Mandeep Singh

Advocates are only recognized class for “ Practice of law” under section 29 of Advocate act 1961. But they are regularly facing partiality in taxation matters since 1984.Changes are required in some areas of Income tax law to efficiently protect the interests of assesses and department as mentioned below.  

1) Practice of law: – It is a prominent area to efficiently protect the interests of assesses . Authorized Representatives should be specialized in other laws like Local land law, Transfer of property act, Hindu law, Muslim law, Contract act, Power of attorney act, Drafting & pleading, Evidence act, Interpretation of laws, CPC and CRPC etc, study of only Income tax law is not sufficient to represent the assessees before Income Tax Authorities, to solve the disputes related to Income tax matters. How can Authorized Representative efficiently protect the interests of assessee. If he has no knowledge that such agreement is violating the provisions of other laws. Which agreement or affidavit is used to defend the case under income tax law. It is a crystal clear that only skilled persons in law should be Authorized Representatives for efficiently protect the interests of assesses.

2) Legal opinion:- There are number of forms in income tax act and certification of those forms is a part of legal opinion. Advocates are only recognized class for given legal opinion on any Indian laws . Form 3CD of Income tax act is related with the legal opinion on Income tax laws than how can be debarred Advocates from certify form 3CD. How can Non- Advocate give legal opinion on tax laws and this provision need to be amended.

3) Confliction of interests:- “Confliction of interests” is a professional misconduct as decided by Apex court and Advocate may be suspended from practice for two years. If he involves himself to represent conflicted interests. Now we understand what is a “confliction of interests”? Confliction of interests means if an Advocate represents any party in a case before any court and prior to this he was council of opposite party in same case than it is called “ confliction interests” of both parties in litigation.

4) Confliction of interests in Income Tax Act: When a Auditor is auditing the accounts of assessee under statutory obligation on behalf of revenue to find out any concealment in the account books and further he represents same assessee before “ Revenue authorities” than it can be amounted to “confliction of interests”. Due to such act either assesses or Department interest will be effected . No AR can protect interests of both parties equally and ones right must be effected.

5) Difference between “ Vakalatnama” and “ Power of attorney:- Vakalatnama is a power of attorney for “ Practice of law”. Vakalatnama can be executed only in favour of Advocate. Power of Attorney under Powers of Attorney Act 1882 can be executed in favour of any person for “act”. Vakalatnama is not covered under Powers of Attorney Act 1882. It is necessary to mention here right to “ Practice of law” is different from right to “Act”.

6) Audit of financial data:- Same cash book, day book, ledger and stock register is maintained by assessee to keep financial record of his business. What is need to verify same financial data again and again under different tax acts like Income tax, vat, service tax etc. It is an unnecessary financial burden on assesses and strict hurdle to widen genuine tax base.

Conclusion:- Representative clauses need be deleted from different acts and only Advocates should be authorized to represent legal matters related to tax laws before revenue authorities . Auditor should be barred from appear before revenue authority on behalf of assessee, whose accounts are audited by him to avoid confliction of interest under income tax act. It should be deemed proper compliance for other acts, if under any act financial data of the assessee is audited by auditor. These steps should be taken to protect the interests of assessee.

(ABOVE ARE THE PERSONAL VIEW OF AUTHOR)

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0 responses to “Partiality with Tax Advocates since 1984”

  1. dr.g.balakrishnan says:

    Advocate taking the case should personally holds himself accountable to use all relevant laws or Acts applicable in the case.

    if he is not really confident he shall not mislead the assesses;

    Similarly if CA or comparable professional is deeply involved in auditing and accounting principles when so how he could give himself enough comparable level study in the relevant interpretation of statutes is the question as there is no guarantee that every statute made is complies with relevant statutory interpretation;

    So simply complying with the statute need not necessarily say that statute is perfect in every aspect of laws, that way interpretation of laws came into being when one goes before the court of competent jurisdiction for interpretation like in SLP before SC…similar weighing is important rather than simply be pro to a particular profession is the import in the hon SC judgement! .

  2. mandeep says:

    Thanks to all. But it is true, we need changes in taxation laws for smoothly running of any business. No need repeated audits of same financial data. we always need to take favour of indian businessman and accounting system should be simple for it.

  3. Adv. LM Chugh says:

    Instead of All the above, It should also consider that when Advocates Prepare of any memorandum and Articles of Association or any LLP Agreement, His / Her signature is not available at the MCA website in the captioned form for formation of the same except of only one form. It seems Advocates prepare the LLP Agreement and will go to CA/CS/CMA for Signature.

