In India, Institute of Company Secretaries of India, Institute of Cost Accountants of India, Institute of Chartered Accountants of India and Bar Council of India are the four professional bodies passed by an Act of Parliament, whose members are engaged in the line of tax practice. They should shed off their own narrow mindedness and come out of their cocoons and think of the country’s interest. Each one trying to desperately fend off others from what they think is their own sacred area.

                Certificate from only Chartered Accountants U/s 44AB introduced in Income-Tax Act in 1984, Since then, CA certificates started entering Income-Tax Act. On date there are 46 plus CA certificates in Income-Tax Act, which is also inherited in draft Direct Taxes Code, 2010. These CA certificates barricade support for voluntary compliance from Non-CA Tax Professionals and new Non-CA Tax Professionals are not entering tax profession. CA certificates are causing strict hurdle for voluntary compliance not only in Income-Tax Act, but also in other Central and State Govt. tax laws (Ex:- In Finance Act, 2012 negative list introduced in Service Tax requiring the assistance of more tax professionals, but number of tax professionals are stand still on date). Tax audit data provided by CBDT has been published in CA Club Website on 16.11.2011. Herein, it is evident that only 59,472 Chartered Accountants are practicing tax law throughout India. There is ceiling of 45 tax audit assignment to be undertaken by each CA, irrespective of Corporates or Non-Corporates. In latest e-filing website of Income-Tax Deptt. only CA’s are treated as Tax Professionals, now existing Non-CA Tax Professionals will also dropout from tax profession and Govt. has to relay on only 59,472 CA’s for seeking compliance U/s 139 of Income-Tax Act.

World over functions of Accounting are classified depending on the area of operation, application and usage. They are as under:-

                Cost Accounts                     >   Manufacturing/Processing Activity

                Financial Accounts             >    Trading Activity

                Management Accounts       >    Management Leval/Decision Making

Management Accounts is nothing but application of Ratio Analysis and Cash Flow Statement on Cost and Financial Accounts.

By The Cost and Works Accountants (Amendment) Act, 2011, name has been changed to “The Institute of Cost Accountants of India” and the members got the power to work in the area of Management Accounts also and can re-designate themselves as ACMA/FCMA. Now, it is funny that both institutes passed by an Act of Parliament called by similar short name of “ICAI”. Of course syllabus is almost similar in all the three institutes called by different name of ICSI, ICWAI and ICAI.

In view of the above amendment, Cost Accountants now possess wide power of working in the area of Cost Accounts, Financial Accounts and Management Accounts. Whereas,Chartered Accountants are restricted to work in the area of Financial Accounts only. This being the case, I do not understand why only Chartered Accountants are authorized to conduct Tax Audit U/s 44AB of Income-Tax Act and enjoy monopoly of authority, causing strict hurdle for voluntary compliance.

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Author  :  B.S.K.RAO, Tax Advocate

E-Mail: raoshimoga@gmail.com

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0 responses to “Tax Audit in Income-Tax Act-Monopoly of Authority Causing Hurdle for Voluntary Compliance”

  1. BSKRAO says:

    WHATEVER ICAI (FINANCIALS) DO, ITS MOTIVE & INTENTION SHOULD BE GOOD. THEN ONLY IT WILL ENJOY NAME & FAME IN THE LONG RUN

  2. Pranay Jain says:

    Dear All ,

    I think all are jealous of chartered Accountants because to become a Chartered Accountant is very difficult if all Other Non CA Professionals have so much issues with CA then they themself should become CA rather Criticizing CA wont help and everybody knows the Level of CA and other Non CA Professionals no further Clarification is required . CA have the Exclusive Domain of Income Tax & Other Tax Laws is a Universal Truth .

  3. B.S.K.RAO says:

    Rahul Nadkarni Sir,

    Your statement “Just wait some time the regulatory exclusivity enjoyed by ICAI will not remain forever” is highly appreciated Sir. I pray god that let it happen at an early date. The statement gives me hope to stay in tax profession Sir.

    • Ganesh says:

      Lets see how long it takes for other professionals to represent the clients in courts so that heavy cost paid to advocates are avoided.

  4. Rahul Nadkarni says:

    Dear Balu & Anand
    If the crime of some CAs does not make all CAs criminal in the same logic all the CMAs painted by ICAI are also not incompetent and some CA’s adverse comments on ICAI-CMA does not degrade the CMA profession as a whole. Just wait some time the regulatory exclusivity enjoyed by ICAI will not remain forever. As far as Cost audit is concerned it is ICAI (Accounts) every now and then raises voice for its abolishment. Now when you poke your nose in others matter either in name change issue or relevancy of cost audit, do you expect the counterparty will remain silence? Rather than advising others please show your character and stop this sledging. One more thing please read carefully my last posting on July 22, 2013 at 1:04 PM… Introspect and ask yourself Are all the CAs strictly adheres to the professional ethics ? Again go to ICAI July 13 Journal. Read the article by Y. H. Malegam a candid confession of the profession now these days.. (Pg 66, 1st Para). I agree due to the ineffective leadership in 80’s /90’s and till 2005 ICWAI did not evolve as a force as it should have been at the same time ICAI-Accounts always try to lay down ICWAI coffin as it did not get the cost audit by the statue and Govt. went ahead to create a separate Institute. Now time is changing and do not jump to any conclusion so fast…

    • Ganesh says:

      Mr.Nadkarni,

      You are requested to also read the 2nd para in which the following sentence need your attention:

      “Audit personnel are, therefore, under peer pressure to perform and are likely to cut corners to internally compete with persons who are often not conscious of or bound by the same professional standards”.

  5. Raghav Goyal says:

    Agreed with Balu & Anand saab..

