CA Sanjeev Lalan
1. The CBDT has vide notification No. 33/2014 dt. 27/07/2014 notified revised forms for tax audit report and details to be furnished. This is just two months prior to completion of tax audits by 30th September, 2014. Hopefully, the ICAI’s views would have been invited before making changes in the forms, as has been the case earlier when the forms had been formulated or revised.
2. Simultaneously, the old forms are withdrawn with immediate effect, without any prior intimation or any sort whatsoever. Even the utility for filing the forms electronically was disabled from the date of notification of the revised forms.
3. While the right of CBDT to revise the forms cannot be disputed the timing and manner in which the same is done completely oblivious of the consultative approach that is promised to be adopted under the new regime and there was total lack of transparency in the whole process whatsoever. There is nothing in the forms that required the CBDT to really wait for 4 months from end of the previous year to notify the forms. It also seems that till date, i.e. even after 11 days the new utility is not uploaded and from the past experience one can be virtually sure that the schema will not be available immediately even when the utility is uploaded. Also, one fails to understand what will be the size of data that will be permitted to be uploaded given the limits set for uploading the data.
4. The details that have been asked for in the revised forms are also not going to significantly boost the revenues for the year under consideration, as most of the assessees would have planned their affairs according to the prevalent legal position in any case.
5. In particular the following issues also need to be taken into consideration and date of implementation of the revised forms should be deferred by one year to AY 2015-16, viz.―
(a) In many large cases the terms of engagement are finalised even before the year end.
(b) In case of assessees with large network of branches, the branch auditors would have already completed audit long time back and the consolidation process would be underway in different stages.
(c) The details on TDS and many other matters like section 56(2)(viia)(viib) etc. asked for, are either of humungous volume or require legal interpretations. ICAI guidance in the matter will be very much necessary before any view could be taken in these matters – (i) for conduct of audit and (ii) for reporting purposes.
6. Also, clause wise some of the issues on which clarity will be required are as under―
a. Form 3CB does not provide any option for change if the auditor has to give an adverse of disclaimer report. It should be brought in line with the SA 700 and other standards in this regards. Representation is needed for change of the form.
b. What is the significance of the word “liable” in clause (4) of Form 3CD? Is the auditor also to take a view in the matter? If there are disagreements with the assessee, how should the auditor report on same? What type of representation will be required to be obtained?
c. Clause 11(b) will pose great challenge if an assessee has no. of branches and at all places books are maintained and only consolidation takes place periodically at HO. What will be auditors duty in this regards? What are the checks to be applied? How should reporting be done by the auditor? Whether mere a place from where only data entry is made will be considered to be place where accounts are maintained or the place where server is located will be considered to be place where accounts are maintained? In case server is not located in assessee’s premises what address should be mentioned?
d. In clause ‘17’ how would auditor report u/s. 43CA having regards to the method of accounting that is followed. Guidance will also be needed for reporting on sale of distressed assets sale by banks and financial institution where section 43CA will be attracted.
e. For items falling in clause ‘19’ detailed guidance for checks to be performed and documentation to be maintained will be required to be given to members.
f. Clauses ‘28’ and ‘29’ – guidance needs to be provided on nature of auditors’ duty for obtaining audit evidence specifically in light of the rules under the Income-tax Rules, representations required to be obtained and manner of reporting, especially when there are disagreements with the assessee?
g. Detailed guidance need on reporting under clause 34 as virtually it tantamount to carrying out assessment of TDS compliance by an assessee.
h. In respect of clause ‘41’ members shall require guidance about the documents and evidence to be obtained. It will also be necessary to obtain representations in appropriate cases. What care should be taken in case reliance is to be placed on representation due to non-availability of documents with the assessee? Can reliance be placed on certificates of experts who are not “auditor’s experts”?
7. Ideally Institute should dissuade from seeking any extension in the matter and should insist on deferment of the revised form by one year. As mentioned earlier no significant revenue loss shall occur to the treasury by deferment of an year, as it is the CBDT waited for four months after the year end to finalise changes without even considering the impact it has on reporting requirements. The Institute should take a firm stand in this matter.
WHATEVER ICAI (FINANCIALS) DO, ITS MOTIVE & INTENTION SHOULD BE GOOD. THEN ONLY IT WILL ENJOY NAME & FAME IN THE LONG RUN
SUDHARSAN SIR
IN T.D.VENKAT RAO CASE THE ISSUE WAS INCOME-TAX PRACTITIONERS, CHARTERED ACCOUNTANTS & TAX AUDIT
IN THE CITATION NOT VISIBLE ON DATE, THE ISSUE IS TAX-ADVOCATES, CHARTERED ACCOUNTANTS & PRACTICE OF LAW
Dear Non-CAs,
Please read the judgement of Supreme Court in the case of T.D.Venkata Rao v. Union of India (1999) 237 ITR 315 where the Apex Court has categorically held that the CAs by reason of their training have special aptitude in the matter of audits and income-tax practitioners does not have the same expertise as CAs in the matter of accounts.
