Introduction: ITR Filing for Companies Covered Under Cost Audit: Step-by-Step Guide

When it comes to corporate tax compliance in India, Income Tax Return (ITR) filing is more than just a mandatory task—it's a powerful way to ensure transparency, maintain financial discipline, and avoid penalties. For companies governed by the Companies Act, 2013, especially those engaged in manufacturing or service sectors with significant turnover, cost audit compliance plays a critical role in their annual tax and financial reporting process.

Cost audits are not just statutory formalities—they’re designed to bring clarity and accountability to the cost structures of companies. But here's the catch: many businesses fail to properly report cost audit-related expenses while filing ITR, leading to issues such as incorrect deductions, compliance mismatches, or even penalties under the Income Tax Act and Companies Act.

If your business is subject to cost audit under the Companies (Cost Records and Audit) Rules, 2014, this guide is made just for you.

Whether you're a CFO, accounts manager, cost accountant, or a business owner handling tax compliance internally, this article will help you understand:

• Whether cost audit applies to your company

• How to claim deductions on cost audit expenses

• Where to report those costs in your ITR

• Common mistakes to avoid and expert tips to stay compliant

At SSCOIndia.com, we specialize in assisting Indian companies with ITR filing, cost audit reporting, and end-to-end compliance with CRA forms (CRA-1, CRA-2, CRA-3 & CRA-4). With decades of industry experience, our tax experts and cost accountants ensure you don’t just file your ITR, but file it right.

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Applicability of Cost Audit: Who Needs to File?

Before diving into how to report cost audit expenses in your income tax return, let’s first understand who exactly needs to conduct a cost audit in India.

Under the Companies (Cost Records and Audit) Rules, 2014, issued by the Ministry of Corporate Affairs (MCA), cost audits are mandatory for certain classes of companies based on:

• Type of industry/product/service

• Annual turnover

• Whether the product is regulated or not

• Whether the company is engaged in domestic or export activity

🔍 Key Criteria for Cost Audit Applicability:

According to the latest rules, companies engaged in regulated sectors (such as telecommunications, electricity, petroleum, drugs & pharmaceuticals, fertilizers, and more) must maintain cost records and undergo cost audit if:

• Their overall annual turnover is ₹50 crore or more, and

• Turnover from regulated products/services is ₹25 crore or more.

For non-regulated sectors, the thresholds are:

• Overall turnover of ₹100 crore or more, and

• Specific product/service turnover of ₹35 crore or more.

Additionally, all companies listed in the industry-specific tables of the Rules—including bulk drugs, cement, steel, sugar, textiles, and others—must maintain cost records (Form CRA-1) even if they don’t meet the audit thresholds.

👉 Internal Link: Sector-Wise Cost Audit Rules in India [2025]

This means not all companies need to undergo cost audit, but many are still required to maintain cost records. And if your company falls within these criteria and you’ve appointed a cost auditor via CRA-2, you must report the associated cost audit expenses in your ITR filing correctly.

📌 Why This Matters for ITR Filing

Most companies think of cost audits as a compliance task limited to the Ministry of Corporate Affairs. But in reality, cost audit expenses are legitimate business expenses that can be claimed as deductions under Section 37(1) of the Income Tax Act.

Failing to report these expenses or misreporting them can lead to:

• Overstated profits and higher tax liability

• Incomplete reporting in Schedule BP (Business & Profession) of ITR

• Mismatches between Form CRA-3 (Cost Audit Report) and Form 3CD (Tax Audit)

• Queries from the Income Tax Department or even penalty proceedings

So, it’s not just about appointing a cost auditor and submitting a CRA-3—you must also know how to reflect those expenses in your tax return to stay compliant.

💡 Did You Know?

Many companies either miss reporting cost audit fees entirely or club it under generic professional fees, which raises red flags during tax scrutiny. When you file your ITR-6, you should separately disclose such expenses under "Audit Fees" or “Other Expenses,” depending on your chart of accounts, and ensure they reconcile with your financial statements.

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At SSCOIndia.com, we not only help companies conduct their cost audit and file CRA-3, but also ensure that the cost audit expense is rightly reported in ITR, financial statements, and tax audit reports. Our dedicated audit & tax filing service for corporates is designed to reduce your compliance burden and maximize your tax savings.

