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.

 Download Copy of Reply by ICAI

Also Read – Tax Audit is exclusive domain of Chartered Accountants

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Tags : ICAI (2675) section 44AB (174) Tax Audit (303) Tax Audit Report (181) tax auditor (122)

0 responses to “Act of Non CAs to Approach CAs to get Tax Audit report signed for Audit not conducted by them is unethical – ICAI”

  1. G.GIRIDHAR says:

    Sir,
    The BCI wants its members to conduct Tax Audit u/s 44AB of I.T Act 1961 whereas the ICAI is allowing members of BCI who pass the Final CA Exam for enrolment and to obtain certificate of Practice. If BCI really wants to help its members why BCI is standing on the way of the member Advocate who are also members of ICAI to obtain COP from ICAI and to conduct Tax Audit .

    The reply of respectful members may be sent to gdmllm@yahoo.com

    g.giridhar

  2. NATARAJU K says:

    Finance department is permit to Tax advocates are Audit u/s 44 A B below the limit of One Crore Of Turnover . most of Tax Advocates are well knowledge about audit u s 44 A B

  3. theerthaprasad says:

    Dear Sir,

    My one Clarification How much file in sign under section Audit 44 AB
    in one C A

  4. B.S.K.RAO says:

    Inclusion of PCS and PCMA in the definition of ‘Accountant’ in the
    proposed Direct Tax Code-As per report of Parliamentary Stadning Committee headed by Shri.Yashwanth Sinha

    Ministry’s Stand as on Apr 18, 2012

    17.6 The Ministry has replied that the definition of accountant as appearing in the DTC is the same as that in the IT Act. An accountant for the purposes of tax matters is required to deal with all financial matters and audit all financial ledgers, books, records and statements of a company or firm etc whereas a cost accountant deals primarily with estimates of cost for projects and monitoring the project to ensure that these are within the budget. Therefore, a cost accountant may not have the expertise to deal with all the financial statements and matters. Accordingly the suggestion is not acceptable.

    17.7 Further, the question here is not of giving privilege to any particular profession rather the most suited profession for dealing with the matters relating to direct taxes has to be assigned the work. Accordingly, the suggestion is not acceptable.

    17.8 Under clause 304(3) (F) of the DTC, the Board may prescribe any person with specified educational qualification to act as an authorized representative. The same procedure is followed under the current Act. Accordingly, this will be considered at the time of framing of subordinate legislation.

    Why change of opinion in DTC-2013 ? It is becasue of below statment of ICAI (Financials) in the letter addressed to CBDT dated 29.01.2013:-

    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.

  5. B.S.K.RAO says:

    DEAR ALL FRIENDS,

    EVERYBODY SHOULD KNOW THAT PRACTICE OF LAW IS THE PREROGATIVE POWER OF ADVOCATES IN INDIA, WHEREAS PRACTICE OF COST ACCOUNTS, MANAGEMENT ACCOUNTS AND FINANCIAL ACCOUNTS IS NOT THE PREROGATIVE POWER OF ANY PROFESSIONAL BODY IN INDIA

  6. K.MUKAMBIKA says:

    I SUGGEST MY TAX ADVOCATE FRIENDS TO SERVE LEGAL NOTICE ON ICAI (FINANCIALS) ALLEGING ALL THE ISSUES PUBLISHED IN THIS BLOG & TAKE ACTION UNDER PIL. I HOPE THAT MY TAX ADVOCATE FRIENDS WILL CONSIDER MY REQUEST

  7. MANDEEP SINGH says:

    Mr. BSK RAO JI,
    YOUR ABSOLUTELY RIGHT HOW CAN CA REPRESENT ASSESSEE WHEN HE CONDUCTS STATUTORY AUDIT ON BEHALF OF DEPARTMENT. YOU CAN PRESUME WHAT WILL BE HAPPEN IF SAME ADVOCATE REPRESENTS BOTH COMPLAINANT & ACCUSED BEFORE COURT.
    Here only intention of the ICAI to give full employment to its members by this way or that way.

  8. B.S.K.RAO says:

    TO

    CBDT/Deptt. of Revenue/Ministry of Finance,

    There is one more question raising in my mind. CAs conduct tax audit U/s 44AB for revenue. Here, how come such same CAs represent before assessing authorities by the strength of power of attorney in scrutiny proceedings on behalf of the assessees for whom they have issued tax audit report ?

    The above question has to answered by CBDT/Deptt. of Revenue/Finance Ministry & ICAI (Financials). Please can any one answer my question ?

