Tax audit report is an annexure to the return of income so that if there is any omission to furnish relevant details therein the same may invite reopening vide PCIT vs. BHARATHI CONSTRUCTIONS AND ANOTHER(2020)16 ITR-OL 435. In this case there was an allegation that certain payments details such as machine hire charges, audit fee etc. were not captured by tax auditors in their report viz a viz section 40 list of disallowances. This lead to reopening action. The Tribunal in their order observed that if there is negligence or omission on the part of the auditor to disclose the correct facts in the audit report prepared under section 44AB of the Act, the assessee cannot be blamed for failing to make full disclosure.
The madras high court refuted such observation of the tribunal by stating as under :
10. However, we are not inclined to agree with the observations made by the learned Tribunal in paragraph 11 of its order quoted above to the extent where the learned Tribunal has stated that if there is negligence or omis- sion on the part of the auditor to disclose the correct facts in the audit report prepared under section 44AB of the Act, the assessee cannot be faulted with.
In our opinion, even if the relevant facts are not placed before the auditors by the assessee himself, they may qualify their audit report under section 44AB of the Act. If the auditor’s report does not specifically disclose any relevant facts, or if there is any omission or non-disclosure, it has to be attributed to the assessee only rather than to the auditor.
On merits the case went in favour of assessee but one observation by tribunal is reversed by high court enabling deptt to take action u/s 147 for any missing disclosures in tax audit report.