Field audit

Field Audit A Field Audit is a comprehensive and detailed examination of a taxpayer’s financial records, books of accounts, and other supporting documents conducted at the taxpayer’s place of business or residence by the tax authorities. The main objective of a field audit is to verify the correctness of income reported, ensure compliance with tax laws, and detect any possible underreporting or evasion of taxes. During a field audit, tax officers may: Review financial statements, bank accounts, sales invoices, purchase bills, inventory records, and expense vouchers. Cross-check tax deductions, exemptions, and credits claimed in the return. Interview key personnel or accountants to understand the nature of transactions. Compare records with information obtained from third-party sources such as banks, suppliers, or customers. Field audits are generally conducted when the tax department detects discrepancies or unusual patterns in a return, or when a taxpayer is selected based on risk assessment criteria.

Example: If a business reports low profits despite high turnover, the Income Tax Department may initiate a field audit. Officers visit the business premises to inspect books, verify inventory, and ensure that expenses and income are accurately reported