Income Tax Return Forms Applicable to Companies

When it comes to filing Income Tax Returns (ITR) for companies, ITR-6 is the form most commonly used. This return is specifically applicable to companies other than those claiming exemption under Section 11 (which relates to income from property held for charitable or religious purposes).

Understanding ITR-6 for Companies

The ITR-6 Form is designed to capture detailed financial and audit-related data from companies. For businesses covered under the cost audit rules, this includes disclosure of cost audit expenses, auditor details, and cross-verification with tax audit data, if applicable. This makes ITR-6 a comprehensive form that aligns taxation with regulatory compliance under the Companies Act, 2013.

ITR-6 vs Other ITR Forms

Let’s quickly compare ITR-6 with other popular ITR forms to understand its scope:

Additional Disclosures from Cost Audit Reports

Companies filing ITR-6 must include details from their cost audit reports such as:

• Expenses under “Other Expenses” in Schedule BP

• Cost auditor’s name, membership number, and audit report date

• Clause 17 of Form 3CD, if tax audit is also applicable

• Reconciliation of cost records with financial statements

Filing all of this correctly not only ensures compliance but also prevents unwanted notices from the Income Tax Department.

Need expert assistance in preparing your ITR-6 with cost audit disclosures? Our specialists at SSCOIndia.com handle it with precision and personalized care. Book your consultation today!

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Documents Required for ITR Filing if Cost Audit is Applicable

When a company is subject to cost audit, the ITR filing becomes more detailed and document-intensive. Missing any essential record can result in errors, tax notices, or penalties. Here’s a checklist of critical documents required for ITR filing if cost audit is applicable:

1. Cost Audit Report (CRA-3)

The CRA-3 form is the official format in which cost auditors submit their findings to the company. This report should be:

• Digitally signed by the cost auditor

• Uploaded on the MCA portal

• Consistent with the data disclosed in your ITR

📌 Internal Tip: Ensure the figures in CRA-3 align with your Profit & Loss statement and the disclosures made in Schedule BP of ITR-6.

2. Financial Statements (Balance Sheet & Profit & Loss Account)

These serve as the foundation of your ITR filing. Make sure they:

• Include cost audit expenses as a separate line item under other expenses

• Match the disclosures made in the tax audit report (Form 3CD)

3. Tax Audit Report (Form 3CD), if Applicable

If your company crosses the turnover threshold under Section 44AB, you must submit a tax audit report along with ITR. This includes:

• Clause 17 disclosure for cost audit

• Auditor remarks (if any) about compliance or inconsistencies

• Verification of all business expenditure, including cost audit

4. Depreciation, Reconciliation & Cost Data

Reconcile:

• Depreciation schedules under the Companies Act vs. Income Tax Act

• Cost audit records with the financial accounts

• Any segment-wise data provided in cost audit (Part B or C of CRA-3)

Proper reconciliation builds a strong compliance narrative and reduces scrutiny.

5. PAN, TAN, and Digital Signature Certificate (DSC)

These basic identifiers are often overlooked, leading to rejections:

• PAN of the company must match across all filings

• TAN (Tax Deduction Account Number) is required if TDS is applicable

• DSC of the authorized signatory is mandatory for online ITR-6 filing

💡 Pro Tip: Ensure your DSC is active and mapped correctly on the e-filing portal well before the deadline.

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Why Choose SSCOIndia.com?

When it comes to filing ITR-6 for companies with cost audit, the process can feel overwhelming — reconciling cost records, checking tax audit clauses, uploading CRA forms, and matching everything with financials.

That’s where SSCOIndia.com steps in.

✅ End-to-End ITR Filing for Companies
✅ Specialized in Cost Audit, CRA-2/3/4 Filings
✅ Chartered Accountants & Cost Accountants Onboard
✅ Dedicated Compliance Advisors

Let us handle the complexities while you focus on your business. Book your expert consultation now.

Step-by-Step Guide to File ITR for Cost-Audited Companies

Filing ITR for a company subject to cost audit is not just a regulatory necessity—it’s a strategic compliance activity that demands accuracy, reconciliation, and documentation. Companies falling under the purview of the Companies (Cost Records and Audit) Rules, 2014 must not only maintain cost records but also submit their cost audit reports (CRA-3) and appropriately report these in their Income Tax Return (ITR-6).