    I therefore suggest that in any formation or Registration Procedure the signature of Advocate would consider in the all the required forms like any other professional.

  4. Adv. LM Chugh says:

    Instead of All the above, It should also consider that when Advocates Prepare of any memorandom and Articles of Association or any LLP Agreement, His / Her signature is not available at the MCA website in the captioned form for fomation of the same except of only one form. It seems Advocates prepare the LLP Agreement and will go to CA/CS/CMA for Signature.

    I therefore suggest that in any formation or Registration Procedure the signature of Advocate would consider in all the required form like any other professional.

  5. taxwell says:

    BASIC RIGHT OF ADVOCATE IS TO PRACTICE ANY LAW.INCOME TAX, VAT,SERVICE TAX ALL THESE ARE LAWS OF COUNTRY.HOW CAN ONE PRACTICE WITHPUT SPECIAL POWER. HOWEVER IN INDIA LAKHS OF TAX ADVOCATES ARE PRACTISING TAXATION WITHOUT POWERS. BCI MUST TAKE STEPS TO SAFEGUARD ADVOCATES BASIC RIGHTS.

  6. M V S N SHARMA says:

    According to notification no 25/2012 dated 20/6/12,

    If an individual advocate or partnership firm of advocates provides service to

    Individual advocate
    Partnership firm of advocates
    Any person other than business entity
    A business entity with a turnover not more than 10 lacks in preceding financial year,

    The service is exempt from levy of service tax.

    What is business entity?

    Any person (individual, firm, HUF, company etc) carrying out any activity relating to industry, commerce or business or profession.

    That means utilization of legal service for personal purposes is exempt.

    When to pay the tax and by whom?

    If business entity that has turnover more than 10 lakhs in preceding financial year receives legal service, business entity has to pay whole service tax under reverse charge mechanism.

    Some advocates provide service related to income tax, vat, pf, esic matters, all these services are covered under legal services because it is assistance in any branch of law.

    If lawyer provides service other than legal service, it is taxable as per taxability of that service. Exemption is only for legal service.”

    It means that any service provided by lawyer/advocate only is legal service. Similar Service rendered by a Tax Practitioner who is not a lawyer/advocate is not a legal service and therefore should pay the service tax.

    WHERE IS JUSTICE IN THIS COUNTRY.

    I’m not a lawyer or a tax practitioner and am not taking any sides.Just making a point as lot of brick-batting was there earlier between advocates and chartered accountants and even now this article has an element of that.

  7. Sanjay Bhatia says:

    This is an unnecessary debate. CAs are also well equipped to represent the case before I.Tax Authorities and at time they does better than Advocates. So its my request not to indulge in this type of Debate and lets maintain harmony among all professionals.

  8. Sidharth says:

    Dear All,

    Implementation of DTC has been delayed for the reasons best known to the policy makers. Good news WAS that the definition of ‘Accountant’ was not limited to CAs only.

    Forget it for a while now. Let’s move to GST.

    GST as expected will be within the purveiw of both Central and State tax administrators. Currently, in many State Tax laws, advocates are entitled to sign various reports including VAT Audit reports.

    Do anyone has knowledge about what is there in GST laws?
    Whether advocates are going to be eliminated in GST regime by the strong lobby of ICAI?
    What is our BCI doing?
    What are all our State Tax Bar Associations are doing for this?
    What does our Hon’ble Finance Minister say about it, who is a notable lawyer himself?

    GST is supposed to be implemented by 2016 as read out by our Hon’ble Finance Minister.

    Let’s raise our voice else one Institute with their vested interest may ruin the economy of our country.

  9. BSKRAO says:

    (01) Due to T.D.Venkat Rao case (SC) only Chartered Accountants will conduct Tax Audit in Income-Tax Act. In view of latest verdict in the case of Bar Council of India Vs A.K.Balaji (SC) excepting assessee, person regularly employed by assessee & legal practitioners, others require deletion from Section 288(2) of Income-Tax Act. In the result only CAs will conduct Tax Audit & only Legal Practitioners will act & plead before Income-Tax authorities. I think CBDT should examine ill effect of this situation to Govt. revenue, keeping in mind trouble faced by assesses to approach more than one Tax Professional for giving compliance in Tax Audit cases.

