CA Sandeep Kanoi

Tax Audit under the Income Tax Act is currently allowed to be conducted only by the Chartered Accountant but Proposed Direct Tax Code 2013 allows Tax Audit not only by Chartered Accountant but also by Company Secretaries and Cost Accountants. Clause 88 of the Proposed Direct Tax code prescribes who needs to get the book audited under the direct tax code 2013 and it further says that the same needs to be audited by an accountant. The Term accountant is been defined in Clause 320(2) which says that accountant means Chartered Accountants , Company Secretaries , Cost Accountants any person having such qualifications as the Board may prescribe, for the purposes specified in this behalf.

Direct Tax Code 2013

Audit of accounts and reporting of international transaction

88. (1) Every person, who is required to keep and maintain books of account under section 87 shall get his accounts for the financial year audited—

(a) where the person is carrying on one or more professions , the aggregate gross receipts of such profession or professions exceed twenty-five lakh rupees in the financial year;

(b) where the person is carrying on one or more businesses , the aggregate total turnover or gross receipts, as the case may be, of such business or businesses exceed one crore rupees in the financial year.

(2) The audit of the accounts referred to in sub-section (1) shall be carried out by an accountant and the report of audit be obtained in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.

(3) The person referred to in sub-section (1) shall furnish the report of audit referred to in subsection (2) to the assessing officer on or before the due date, in the manner as may be prescribed.

(4) The provisions of sub-section (1) shall not apply to the business where the income therefrom is determined under paragraph 1 of the Eleventh Schedule.

(5) A person shall be deemed to have complied with the provisions of sub-section (1), if the person—

(a) gets the accounts of his business audited as required by, or under, any other law for the time being in force, before the due date; and

(b) obtains by the due date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under sub-section (2).

(6) A person referred to in sub-section (2) of section 87 shall furnish a report of the international transaction or the specified domestic transaction entered into during the financial year to the Transfer Pricing Officer and the Assessing Officer on or before the due date, in the manner as may be prescribed.

(7) The report referred in sub-section (6) shall be obtained from an accountant in such form duly signed and verified in such manner, as may be prescribed.

Meaning of Accountant as per Clause 320 (2)

320. In this Code, unless the context otherwise requires —

(1) *******

(2) “accountant”means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act, and shall include-

(i) a company secretary within the meaning of the Company Secretaries Act, 1980 ;

(ii) a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 ; or

(iii) any person having such qualifications as the Board may prescribe, for the purposes specified in this behalf.

Also Read

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Tags : CA Sandeep Kanoi (276) Direct Tax Code (296) dtc (262)

148 responses to “Proposed DTC allows tax Audit by CS and Cost Accountants also”

  1. CS K. GANGATHARAN says:

    WE ARE WAITING FOR DIRECT TAX CODE

  2. pc says:

    @S JEGADEESAN. We welcome CAs in cost audit and secretarial audit. Then Cs & CMAs should be allowed to do financial audit.This is good move to allow CS & CMAs to include them in the deficition of Accountant proposed in the new tax code.This will abolish the monopoly of CAs in income tax practice.The Govr. so far has been allowing only CAs. Even to issue 15CA,CB cerficates only CAs are allowed. Why this desperity?

  3. B.S.K.RAO says:

    AUDIT IN COMPANIES ACT IS A COST, FINANCIAL & MANAGEMENT ACCOUNTS AUDIT. HERE CMAS BE ALLOWED TO FURNISH THE SAME. WHEREAS IN INCOME-TAX ACT, IT IS A TAX LAW AUDIT. THEREFORE ALL PERSONS AUTHORISED TO PREPARE RETURN UNDER RULE 12A READ WITH SECTION 288(2) OF INCOME-TAX ACT, BE ALLOWED TO FURNISH TAX LAW AUDIT REPORT U/S 44AB. HERE MORE STRESS GIVEN TO INTERPRETATION OF LAW. THEREFORE, DECISION OF MINISTRY OF FINANCE TO EXPAND THE DEFINITION OF ACCOUNTANT IN DTC TO INCLUDE RELATED PROFESSIONAL IS APPROPRIATE. I MIGHT HAVE USED THE WORD MOST APPROPRIATE, IF TAX ADVOCATES AND INCOME-TAX PRACTITIONERS WERE ALSO INCLUDED IN DEFINITION OF ACCOUNTANT IN DTC-2013