Here's a simplified, step-by-step approach to accurately file your ITR when cost audit is applicable:

✅ Step 1: Collect Financial Statements & Cost Audit Reports

Start by collecting the following:

• Audited Financial Statements (Balance Sheet and Profit & Loss Account)

• Cost Audit Report (Form CRA-3)

• Tax Audit Report (Form 3CD, if applicable)

These documents form the basis of your return and ensure that income and expense disclosures are correct.

✅ Step 2: Reconcile Cost Audit and Financial Audit Data

A common pitfall is inconsistency between the cost audit and financial audit figures. You must reconcile:

• Turnover figures

• Cost of production

• Expenses related to materials, labor, overheads

• Profitability across products/services

Any mismatches can trigger scrutiny from the tax department or even attract penalties.

✅ Step 3: Prepare ITR-6 Using the Official Utility or Software

Download the Income Tax Department’s utility for ITR-6 or use licensed tax filing software compatible with MCA filings. Fill in the general details such as:

• Name of the company

• PAN, TAN

• Nature of business and key financial figures

✅ Step 4: Fill Cost Audit-Related Schedules

In ITR-6, pay special attention to:

• Schedule OI (Other Information) – Include audit-related disclosures

• Schedule BP (Business Profits) – Include audit fees under allowed business expenses

• Schedule ICDS, if applicable – Ensure income recognition matches the cost accounting records

Also, disclose the cost audit applicability and report filing status accurately.

✅ Step 5: Verify Depreciation, Expense Heads & Related Party Transactions

Ensure depreciation claimed under the Income Tax Act matches your books and cost records. Disclose related-party transactions if cost audit points to inter-company transfers, captive consumption, or shared services.

✅ Step 6: Validate and Upload Using Digital Signature

Once the form is filled:

• Validate using the built-in tool

• Upload the XML/JSON file on the Income Tax Portal

• Affix Digital Signature Certificate (DSC)—mandatory for companies

✅ Step 7: E-Verification & Acknowledgment

After submission, complete e-verification using:

• DSC again, or

• Authorized signatory verification through Aadhaar OTP (if applicable)

You will receive an ITR-V acknowledgement, which you should keep for your records and compliance audit.

👉 Pro Tip: Choose a trusted compliance partner like SSCOIndia.com to handle complex ITR filings with cost audit data integration, reconciliations, and end-to-end document preparation. Our experts specialize in ITR-6 and cost audit filings, helping you avoid compliance pitfalls.

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Common Mistakes to Avoid in Reporting Cost Audit Expenses

Many companies commit avoidable errors when reporting cost audit expenses in ITR filing, which can trigger notices, re-assessments, or disallowances from the Income Tax Department. Let’s explore some of the most common pitfalls—and how to steer clear of them.

❌ Mistake #1: Not Including Cost Audit Expenses at All

Failing to report cost audit fees and related expenses is a serious omission. Under Section 37(1) of the Income Tax Act, these are allowable business expenses if incurred wholly and exclusively for the purpose of business. Make sure they are properly shown in Schedule BP of ITR-6.

❌ Mistake #2: Misreporting Under Financial Audit or Tax Audit

Many filers confuse cost audit with statutory audit, reporting fees under a general audit expense head. This reduces transparency and can flag your return for scrutiny. Always classify and disclose cost audit fees separately, especially when filing CRA-3 and CRA-4.

❌ Mistake #3: Duplicate Claims for Audit-Related Expenses

Companies sometimes claim cost audit fees both under business expenses and again under professional fees or consulting charges. This double claiming can lead to disallowance and penalties.

Avoid this by tagging each expense correctly and reconciling it with your:

• Cost audit report

• Tax audit disclosures (Form 3CD)

❌ Mistake #4: Inadequate Record Maintenance

Missing cost audit invoices, lack of bank proof, or unfiled CRA-3 forms can make your expense claim inadmissible. Keep proper documentation like:

• Signed audit agreements

• Bank payment confirmations

• CRA-2 (appointment), CRA-3 (report), and CRA-4 (filing)

❌ Mistake #5: Failing to Reconcile with 26AS or AIS

If the cost auditor is a professional who also files a TDS return, ensure Form 26AS reflects the TDS deducted on audit fees. Mismatches can lead to questioning by CPC or manual verification.

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✅ Final Tip:

Using the wrong audit year or referencing the wrong CRA form is surprisingly common. Ensure your reporting aligns with the correct financial year and assessment year, e.g., FY 2024–25 / AY 2025–26.

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Ready to Simplify Your ITR + Cost Audit Filing?