My question to you people is – Can any one claim that the Nurses or Medical Assistants should also be allowed to give prescription and perform surgery?
It is a well accepted fact that the technical acumen CAs possess in the field of taxation and accounting is much beyond the standards of so called tax-practitioners or any one else in this matter.
We are all witnessing how pathetic is the legal redressal system in our country and the people who are behind this is known to all.
Among Cash, Mercantile & Mixed System of Accounting, Mercantile System reflects true profit or loss of the business enterprises. In this system all expenses relates to the year, whether paid or payable are debited to Profit & Loss A/c & payable portion shown in liability side of Balance Sheet, similarly all income relates to the year, whether received or receivable are credited to Profit & Loss A/c & receivable portion shown in the assets side of Balance Sheet. Further, expenses incurred in advance & income received in advance are shown in assets & liability side of Balance Sheet respectively. Based on this principle only all other accounting standards (Clarifications) are framed.
Above information about Accounting Principles & Systems are taught at Pre-University level to commerce students. I being a PUC (Science) student, learnt about this at B.Com level.
Because of 46 plus mandatory CA Certificates in Income-Tax Act, new Non-CAs are not entering tax profession & existing Non-CAs who are practically involved in writing the books of assesses in digital format for State VAT compliance are not encouraged to give compliance under Income-Tax in all VAT cases handled by them. And only person seeking financial assistance are giving compliance under Income-Tax Act. This the strong reality of the situation prevailing on date.
manish Gupta Sir, AS are clarificatory in nature & can not over raid basic principle & system of accounting. I am of the strong view that one should follow the basic principle & system of accounting. In fact, AS are framed by professional bodies to take scope, which is creating confusion in the minds of assesses, tax professionals & public at large.
First of all icai has issues many accounting standard and all are velid and conceptual in mature and are applicable at dif dif situations and auditor are following during their audit process.
secondly whenevr assessee sign off the audit balance sheet their accountant and assesse himself verifying each figure contained on the face of balance sheet and p&l.and they are doing cross check with their actual profit assumtion after only that assesee is ready to pay advance tax and self assessment tax.
one of the major issues in changed 3cd is to give all the details of TDS. it means professionals have to keep on their table along with assesse accountant all the 4 quarter TDS returns and have to work upon these. Mind it only TDS details itself will take 30 percent of the time total needed in completing form 3CD. I think only TDS default case should be required to be reported.
TO,
SRI.K.V.CHOWDARY,
CHAIRMAN,
CENTRAL BOARD OF DIRECT TAXES,
NORTH BLOCK, NEW DELHI-110001.
HON’BLE SIR,
MEMBERS OF ICAI (FINANCIALS) STATES THAT INSTITUTE GUIDANCE NOTE IS REQUIRED TO INTRODUCE NEW TAX AUDIT FORMS. NOW QUESTION RAISED IN MY MIND, WHO IS ADMINISTRING INCOME-TAX ACT IN INDIA. IE, CBDT OR ICAI (FINANCIALS) SIR. PLEASE GIVE ANSWER TO MY QUESTION SIR.
YOUR’S
B.S.K.RAO, B.Com, LL.B, MICA,
Auditor & Tax Advocate,
BDKRAO, Beside SBI,
Tilak Nagar, Shimoga-577201
KARNATAKA STATE
MO : 0-9035089036
E-Mail : raoshimoga@gmail.com
some non C A tax practitioner are demanding to allow them to conduct the audit under section 44 a b. I am very much surprising for their such demand, every person knows that a C A is having perfect knowledge of accounting and taxation. and it is very difficult to qualify the c a course. To qualify the c a, he has to study theoretical, but also to go for practical knowledge. Every person knows that the standard of conducting the exam. of C A is on the number one , in the word. Any unqualified can not be compare with C A, then why some person are demanding to conduct the audit by non c a
k c agarwal
The above two comments are biased and prejudiced. These comments by advocates are to be ignored by the government. The advocates always practice by fighting with the department by filing frivolus appeals whereas Chartered Accountants really study the issue deeper, understand the difficulties of the officers of the department and cooperate with them in the collection of revenue with out going for unnecessary appeals.
sir,
When the CBDT has introduced the new Form, it is duty of the tax professionals to use the same,if the CA’s wants to wait for the ICAI guide lines, why CBDT should be there to administer the tax laws? Let the ICAI administer the same and along with the amendments, let it issue guidance notes.Keep the ICAI from advising the government in tax matters for 10 years and the government can see some positive result in tax administration.
