Management Representation Letter
[On the letterhead of the Assessee]
Date: [Insert Date]
To,The Tax Auditor,
[Name of Audit Firm],
[Address of Audit Firm]
Subject: Management Representation Letter for the Financial Year ended 31st March, 2024 in connection with Tax Audit under Section 44AB of the Income Tax Act, 1961
Dear Sir/Madam,
This letter is provided in connection with your audit of the financial statements of [Name of the Entity] for the financial year ended on 31st March, 2024, as well as the audit conducted in accordance with Section 44AB of the Income Tax Act, 1961, and Form 3CD. We confirm the following representations made to you during your audit:
1. General Representations
1.1. The financial statements have been prepared and presented in accordance with applicable accounting principles and standards.
1.2. All books of account and financial records have been properly maintained and reflect a true and fair view of the company’s affairs.
1.3. We have made available all necessary documents, books, records, and related information necessary for the purpose of the audit.
1.4. All transactions recorded in the books are lawful and accounted for properly.
2. Representations with Respect to Form 3CD
The following representations are made with respect to the clause-wise reporting in Form 3CD:
Clause 13: Disclosures as per ICDS
The Assessee has disclosed ICDS as required by the disclosure norms mentioned as per section 145(2) of the Income Tax Act, along with any adjustment in clause 13(e) of Form 3CD.
Clause 16: Method of Accounting
2.1. The entity follows the accrual method of accounting consistently.
2.2. No material changes have been made in the accounting policies compared to previous years unless explicitly disclosed in the financial statements.
Clause 21: Details of Payments Made to Specified Persons
2.3. All transactions with persons covered under Section 40A(2)(b) of the Income Tax Act have been disclosed, and payments are at arm’s length.
Clause 22: Amount of Interest Inadmissible Under Section 23 of the Micro, Small, and Medium Enterprises Development Act, 2006
2.4. We confirm that the amount of interest payable to Micro, Small, and Medium Enterprises as per Section 23 of the MSMED Act, 2006, has been duly computed and disclosed. Any interest which is inadmissible as a deduction under this section has been accounted for and appropriately reflected in the financial statements.
We confirm that the classification of suppliers as Micro or Small Enterprises has been done based on records available with us and information received from suppliers, in accordance with MSMED Act 2006 and verified the classification thereof on the Udyam portal. To the best of our knowledge, there are no other suppliers that should be considered for compliance under Section 43B(h) of the Income Tax Act, 1961.
The credit period considered for the purpose of disallowance under Section 43B(h) is appropriately determined based on mutual contracts or agreements, considering the terms specified in the invoices, purchase orders, agreements, or other relevant documents.
We affirm that payments to such identified suppliers have generally been made within the time limits prescribed under Section 15 of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, except for a few cases. Given the high volume of transactions, it is not feasible for us to accurately calculate the interest payable under Section 16 of the MSMED Act for such cases. Moreover, based on mutual contracts and established practices, no interest is payable for delayed payments; hence, no provision has been created for the same.
The amount disclosed as inadmissible under Clause 22 of Form 3CD is complete and accurate, in accordance with the requirements of the clause.
Clause 26: Depreciation
2.5. Depreciation on fixed assets has been computed as per the Income Tax Rules, 1962.
Clause 27(b): CENVAT Credit Adjustment
2.6. The CENVAT credit availed during the financial year has been correctly adjusted against the purchase value of goods, and no unadjusted amounts remain except as disclosed in the financial statements.
Clause 28: Compliance with Section 43B
2.7. All payments covered under Section 43B (such as contributions to provident fund, employee state insurance, taxes, duties, etc.) have been made within the prescribed due dates or disclosed as payable if not paid.
Clause 31(a): Cash Payments Exceeding ₹10,000
2.8. No payments exceeding ₹10,000 have been made in cash in contravention of the provisions of Section 40A(3), except as disclosed.
Clause 31(b): Cash Receipts Exceeding ₹2,00,000
2.9. No receipts exceeding ₹2,00,000 have been received in cash for a single transaction or in aggregate from a single person in contravention of the provisions of Section 269ST, except as disclosed.
Clause 32: Speculation Losses
2.10. All speculative losses, if any, have been separately disclosed in the financial statements and accounted for properly.
Clause 35(a): Compliance with Chapter XVII-B (TDS)
2.11. The entity has complied with all applicable provisions of Chapter XVII-B, and all necessary tax deductions at source (TDS) have been made for payments covered under these provisions. No instances of failure to deduct or short deduction exist except as disclosed.
Clause 35(b): Non-Deduction of TDS and Interest Paid Thereon
2.12. All instances of non-deduction or short deduction of TDS have been disclosed, and interest under Section 201(1A) of the Income Tax Act has been calculated and paid where applicable.
Clause 36: Dividend Distribution Tax (DDT)
2.13. There are no unpaid Dividend Distribution Taxes, and the provisions related to DDT, if applicable, have been duly complied with.
Clause 38: Shareholding of Assessee in Companies
2.14. The shareholding pattern and investments made in other entities have been accurately disclosed as required.
Clause 40: Transfer Pricing Compliance
2.15. Transactions with associated enterprises have been disclosed and complied with in accordance with the applicable transfer pricing regulations.
Clause 41: Tax Deducted at Source – Payments to Non-Residents
2.16. All transactions involving non-residents have been properly reported, and tax has been withheld at the applicable rates as per the Income Tax Act and relevant DTAA provisions.
Clause 44: Break-up of Total Expenditure with Respect to Registered or Unregistered Entities under GST
2.17. We confirm that a complete break-up of the total expenditure has been provided, categorizing payments to registered and unregistered entities under GST. The classification provided is true, accurate, and based on available records.
3. Financial Statement Assertions
3.1. We confirm that the financial statements reflect all assets, liabilities, income, and expenses.
3.2. There are no known liabilities or commitments that have not been disclosed in the financial statements.
3.3. Provisions for all known liabilities, including litigation, warranties, and contingent liabilities, have been adequately disclosed or provided for.
3.4. All events subsequent to the balance sheet date that require adjustment or disclosure have been considered.
4. General Statutory Compliance
4.1. All statutory dues, including but not limited to GST, TDS, PF, ESI, Income Tax, and others, have been duly accounted for and deposited within the due dates or disclosed as payable.
4.2. All direct and indirect tax returns have been duly filed within the prescribed due dates.
We further acknowledge our responsibility for:
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Maintaining adequate and effective internal control systems for safeguarding the assets of the entity.
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Ensuring compliance with applicable laws and regulations, including the Income Tax Act, 1961, and other relevant provisions.
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Providing accurate and complete information to the tax auditor.
This representation is provided in good faith and with the belief that it is true and complete to the best of our knowledge.
Sincerely,
For [Name of the Entity]
[Name of the Managing Director/Proprietor/Authorized Signatory]
[Designation]
[Date]
Disclaimer:
The draft Management Representation Letter (MRL) provided here is intended for general understanding and reference purposes only. It is not exhaustive and may not cover all specific circumstances or requirements relevant to every tax audit. Users are advised to modify, add, or remove sections as deemed necessary based on the unique needs of their organization or audit. This draft should not be considered a substitute for professional advice.