax Department or lead to tax adjustments. Ritika Nayyar, Partner at Singhania & Co, said taxpayers should reconcile turnover, profits and other financial details in their ITRs with the tax audit report and books of accounts. They should also verify disallowances, depreciation, deductions and statutory dues while computing taxable income. Turnover, expenses and losses need careful reconciliation One of the key checks is whether the turnover and gross receipts reported in the ITR match the figures disclosed in the tax audit report, including Form 3CD, and the audited financial statements. Any differences should be reconciled and supported by appropriate documentation. Hari Raheja, Advocate at D.M. Harish & Co. LLP, said taxpayers should check disallowances relating to unpaid provident fund (PF), employees' state insurance (ESI) contributions and other statutory dues, along with expenses covered under Section 43B. Taxpayers should ensure that expenses identified as inadmissible by the auditor are not incorrectly claimed as deductions in the return. This includes cases involving statutory payments and other expenses that must be added back while calculating taxable income. Another important area is brought-forward business and capital losses, as well as unabsorbed depreciation. These figures should be checked against earlier returns, assessment records and disclosures in the tax audit report. Fixed-asset additions and deletions, depreciation claims and other income, including interest, dividends and capital gains, also need to be reported correctly. Mismatches in AIS and tax credits can trigger queries Taxpayers should cross-check their income and tax details against the Annual Information Statement (AIS) and Form 26AS. Income appearing in these records but missing from the ITR can invite questions from the department. Suresh Surana, a Mumbai-based chartered accountant, said discrepancies between the ITR, tax audit report, GST returns and information available with the department may trigger notices seeking clarification. Incorrect deduction claims, including those not permitted under the chosen tax regime, can also result in adjustments. Similarly, claiming TDS, TCS, advance tax or self-assessment tax credits that do not match the department's records may lead to denied credits or tax demands. A mismatch does not automatically mean that a notice will be issued. However, taxpayers should be able to explain differences and provide supporting documents if the department seeks clarification. What if an error is discovered after filing? Taxpayers who identify an error after filing their ITR should first determine whether the mistake is in the return, the tax audit report or both. Nayyar said taxpayers should consult their tax auditor to correct the audit report, wherever necessary, and then revise the ITR to ensure that both documents are consistent. Raheja said the auditor can revise the tax audit report, preferably before the return is processed. If the return has already been processed, taxpayers may need to consider a revised report and return. Surana advised taxpayers to identify the impact of the error on income, deductions, losses, depreciation and tax credits before taking corrective action. They should also pay any additional tax and interest arising from the correction. Keeping reconciliations, supporting documents and explanations for differences can help taxpayers address departmental queries and reduce the risk of avoidable tax disputes. Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.