    (2) On date, assesses, Non-CA Tax Professionals & CAs should join hands to upload Tax Audit cases as per the software provided by vendors to avoid repetitive job of filling Tax Audit Report (Because common fields in Form No.3CB, 3CA & 3CD are automatically filled-up while filling ITR). It is also indicated in e-filing portal that in future, Cost Audit Report, Report under Central Excise & Service Tax has to be uploaded. Ie, in future following persons with pass word for their respective DSC should join hands to upload Tax Audit cases.

    (a) Assessee
    (b) Non-CA Tax Professionals (DSC not required on date)
    (c) Chartered Accountant
    (d) Cost & Management Accountant
    (e) Auditor under Central Excise & Service Tax
    (f) State VAT Auditor-Sales Tax Practitioner (If added in future)

    Here, I have got one more question to Revenue Deptt. of Central & State Govt. I.e, why same data of assesses have to be verified again & again for audits under various Central & State Govt. taxation laws. Why Govt. is not thinking on below lines:-

    (1) It is a financial burden on assesses.
    (2) Increased cost of compliance due to ceiling on tax audit.
    (3) No desired output from such tax audit.
    (4) Govt is not evaluating the utility derived from such audit clause
    (5) Causing strict hurdle for voluntary compliance as mentioned above

  10. DILIP KUMAR AGARWAL says:

    Nice write up now every has to practice within their domen and you have explain the “Conflict of Interest” & difference between “Vakalatnama and Power of Attorney. Now the time has come to demonstrate all these to finance ministry

  11. NIKHIL CHHABRA ADVOCATE says:

    Dear Mandeep,

    Indeed this is a beautiful article and We appreciate your concern and the factual position. I agree with u all.

    Hope to see good things coming from you in future, God bless you.

  12. Advocate Yash Pal Gupta, Corporate Jurists at Chandigarh says:

    Dear Mandeep Bro,

    Indeed this is a beautiful article and We appreciate your concern and the factual position. I agree with Mr. Thakkar as well that addition of Madras Tax Advocates Assn. reference would have caused much more effect.

    Hope to see good things coming from you all in future, God bless.

    9878572526

  13. Rajesh Thakkar Advocate says:

    Dear Mandeep,

    Congratulation for giving very good article. However, If you had mentioned the reference of the decision of constitution bench of Hon’ble Apex Court in the case of Madras Tax Advocate Association vs Union of India, the article become more powerful and meaningful.
    Now, we have to wait for the move from the CBDT, CBEC, and State Governments for giving the effect of the decision of Hon’ble Apex Court.

  14. BSKRAO says:

    How to Recognize Unauthorized Practice of Law
    By Ron Klein

    There are several practice areas in which CPAs can find themselves interpreting laws for clients, thereby crossing the boundary between what is allowed and what is not allowed.

    The only areas where CPAs are allowed to interpret laws for clients are federal, state and local taxation, as long as the legal principles being interpreted do not extend beyond tax law.

    U.S. Treasury Circular 230 allows CPAs to represent tax clients’ interests before the Internal Revenue Service, which means CPAs may need to:-

    Analyze and interpret how tax laws apply to particular client fact patterns; and (2) consult with tax clients regarding the resulting analyses and interpretations. Many states have adopted Circular 230 as part of their own state regulations.

    Almost all states have statutes or regulations prohibiting the unauthorized practice of law (UPL). Some states, such as New Jersey, have strict interpretations of UPL, even when using incorporation services or prepared forms. Always check your own state laws before using such services and forms.

    CPAs should consult an attorney when a tax issue involves legal principles that extend beyond tax law, or when any other type of issue or engagement involves legal principles that need to be interpreted for clients. Clients will sometimes apply pressure on the CPA firm to provide legal services in order to avoid a fee from a law firm, but CPAs who yield to such pressure may find themselves being sued for UPL.
    Following are some guidelines for areas where CPAs need to consult an attorney:-

    (1) Legal principles extending beyond the practice of federal tax law; e.g., partnership taxation issues when the CPA is analyzing obligations created by the partnership agreement, agreements with creditors, and any side agreements among the parties.

    (2) Issues requiring interpretations of state or local law; e.g., partnership taxation, real estate taxation, estate and gift taxation, and business valuation issues, especially when family limited partnerships (FLPs) or family limited liability companies (FLLCs) are used.

    (3) Issues presenting a mix of legal, tax and accounting questions; e.g., entity choices and classifications, as in limited liability companies (LLCs) and limited liability partnerships (LLPs), and estate and gift taxation.