At SSCOIndia.com, we simplify cost audit and ITR-6 compliance for companies across India. Our specialized CA and CMA team ensures:

• 100% accurate reconciliation

• CRA-2 to CRA-4 filing support

• Maximum deduction claims under Section 37(1)

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Penalties for Non-Compliance

Filing your Income Tax Return (ITR) correctly is not just a good practice—it’s a legal obligation. When your company falls under the ambit of cost audit compliance, the stakes are even higher. Any error, delay, or non-submission related to ITR or cost audit reports like CRA-3 or CRA-4 can attract heavy penalties under both the Income Tax Act and the Companies Act.

Penalties Under Income Tax Act for Incorrect ITR

If your company submits an incorrect ITR, especially one that omits or misreports audit-related data, the Income Tax Department may impose:

• Penalty under Section 270A: For underreporting income, the penalty can be 50% of the tax payable.

• Section 234F: Late filing of ITR can lead to ₹5,000 penalty.

• Interest under Section 234A/B/C: Delay in filing or paying advance tax also results in interest liability.

These penalties increase if your company doesn’t report cost audit expenses, depreciation, or reconciliations in line with CRA-3 disclosures.

Companies Act Penalties for CRA-3/CRA-4 Non-Compliance

As per Rule 6 of the Companies (Cost Records and Audit) Rules, 2014:

• Not appointing a cost auditor (CRA-2 filing delay) may lead to monetary fines for the company and officers in default.

• Non-filing of CRA-3 (Cost Audit Report) or CRA-4 (submission to MCA) can result in:

  • ₹25,000 to ₹5 lakh fine for companies.

  • ₹10,000 to ₹1 lakh fine for directors/officers, plus ₹1,000/day for continued default.

Risk to Corporate Assessments and Audit Scrutiny

When CRA-3 and CRA-4 filings don’t align with your ITR, it raises red flags during tax assessments, increasing chances of audits, notices, and delayed refunds.

Avoid penalties—file your ITR and cost audit reports with precision.

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Why Choose SSCOIndia for Your ITR & Cost Audit Filing?

If your company is covered under cost audit provisions, filing an accurate and compliant ITR is not a DIY task. You need expert support, and SSCOIndia.com is here to help.

Here’s why hundreds of companies trust us for ITR and cost audit filing in India:

✅ Expert Team of CAs and Cost Accountants

We bring together chartered accountants, cost auditors, and tax professionals under one roof—so every part of your return, from Form ITR-6 to CRA-3, is handled with precision.

✅ End-to-End Filing Support

From appointment of cost auditor (CRA-2) to preparing and filing CRA-3, CRA-4, and ITR-6, we offer a comprehensive service package tailored for cost-audited companies.

✅ Compliance, Accuracy & Timeliness

We ensure:

• Timely reconciliation between cost records and financials

• Proper expense mapping with cost audit disclosures

• Use of validated filing software

• Integration with MCA and Income Tax portals

✅ Save Time and Avoid Penalties

Our team reviews your documents, flags discrepancies, and ensures zero error submission—protecting you from costly penalties.

🧮 Try our Free GST Calculator to estimate tax impact alongside cost audit disclosures.

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Conclusion

Filing your ITR correctly is critical, but when cost audit compliance is involved, it becomes even more complex. From CRA-3 report reconciliation to aligning with ITR-6 disclosures, everything must be spot-on.

Don’t risk penalties, audits, or notice letters.

Let SSCOIndia.com be your compliance partner. We specialize in:

• ITR filing for companies

• CRA-3 report filing

• CRA-4 submission

• GST, tax audits, and reconciliation services

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📞 Let SSCOIndia help you file your ITR with 100% cost audit compliance. Book your expert consultation now.

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FAQs

Q1. Can a company file ITR without a cost audit report?
If your company meets the thresholds defined under Companies (Cost Records and Audit) Rules, 2014, cost audit is mandatory, and CRA-3 must be completed before filing ITR-6. Filing without it may lead to penalties.

Q2. What is the deadline for ITR filing if cost audit is applicable?
For companies, the usual ITR deadline is 31st October of the assessment year. However, if cost audit is applicable, ensure CRA-3 and CRA-4 are filed beforehand to avoid delays.

Q3. How does CRA-3 affect ITR filing?
CRA-3 contains key data—like cost of production, profitability, related-party transactions—which must be aligned with ITR-6. Any mismatch can attract tax scrutiny or penalties.