Dear Mr Singh -You are absolutely right when you state that taxes are paid by assessees and not auditors.But then the assessee(s) generate income by leveraging infrastructural facilities and financial resources of the society and ICAI is the monitoring body representing the Accountants responsible for laying down rules and compliance of such rules.In short ICAI is the checkpoint of financial regulation compliance by businessmen.
In general trade opinion, considering all the highlighted issues, CBDT has given reasonable time for preparation,
FURNISHING INFORMATION IN INCOME-TAX LAW AUDIT REPORT U/S 44AB IS A CLEAR CASE OF PRACTICE OF LAW. RECENTLY IN THE CASE OF BAR COUNCIL OF INDIA VS A.K.BALAJI (SC) IT WAS CLEARLY HELD THAT ADVOCATES ALONE ARE ENTITLED PRACTICE LAW. ICAI (FINANCIALS) AUTHORISED TO WORK ON FINANCIAL ACCOUNTS ONLY IN THEIR STATUTE BOOK & NOT AUTHORISED TO PRACTICE ANY INDIAN LAWS. I DO NOT UNDERSTAND WHY ICAI (FINANCIALS)GUIDANCE IS REQUIRED FOR CBDT TO REPLACE TAX AUDIT FORMS ? DISSENTING NOTE OF 2 MEMBERS IN WANCHOO COMMITTEE ABOUT INTRODUCTION OF TAX AUDIT IN INCOME-TAX ACT HAS BECOME TRUE AFTER A PERIOD OF 30 YEARS.
(1) Particulars of Income-tax admitted in tax audit cases for Asst. Year 2012-13 & 2013-14 that relates to return filed in ITR-4, 5 & 6 as provided by CPC, Bangalore as at 28.05.2014 are as under:-
Particulars………………..Asst. Year 2012-13….Asst. Year 2013-14
ITR-4 Total Tax Admitted…..Rs. 23,986 Crores….Rs. 23,952 Crores
ITR-5 Total Tax Admitted…..Rs. 20,712 Crores….Rs. 21,556 Crores
ITR-6 Total Tax Admitted…..Rs. 2,92,266 Crores….Rs. 2,34,456 Crores
Margin derived by farmers is not taxed in Income-Tax Act, but margin derived by next sellers of such agricultural output is taxed in their hands in Income-Tax Act. Presuming the output of corporate assessees reach the ultimate consumer in three stages & considering tax admission in corporate case & 50% of such corporate assessees do business with non-corporates covered by tax audit, who are in between the corporates & retailers and also considering non-corporates engaged in service sector, I am of the strong view that combined Income-Tax admission as per return filed in ITR-4 & 5 covered by tax audit U/s. 44AB should have crossed at least Rs. 15,00,000/-Crores. (Basis being 80:20 ratio of Ag. & Ind. Output).
(2) From the above information, it is clear that our esteemed Central Govt. has lost heavily on account of Income-Tax because of acceding the wishes of ICAI (Financials) for making amendments to Income-Tax Act since 1984, year in which Tax Audit clause was introduced in Income-Tax Act. Therefore, ICAI (Financials) should reimburse loss incurred by our esteemed Central Govt. since 1984 due to 46 Plus Mandatory CA Certificates in Income-Tax Act.
(3) Original Income-Tax Act, 1961 was well drafted by learned officials in Finance Ministry & it was capable of meeting the expectations of the Govt. in all future events, except requiring amendments for events/changes taking place in this 21st Century. Disturbance to the original intention of legislature in Income-Tax Act, 1961 started in 1984 by the intervention of Institute of Chartered Accountants of India by way of inserting mandatory Tax Audit Certificate U/s 44AB by only Chartered Accountants. This was also cautioned by Sri.P.C.Padhi, former Chairman, Central Board of Revenue and Deputy Controller & Auditor General of India, Sri.D.K.Rangnekar former Editor, Economic Times, who were the members of Direct Taxes Committee, popularly known as Wanchoo Committee & gave dissenting note on the issue.
To know more about the above issue, kindly put an RTI to CBDT and ask for copy of Wanchoo Committee Report.
Sir, since 1984 CBDT following ICAI accounting stranded but these are not beneficial to widen genuine tax base since 1984. Due to these complicated accounting standards department regulars loosing revenue. This loss day by day increasing due to blindly following standards by CBDT which were produced by ICAI.
we need simple accounting system which can be easily understand by assessees. Because assessees pays tax not auditors.
To widen genuine tax base all authorized persons u/s 288(2) should be authorize to conduct audit u/s 44ab.