    (4) Formation or liquidation of legal entities; e.g., corporations, partnerships, estates and trusts or both, or any entity that requires the drafting of organizational documents.

    (5) Agreements and documents for mergers, acquisitions, dissolutions, liquidations, employment, compensation, stock option plans or severance.

    (6) Any consulting services involving a legal component; e.g., compensation and benefits planning, and personal financial planning (PFP) when the formation of trusts or other estate planning or asset protection techniques are involved.
    __________________________________________________________________________
    Ron Klein, J.D., CFE, is vice president of claims with Camico. Recipient of the 2002 Award for Outstanding Conference Speaker from the Education Foundation of the California Society of CPAs, Klein co-authored the CPA’s Guide to Loss Prevention Practices and CPA’s Guide to Effective Engagement Letters.

  15. Tpr.PARTHASARATHY SREEDHARA says:

    (01)WELL DIVERSIFIED GROUP OF TAX PROFESSIONALS OF INDIA
    As per Section 288(2) of Income-Tax Act, 1961 eight class of persons are authorized to represent the assesses. Among them only following five class of persons are authorized to prepare return on behalf of assesses under Rule 12A of Income-Tax Rules, 1962:-
    (1) Advocates
    (2) Chartered Accountants
    (3) Cost & Management Accountants
    (4) Company Secretaries
    (5) Registered Income-Tax Practitioners

    (02)HURDLES FOR VOLUNTARY COMPLIANCE IN INDIAN TAXATION LAWS
    In India, Registered Tax Practitioners outnumber other class of tax professionals. While giving compliance in Indian taxation laws, various Certificates/Reports are required to be furnished. Even though Registered Income-Tax Practitioners are authorized to prepare return under Rule 12A of Income-Tax Rules, 1962 read with Section 288(2) of Income-Tax Act, they can not exercise the authority granted in the statute fully & independently, because the whole powers of Certification/Reporting vested on only Chartered Accountants. In fact, the other four class of tax professionals who are also assisting the assesses for tax compliance have been virtually ignored. Here, crux of the matter is only CAs enjoy both the power of certification & representation, but Non-CA Tax Professionals are authorized only to represent assesses. This is practically causing strict hurdle for voluntary compliance & assesses prefer to approach only CAs for tax compliance, resulting in unemployment of Non-CA Tax Professionals & over burdening of Chartered Accountants. Hence, new Registered Tax Practitioners are not entering tax practice to support voluntary compliance in Indian taxation laws.

    (03)IMPLICATION OF SUPREME COURT VERDICT
    Registered Tax Practitioners of India assisting the Central/State Govt. in revenue collection process since 1922 & acting as bridge between assesses & Tax Deptt. starting from commercial tax registrations, preparation of monthly/annual tax returns till conclusion of assessment & recovery of taxes. In view of mandatory CA Certificates in all Indian taxation laws, Reg. Tax Practitioners are restricted to assist only small dealers, including salary & direct refund cases. Due to T.D.Venkat Rao case (SC) only Chartered Accountants will conduct Tax Audit in Income-Tax Act. In view of latest verdict in the case of Bar Council of India Vs A.K.Balaji [SLP(Civil)No(s)17150-17154/2012] Dt.4.7.2012 (SC) it was held by Hon’ble Supreme Court that Advocates alone are entitled to practice the Profession of Law both in litigious & non-litigious matters. On date, appearance clause in all Indian taxation laws has been subject to review of Apex Court & the order of revenue authority passed against the representation of Non-Advocates become in-fructuous, bad in law, null & void. Further, such orders cannot be enforced/appealed. Reg. Tax Practitioners of India are totally deprived from both the powers of Certification & Representation, which is causing strict hurdle for voluntary compliance. In the result only CAs will conduct Tax Audit & only Advocates will plead & act before tax authorities. Therefore, Govt. should examine ill effect of this situation to revenue, keeping in mind the trouble faced by assesses assisted by Reg. Tax Practitioners to approach only Chartered Accountants & Advocates for their tax compliance.

    (04)MEANING OF AUDIT UNDER TAXATION LAWS
    Audit means “verification”, person who conduct audit needs to be knowledgeable in the matter he undertakes Audit. In conclusion, person specialized in Income-Tax law should issue Certificates/Reports in Income-Tax Act. Furnishing Certificate & Reports in Income-Tax Act require both interpretation of facts & law. Interpretation of facts is not a tough job, but interpretation of law is a tough job. On careful study of Section 288(2) of Income-Tax Act read with Rule 12A of Income-Tax Rules, it has to be presumed that all five class of persons possess the knowledge of Section 145 of Income-Tax Act, required for Income-Tax practice. Here the question is, when such other four class of Non-CA Tax Professionals are authorized to prepare return under Rule 12A of Income-Tax Rules, there is no justification to prohibit them for issue of Certificates/Reports in Income-Tax Act.

