Penalty on professionals for furnishing incorrect information in statutory report or certificate

The thrust of the Government in recent past is on voluntary compliance. Certification of various reports and certificates by a qualified professional has been provided in the Act to ensure that the information furnished by an assessee under the provisions of the Act is correct. Various provisions exist under the Act to penalise the defaulting assessee in case of furnishing incorrect information. However, there exist no penal provision for levy of penalty for furnishing incorrect information by the person who is responsible for certifying the same.

In order to ensure that the person furnishing report or certificate undertakes due diligence before making such certification, it is proposed to insert a new section 271J so as to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct him to pay a sum of ten thousand rupees for each such report or certificate by way of penalty.

It is further proposed to define the expressions “accountant”, “merchant banker” and “registered valuer“. It is also proposed to provide through amendment of Section 273B that if the person proves that there was reasonable cause for the failure referred to in the said section, then penalty shall not be imposable in respect of the proposed section 271J.

These amendments will take effect from 1st April, 2017.

[Clauses 86 & 87]

Extract of relevant clause from Finance Bill, 2017

Insertion of new section 271J.

86. After section 271-I of the Income-tax Act, the following section shall be inserted, namely:—

Penalty for furnishing incorrect information in reports or certificates.

‘271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate.

Explanation.––For the purposes of this section,—

(a) “accountant” means an accountant referred to in the Explanation below sub-section (2) of section 288;

(b) “merchant banker” means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992;

(c) “registered valuer” means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957.’.

Amendment of section 273B.

87. In section 273B of the Income-tax Act, after the word, figures and letter “section 271-I,”, the word, figures and letter “section 271J,” shall be inserted.

More Under Income Tax

Posted Under

Category : Income Tax (24501)
Type : Articles (12880)

15 responses to “Penalty on CA & professionals for incorrect report or certificate”

  1. subash chandra dwibedy says:

    All CAs must apply their Viveka and must stand for truth while discharging their professional obligations.
    I fully agree to the statute of penalizing wrong doing.
    But it should be made applicable to all professions.

  2. subash chandra dwibedy says:

    Why not a CA must apply his Viveka while providing his professional services ? I fully subscribe to the new statute.
    My view is that it must apply to all professions equally.

  3. A.K.GUPTA says:

    All these comments should be posted on PMO’s site so that it is aware of representation.

  4. CA Gajanan Kondhare says:

    Such type of penalty cannot be applicable only to only one professionals or community. All persons who are involved in wrong doings has to be covered and the person who have authority to punish should be independent one

  5. GURNANI ISHWAR G. says:

    Personally I am in favour of such strict rules. Such rules should be applied to all professions like Doctors, Lawyers, Engineers etc. We Chartered Accountants should not be singled out to give such treatment.
    Recently Hon. Supreme Court gave the verdict that Lawyers and Doctors can not give guarantee for the result of their efforts and advise, so they can not be penalized even if the advice given by them is wrong.

  6. Ravi Khurana says:

    The Government in conjuction with Bankers and tax authorities can easily identify the Statutory auditor who never declares in the audit report the amount of tax arrears i e income tax, tds, service tax, proff.tax, etc,
    Majority of the companies who have fraudulently siphoned off the funds have not deposited the above dues and have become NPA’S.
    All these Statutory Auditors should not only be penalised but their names removed from membership.

  7. CA. G. SURYA PRAKASH says:

    OK, IT IS A WELCOME STEP, BUT IT SHOULD COVER ALL PERSONS WHO ARE ENJOYING POWER BY THE CONSTITUTION.
    WE SHALL ALSO BE PROVIDED THE POWER OF ASSESSMENT TOO.

  8. CA MBG Tilak says:

    when there is no accountability for most of the corrupt bureaucracy, corrupt political bosses,corrupt & incompetent judiciary in our country as of now & infuture as it appears to be ,how can the Finance Minister unilaterally enforce stringent accountability for Chartered Accountants alone?The recent finance act has done hardly done any thing in this direction of setting right corrupt & incompetent Govt”s machinery!Perhaps it may be the beginning of dooms day!The Council of the ICAI ought to strongly protest with Finance Minister,being in Independent position as Chartered Accountants in the Country shunning appeasement policies in the interests & prestige of profession

  9. Vikram Singh Chaudhary says:

    If we professional do with our moral then no need for such law but we shall not do. We will do as our client say.

  10. Dhruv Pandey CA says:

    We strongly oppose this penalty imposed by new budget under provision of new section 271J. It is a tool of authority to litigate the matter without reasonable cause. We CA have our inherent limitations can not go beyond the books of account. This provisions shall be removed immediately.

  11. Er Rahul Jadhav says:

    Welcome step for sincere professionals . Minimum Fees shedule also to be adhered .

  12. Saji P. Chacko says:

    I welcome this proposal in the Union Budget 2017. Also, I fully agree to Dr.Arun Draviam in his suggestion that this should not be restricted to CAs alone, instead it should be applied to all professionals making similar certifications, or making their clients to file affidavits, declarations, etc. like Advocates, Company Secretaries, Doctors, Tax Practitioners, Chartered Engineers, etc. etc.
    Similarly there should be unification of fees charged by the professionals for the services rendered. Many professionals, especially advocates charge clients ‘as the wind blows’ which is tantamount to looting the helpless clients. Though there is provision to complain to the governing professional body like the Bar Council, in a very vast majority of the cases, the aggrieved clients do not go for such unpleasant courses of law; many a times the client wont be able to air his or her displeasure or objection at least to the professional himself, but to gulp the anguish.

  13. M M Gupta says:

    for all my CA freinds

  14. Dr. Arun Draviam says:

    It is a welcome measure that CAs and like professionals will be subjected to penalty for wrong certification of any document, in the context of the application of the law relating to Income Tax. It is however, wrong to restrict the application of this penal provision to compliance with income tax law. It would be better to insert such provisions in the conduct rules of the professional body viz. the Institute of Chartered Accountants of India. In that case, it will be easier for the Banks that occupy a crucial place in the digital economy, to track the updating of KYC. Similar, provisions should be made in the conduct rules of the Institute of Company Secretaries of India whose member undertake certification of Memorandum & Articles of Associations of Companies, Cooperatives and Societies, that have duty towards the public. The next target should be to bring under scrutiny the actions of Advocates who make their clients file wrong affidavits or give false evidence in courts of law.

    • Riddhisiddhi says:

      Mr. Arun your statement..
      “The next target should be to bring under scrutiny the actions of Advocates who make their clients file wrong affidavits or give false evidence in courts of law.” is wrong, because Lawyers & Advocates do not certify affidavits… and they do not give false evidence, but they merely represent themselves on behalf of clients. there is no certification work done by the advocates/lawyers.

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