  9. K.MUKAMBIKA says:

    DEAR ALL CA FRIENDS

    CHARTERED ACCOUNTANTS MEANS LICENCED ACCOUNTANTS. IE, WRITER OF FINANCIAL ACCOUNTS ONLY. HOW WRITER OF FINANCIAL ACCOUNTS ISSUE AUDIT CERTIFICATE. UNDER INDIAN CONSTITUTION CAG ARE CALLED AUDITORS. IF CA’S WANTS TO CALL THEM AS AUDITORS CHANGE THE NAME OF THEIR INSTITUTE AS FINANCIAL AUDITORS OF INDIA. CORRECT NAME OF YOUR INSTITUTE SHOULD BE INSTITUTE OF FINANCIAL ACCOUNTANTS OF INDIA, WHO GAVE THE WORD CHARTER TO ICAI (FINANCIALS)

  10. B.S.K.RAO says:

    Raghav Goyal Sab,

    Roshan Karne Ka bath nahi sab, following questions have been put before CBDT, Ministry of Finance to decide about retaining CAs monopoly on tax audit:-

    1. Objectives for introduction of tax audit elaborated in Circular No.387 dated 6th July 1984 have been achieved since past 30 years.

    2. Becasue of mandatory tax audit clause by only CA’s new Non-CA Tax Professionals are not entering tax profession in India to support voluntary compliance

    3. On one hand new Non-CA’s are not entering tax profession & on the other hand all new CA’s will not stick to tax practice. This has lead to the situation that Govt. has to relay on only 65,570 existing practicing CA’s spread throghout India for seeking compliance.

    4. Because of tax audit ceiling Non-CA’s handling tax audit cases have to roam around in search of CA’s during due dates. This situation prevailing only in India.

    5. ICAI (Finaicals) in the above publication says that

    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.

    Here question arises what Non-CA’s handling tax audit cases have to do ?
    What about the compliance in those cases ? Govt. should answer ?

    6. No. of practicing CA’s has come to light only after mandating the return to be filed online in tax audit cases. At that time only Govt. took decision to expand the definition of “Accountant” in DTC-2013

    I have requested to Govt. & ICAI (Financials, do not mandate uploading of tax audit report for the genuine reason that RTI for section wise wrong claims required to be answered by CBDT, at that time ICAI (Financials) should answer the Govt. On date all such RTI’s are in the stage of Pending Disposal/1st Appeal

  11. K.MUKAMBIKA says:

    LET ICAI GIVE AT LEAST ONE SINGLE INSTANCE TO PROVE ITS SOCIAL RESPONSIBILITY, ALL ITS REPRESENTATION ALWAYS GOES IN FAVOUR OF ITS MEMBERS ONLY THAT TOO AT THE COST OF ASSESSEES, GOVERNMENT & PUBLIC AT LARGE. GOVT. OF INDIA SHOULD TAKE NECESSARY ACTION ON ICAI. BECAUSE PERSONAL AGENDA OF MEMBERS ARE SATISFIED THROUGH THE INSTITUTE EX: SECURING FULL EMPLOYMENT TO EXISTING MEMBERS BY ALL WAYS & MEANS, DISTURBING RELATED PROFESSIONALS IN THE FIELD AND ENTERING OTHERS AREA OF OPERATION ETC. ICAI BELIEVE IN MONOPOLY IN ALL FIELDS & NOT READY TO FACE COMPETITION FROM RELATED PROFESSIONALS. IT IS EVIDENT FROM RECENT REPRESENTATION MADE BY ICAI TO CBDT/DEPTT. OF REVENUE OBJECTING DEFINITION OF ACCOUNTANT IN DTC.

  12. MANDEEP SINGH says:

    Hello Raghav Goyal ji, how r u ?
    Please tell me quality of work done by CA’s in audit u/s 44ab as posted by me in a comment. By such quality we widen our tax base & after that only CA’s should be authorize to conduct audits u/s 44ab. Please also explain which extra knowledge required to tax audit u/s 44ab for non-corporate assessees not mentioned in ( B.COM + LLB) syllabus.
    As per I know if Non CA Professionals are authorized definitely increase quality in audit work & to prevent revenue leakage.

  13. B.S.K.RAO says:

    DEAR ALL RESPECTED CA FRIENDS,

    Please argue academically on making study of Section 288(2) of Income-Tax Act read with Rule 12A of Income-Tax Rules and Section 145 read with 14 Accounting Standards of CBDT, instead of saying that Non-CAs posting comments here with jelous (Here, it is presumed that all five class of persons who are authorised to prepare return under Rule 12A among total eight class of persons authorised represent the assessee U/s 288(2), possess the knowledge of Section 145 read with 14 Accounting Standards of CBDT, required for Income-Tax Practice). Because certain qualification has been fixed in Income-Tax Act for these five class of persons. Accounting Standard framed by ICAI & IFRS not required for Income-Tax Practice.

    I hope that my fellow CAs posting comments in this blog consider my genuine request to enable DTC-2013 to come out smoothly with good shape, both in the interest of all Tax Professionals & Govt. revenue, keeping in mind that status of CAs are not disturbed in draft DTC-2013.

  14. prasad.S.N. says:

    Thank yiu mr Rao and friends to explained to ca’s.
    Dear CA friends please leave ego and accepts without ca can do the tax audit..

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