  6. B.S.K.RAO says:

    Rahul Nadkarni Sir,

    Why can’t you people make use of the situation prevailing in the article
    & claim your bonafide rights to conduct Audit U/s 44AB of Income-Tax Act
    through your apex body to remove the hurdle for compliance under Income
    Tax Act, which is also in the interest of our nation. If such authority
    is granted to Cost & Management Accountants, more people will join your
    ICAI course to support for voluntary compliance in all Indian tax laws.
    It is right time, you have to make such claim before your President Sri
    Rakesh Singh

  7. Rahul Nadkarni says:

    To Ganesh..

    Go back to history which I came across in July CA journal… it was mentioned that before establishing ICWAI, GOI formed a committee in which then ICAI council members were part of. Now you guys ask yourself what was the necessity to form ICWAI. If the ICWAI has no utility then through your Institute which is much powerful and boast so much arrogance ORDER MCA and MOF to close down ICWAI. Just ponder for a moment and think the real value of Cost and Management Audit will accrue to the society at large not to the Management of Business class. FYI if you refer the “standing committee on finance” comments who heard the name change application of ICWAI.. It was ICAI who vehemently opposed the tag Management as it will create confusion in public. Now the real confusion is there are 2 ICAIs.

  8. Rahul Nadkarni says:

    To Balu & Anand :
    Yes sir we have seen the quality audit in the form of Satyam scam, GTB fiasco and numerous reported/ unreported financial scams. In the hindsight you will also agree that most of the CAs are hands in glove with the management to present a false picture of the financial health of a company. This portal has bravely reported on numerous occasions the crime of CAs. You agree or not the reality is maintenance of accounts and per se Accountancy as a subject is not a rocket science. The kind of self-eulogize you guys display is laughable. And the hatred towards ICWAI is ignorable.

    • Ganesh says:

      Mr.Nadkarni,

      If you go by the few scams which took place in the recent past, then what about the street fights done by the advocates??

      ICAI never tried to get the recognition of other fraternity or the name of other fraternity whereas the ICWAI did it recently. Dont you feel ashamed for claiming something which made you lose the identity?

      Earlier, Cost accountants’ apex body was easily recognizable with the acronym “ICWAI”. But now you have to mention the fact Cost and Management Accountant by including something in brackets….

      Is it not laughable?

      Can you specify instances of cost audit which rendered beneficial to the Government?

    • Balu & Anand says:

      Rahul Nadkarni commented:

      To Balu & Anand :
      Yes sir we have seen the quality audit in the form of Satyam scam, GTB fiasco and numerous reported/ unreported financial scams. In the hindsight you will also agree that most of the CAs are hands in glove with the management to present a false picture of the financial health of a company. This portal has bravely reported on numerous occasions the crime of CAs. You agree or not the reality is maintenance of accounts and per se Accountancy as a subject is not a rocket science. The kind of self-eulogize you guys display is laughable. And the hatred towards ICWAI is ignorable.

      Dear Mr Nadkarni

      Like all others here you also seem to be making the same error. You seem to equate one/few person’s misdemeanor or misconduct as a justification for painting all people in that category with the same brush. If that logic is applied then every doctor, policeman, lawyer and teacher would have to be banished from their profession.
      Secondly, all the misconduct and scams where CAs are involved taken together would still not make the CWAs or lawyers eligible to do what CAs can do. There is no guarantee that you guys are above the normal human failings such as greed and lust such that the society can blindly trust you. If I am bad at my job, it would not automatically mean that you are good at it. Only naive people would buy your argument.

      Thirdly, regarding my comment itself, I can assure you that if somebody had asked what difference it would make if a CA were to do Cost Audit or sign a Secretarial Compliance certificate, then my answer would have been the still the same. As a CA, I am not afraid or ashamed to acknowledge another man’s competence and this is where the difference lies between us. You guys seem to have a feeling of inadequacy about your own profession so much that you have to always compare yourselves with a CA. You don’t really need to. Please grow up a little.

  9. Balu & Anand says:

    “Rahul Nadkarni says:
    July 18, 2013 at 3:05 PM

    What an irony!!! In the name of compliance and statutory obligation even ICWAI has to conduct the audit of its books of accounts by a statutory financial auditor who is a CA. Now do not tell my CA friends that even ICWAI recognizes only the CA’s capability to do statutory audit…. hence they invite the EOI. Its bloody law under which they compel to do so… Not the so called audit expertise blah blah blah…
    If we assume let a Cost accountant be allowed to do same for ICWAI financial audit what difference would it have made…????”

    The difference would have been that between Poor Quality and Proper Quality 🙂

  10. Rahul Nadkarni says:

    What an irony!!! In the name of compliance and statutory obligation even ICWAI has to conduct the audit of its books of accounts by a statutory financial auditor who is a CA. Now do not tell my CA friends that even ICWAI recognizes only the CA’s capability to do statutory audit…. hence they invite the EOI. Its bloody law under which they compel to do so… Not the so called audit expertise blah blah blah…
    If we assume let a Cost accountant be allowed to do same for ICWAI financial audit what difference would it have made…????

    • Ganesh says:

      A CA Firm which does lots of tax audit of companies need to get its accounts audited by another CA when it is subject to 44AB, and not by its own. When the ICAI has regulatory measures for its members too, how could people expect the IC(W)AI to conduct its audit by a CMA instead of CA which the Income-tax Act prescribes.??

  11. CA. M. Lakshmanan says:

    Mr. B.S.K Rao has suggested that “Govt. should definitely think about alternative professionals for tax audit”.Can any one suggest that the Veterinary Doctors can conduct heart surgery of human beings due to shortage of thoracic surgeons?

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