Request to relax Tax Audit Limit from 60 to 90 as one time measure for A.Y. 2020-21

Before The Council
Through The President
The Institute of Chartered Accountants of India
New Delhi

Ref: Request to relax the Tax Audit Limit from 60 to 90 as one time measure for A Y 2020-21.

Respected Sir,

We practicing Chartered Accountants are subject to many regulations and The Institute of Chartered accountants issue guidelines to ensure the maintenance of quality and standards in the work done by the Chartered Accountants which is undisputedly in furtherance of the statutory duty cast upon the Institute to regulate the profession of Chartered accountants. The maximum number of tax audits that can be undertaken by a Chartered Accountant is limited to 60 which were resolved by the council in the year 2014.

The Council of the Institute at its 331st meeting held from 10th to 12th February 2014 has decided to increase the “specified number of tax audit assignments” for practising Chartered Accountants, as an individual or as a partner in a firm, from 45 to 60. The said limit will be effective for the audits conducted during the financial year 2014-15 and onwards. Accordingly, the Council Guidelines No.1-CA(7)/02/2008, dated 8th August 2008 stands amended from 1.4.2014 as under:-

In the Council General Guidelines, 2008, the Council Guidelines No.1-CA(7)/02/2008, dated 8th August 2008, in Chapter VI “Tax Audit assignments under Section 44AB of the Income-tax Act, 1961”, in Explanation given in Para 6.1, in sub-Para(a) and sub-Para(b), the figure “45” be substituted with the figure “60”.

As the matter of fixing the limit is well within the powers of the council and council is quiet competent to relax or enhance the Tax Audit Limits issued as a general guideline. The council should consider the overall enviourment created with the spread of Covid-19. The members at large are facing problem to complete the assignments outside the city hence the assessees are facing a problem to complete their tax audits because of non-availability of Chartered Accountants services at their end.

Section 44AB of the Income Tax Act 1061, had been inserted in the statute book by the Finance Act 1984 and the same into force w.e.f 1^st April 1985. The objective behind the said section 44AB is to prevent evasion of Taxes, plug loopholes enabling tax avoidance and also facilitate tax administration and fulfil the directive principles laid down under Article 39(c) of the Constitution of India. This is to mention that it was CBDT who wanted to restrict the number of tax audits on the lines of section 224 of the Companies Act 1956 to maintain the quality of the Tax reports submitted to them. However, the council has stepped in by his move and prescribed the notification for restricting the Tax Audit in the year 2001. The said notification was replaced by the Guidelines No. 1 CA (7)/02/2008 dated 8^th August 2008 laying down the same limit of 30 Tax audits for one assessment year as prescribed in 2001. Later the limit has been enhanced to 45 & lastly in 2014 enhanced to 60.

You are requested to relax the said general guidelines as a onetime measure to enhance it further to 90 for A Y 2010-21 due to the Covid-19 restrictions of travelling, maintaining social distance etc. This one-time measure will surely helpful to the members to complete their tasks with comfort. The small firms will definitely be benefitted by such decision and help them to fight with the Covid-19 consequences. This will also be helpful to a number of assessees spread over to the remote areas of the country to go through it.

Further, in the year 2017, the Council has suitably amended the 2008 guidelines to accommodate the audits u/s 44AD, 44ADA and 44AE of the Income Tax Act 1961 by not taking into account for the purpose of reckoning the specified number of tax audit assignments.

I am looking forward to a timely and favourable decision in the matter.