    (05)DYNAMISM/PROGRESSIVE THINKING OF MINISTRY OF FINANCE
    Latest policy decision of learned officials in Finance Ministry, Govt. of India to expand the definition of “Accountant” to include related professionals in DTC-2013 read with delegated legislation Section 320(2) (iii) is most welcome move. To involve all persons exclusively practicing taxation side to improve/enhance compliance & revenue, Tax Practitioners Law required for India to enable all these well diversified group of tax professionals including Advocates to practice tax law in India. Therefore, our Central Govt. should come out with significant legislation; to introduce Tax Practitioners Bill covering all five class of tax professionals of India. Such Tax Practitioners Bill should be introduced with “Preamble” stating that “Other than Advocates are also exclusively practicing tax laws in India, in order to protect them & also in the interest of Government revenue, this Tax Practitioners Bill has been introduced”. Then such Tax Practitioners Law can not be struck down in view of Apex Court Verdict. US Treasury Circular No.230 for regulations governing practice before the Internal Revenue Service of Income-Tax Deptt. in USA & Tax Agent Service Act of Australia are very good examples for consideration of Ministry of Law & Ministry of Finance, Government of India to have similar Tax Practitioners Law in India also, to generate tax professionals for widening genuine tax base & number of assesses. In USA & Australia Non-Advocates are appearing before revenue authorities by the strength of above Tax Practitioners Law.

    (06)TAX PRACTITIONERS LAW TO AUGMENT PROGRESSIVE REVENUE
    In view of the above facts & Supreme Court verdicts, it is right time to have unified control & regulation for all five class of tax professionals to practice exclusively in Indian taxation laws. Tax Practitioners Law is the need of the hour. Among Advocates, Cost & Management Accountants, Company Secretaries, Chartered Accountants and Registered Tax Practitioners, who wants to practice exclusively in Indian tax laws, should get mandatorily registered under this unified Tax Practitioners Law, whatever their parent body articulate is immaterial. This unified Tax Practitioners Law should also prescribe the qualifications & experience required to be possessed by all the five class of tax professionals. On date, abundant tax compliance at hand, but there is requisite tax professionals to support voluntary compliance in Indian taxation laws. As per the latest information available, there are only 2,427 Cost & Management Accountants, 5,170 Company Secretaries & 65,570 Chartered Accountants are in full time practice, who are unevenly spread throughout India. Indai is highly populated country; existing number of practicing CMA, CS & CA does not meet the requirement of our economy. “More persons in the line of tax practice, will escort to progress in quantum of compliance & generate more revenue to Government. Tax Practitioners Law on the lines of US Treasury Circular No.230 is well suited to India, required for India & also need of the hour to widen genuine tax base of assesses.

  16. t.v.sreekantan says:

    ADVOCATES CAN ONLY APPEAR BEFORE HIGH COURTS AND SUPREME COURT
    IN ALL DIRECT AND INDIRECT TAXES FOR ASSESSEES AND FOR
    GOVERNMENT DEPARTMENTS AND NOT CHARTERED ACCOUNTANTS.HENCE ADVOCATES CAN LEGAL OPINION ON TAX MATTERS.THIS ITSELF SHOWS THE SKILL OF THE ADVOCATES.
    EVEN INCOME-TAX DEPARTMENT ENGAGING TAX ADVOCATES TO REPRESENT BEFORE THE INCOME-TAX APPELLATE TRIBUNAL,HIGH COURTS AND SUPREME COURTS.THIS ITSELF SHOWS THE SKILL OF THE ADVOCATES.ADVOCATES ARE ALSO DOING THE JOB OF COMPANY FORMATION.ONE IMPORTANT FACT TO BE NOTICED BY THE CHARTERED ACCOUNTANT WHEN OUR RESPECTED PRIME MINISTER SRI.NARENDRA MODI WAS THE CHIEF MINISTER OF GUJARAT HE HAS AUTHORISED ALL THE ADVOCATES,VAT PRACTITIONER AND COST ACCOUNTANT TO AUDIT THE ACCOUNTS THE DEALERS U/S.63 OF THE GUJARAT VALUE ADDED TAX ACT.

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