CA Sandeep Kanoi
We are producing below the extract from the reply of ICAI dated 29.01.2014 to CBDT in respect of Information Provided by Tax Advocate Shri B.S.K Rao and Shri Srikrishna to CBDT. In his letter Shri B.S.K Rao and Shri Srikrishna has raised the following issues before CBDT :-
In their opinion Tax Audit U/s. 44AB is not serving any purpose and not benefiting the Income Tax Department at all. He further submitted that there is a Shortage of CA’s and they have to search for the Chartered Accountants to get the Tax Audit Report signed in respect of Audit Conducted by them.
In response to Act of Non CA professionals of Approaching Chartered Accountants to get Tax Audit report signed from for audit not conducted by them ICAI has replied as under –
In fact, the act of Non-CA tax professionals for making an effort to approach a chartered accountant for getting signature for audit not conducted by him in itself is an unethical act which should be seriously viewed.
ICAI Reply in respect of Shortage of Chartered Accountants is as follows :-
Availability of tax Auditors for Non-Corporates:
Tax Advocates Shri B.S.K.Rao and Shri Srikrishna in their letters addressed to Committee on Petitions, Parliamentary Standing Committee dated 30th April, 2012 and Central Board of Direct Taxes dated May 14, 2012 stated as under:
“……. In case of Corporates, chartered Accountants are getting fees in the range of Lakhs, but in non-corporates cases, they get fees in the range of Thousands only. Therefore, CA’s make best combination of tax audit assignments to sign tax audit reports under section 44AB to yield Revenue.
2. Those Non-corporates assesses Rejected by CA’s approach Non-CA Tax professionals covered under section 288(2) to file returns u/ s 139. Non-CA’s have to search out for unused limits of CA’s in their area, to get signatures on their audit reports. Some CA’s holding unused limits will not sign for work done by non- CA’s but the clients insist us to do the job.
In Para No. 1 & 2 above, I have proved that CBDT is indirectly handcuffed by 59,472 practicing CA’s of ICAI in the matter of revenue collection…. “
With regard to the above allegation we wish to mention the following
a) As per the recent data provided to us by the CBDT. 16,16,096 tax audits have been conducted by 59,472 chartered accountants during the year 2010-11. An analysis of the said data clearly depicts that on an average a chartered accountant has conducted 27 tax audits. It may be noted that this number is well below the ceiling limit set by ICAI i.e. 45 audits per member. Therefore, the question of non availability of chartered accountants for conducting tax audits of non-corporates does not arise. It is further pertinent to mention here that there are adequate number of Chartered Accountants at all places in India and there is not even a slightest of whisper from any assessee that no Chartered Accountant was available to him so as to perfoi.iii his tax audit, even at Block or District level.
b) Section 288 of the Income-tax Act, 1961 talks about authorized representative. It clearly mentions that any assessee who is entitled or required to attend before any income tax authority or the Appellate Tribunal in connection with any proceedings under the Act may attend through authorized representatives. Further section 288(2) provides the definition of “Authorized representative” includes a chartered accountant and also a non Chartered accountant. It, however, no where mentions that this section makes Tax Advocates eligible, to conduct an audit or an audit under section 44AB. Intact, section 44AB allows only ‘an accountant’ defined under Explanation to section 288(2) to conduct the tax audit. The Tax Advocates have a limited role of appearing before the tax authorities on behalf of the assessees. Even if the client insists them to conduct audit, the Act does not authorize them to do so.
c) Tax Advocate Shri. B S K Rao and Shri Srikrishna have stated that non-corporate assessees approach Non-CA Tax professionals covered under section 288(2) to file returns u/s 139. It may be noted that return filing under section 139 is no where connected with tax audit. These are two different tasks. An assessee, the audit of whose accounts is not complete due to one reason or the other is eligible to file his income tax return to avoid interest and penalty, While, he may be ready to shell out penalty for not getting accounts audited within specified period. It is indeed heartening to note that sometimes the assessees are not able to differentiate between the domains of Tax Auditors and that of Income-tax Practitioners.
d) The distinction between audit fees charged from a corporate and a non corporate entity is not because of the status difference but because of the difference in the complexity of accounts, compliance of accounting standards and other statutory provisions involved therein. The audit fees to be charged depend on factors like volume of work. nature of transactions to be audited, complexity and extent of coverage etc.
e) A chartered Accountant would in no case accept the responsibility of audit not conducted by him. In case he signs the audit report in respect of accounts not audited by him, he shall be deemed to be guilty of professional misconduct under the provisions of the Chartered Accountants Act, 1949. The Chartered Accountants respect the confidence reposed by the Government in the profession and thereby abiding by their professional ethics they refuse to sign the audit report in respect of audit not conducted by them. In fact, the act of Non-CA tax professionals for making an effort to approach a chartered accountant for getting signature for audit not conducted by him in itself is an unethical act which should be seriously viewed.
f) Tax Advocate Shri B.S.K. Rao and Shri Srikrishna in their letters as aforesaid have mentioned that non-CA tax practitioners are being forced to do the job of the tax auditor. This is absolutely a wrong statement and without any base. In fact, no one can be forced to carry out a job, if one does not want to do it. Further, it may be noted that this action of doing audit by non-chartered accountants is illegal and against the provisions of the law. The non-CA tax practitioners are neither equipped ‘with knowledge to maintain books of account nor can appreciate the intricacies of the accounting system being followed and the compliance of various accounting standards. It is a fact that advocates. while studying law do not study the subject of accountancy and auditing , whereas a Chartered accountant has to undergo ,at all levels of the course, the subjects of Accounting and Auditing. A Chartered Accountant has to undergo rigorous practical training of 3 years as articles under experienced chartered accountants. The training covers all aspects of accounting, auditing. taxation, fulfillment of statutory compliances and so on. The very requirement of practical training is instrumental in shaping a well-rounded professional to ensure that students have an opportunity to acquire on-the-job work experience of a professional nature. Such a practical training inculcates a disciplined attitude for hard work; develops necessary skills in applying theoretical knowledge to practical situations; provides exposure to overall socio-economic environment in which organizations operate; and develops ethical values.
g) Conducting of tax audit by non-chartered accountants having no knowledge of Accounting Standards ,principles of accounting and auditing and procedures thereof would result into inaccurate computation of income, leading to leakage of revenue. While processing the data provided by the Income-tax Department in respect of tax audits conducted by chartered accountants, it was observed that a number of tax audit reports were filed by the assessees by quoting wrong membership details of the Chartered Accountants. The fact of alleged misuse of membership details of chartered accountants was also reported to CBDT vide letter no. DTC/2011-12/Rep-07, dated 16th December, 2011, Letter no. DTC/ 2012-13/ Rep-09, dated 15th June, 2012 and Letter no. DTC/ 2012-13/ Rep-19, dated 18th December, 2012. In this regard we wish to submit that this is an illegal practice being followed, which needs to be looked into. The possibility of this practice being followed in earlier years also cannot be ruled out as the tax audit reports were not required to be filed along with the return of income since the year 2008.