  4. K.MUKAMBIKA says:

    P S Deshmukh Sab,

    Very pupose of uploading tax audit report is e-filing portal for the Asst. Year 2013-14 was to utilse the same to concluding quality assessment. This also confirms to e-filing project agreement. Against RTI for seeking information about total of section wise wrong claims reported in Tax Audit Report, CBDT failed to provide the same. If you kindly go through Rule 12A of Income-Tax Rules, you will find that other four Non-CA’s class are also authorised to prepare return. Hence, it does not amounts to “treating a patient by a person who even doesn’t know how to check blood pressure”. It is also well known to the Deptt. that it could not utilise the tax audit report furnished by CA’s since 1984, then why 2nd opinion about expanding the definition of Accountant in DTC by including related professionals.

  5. P S Deshmukh says:

    With all views of the above qualifieds, i put forward my opinion.
    this is not a war like, to curtail somebodys right against infavour of some one. there is established principle of natural justice that, there can be a profit at a cost of other. Once there is settled profession with esteemed repute and command over act, accounts , decision making, there can not come to allow other non qualified professionals ( not to qualify to be a auditor and accountant). one should understand that, mother act of companies , i.e comapny act 1956 and it’s precedent act allows Chartered Accountant to audit both, cost audit as well as financials audit. there has been vast knowledge input is on hand as a result of long continuous research which makes it alien with national interest. foreign bodies like AICPA, CA of Australia are having tie up with the ICAI (financials), they allows chartered accountants to practice in their respective countries. here chartered accountants are considered as a world class professionals, even corporate world prefer chartered accountant than any other sister institute pass out. in the area of direct tax, chartered accountants are handy in conducting tax audit because the audit is nothing but the financial checking, cost accountant ans company secretary having different domains and thy can;’t be considered fit for the audit( remember:- mother company act allows CA to be a secretary of company also).
    Last but not least, when a CA passess out, he makes it through with his dedicated continuous efforts , after 3.5 years of article ship and he is well set due to his practice of study. if other people are allowed to practice as a accountant, then it could be like treating a patient by a person who even doesn’t know how to check blood pressure.
    We strictly oppose the inclusion of such other institute pass outs.

  6. B.S.K.RAO says:

    BASIC CONCEPT OF AUTHORISING “ACCOUNTANT” TO CONDUCT “TAX LAW AUDIT” BOTH IN INCOME-TAX ACT AND DIRECT TAXES CODE AMOUNTS TO CONTRAVENTION LIABLE FOR ACTION UNDER ARTICLE 129 READ WITH ARTICLE 142(2) OF INDIAN CONSTITUTION IN VIEW OF LATEST SC VERDICT IN THE CASE OF BAR COUNCIL OF INDIA VS A.K.BALAJI READ WITH HC VERDICT A.K.BALAJI VS GOVT. OF INDIA. INCOME-TAX ACT/DIRECT TAXES CODE BEING “LAW”, ADVOCATES ALONE ARE ENTITLED TO PRACTICE, PLEAD AND ACT BEFORE THE ASSESSING OFFICERS OF TAX DEPTT. ON DATE “PRACTICE OF ALL INDIAN TAXATION LAW” SQUARELY FALL WITHIN THE PURVIEW OF NON-LITIGIOUS MATTER AND PRACTICE OF THE SAME BY NON-ADVOCATES HAS BEEN SUBJECT TO REVIEW AS PER INTERIM ORDER OF ABOVE MENTIONED SUPREME COURT. THEREFORE I SUGGEST MY ADVOCATE FRIENDS TO ISSUE SECTION 80 CPC NOTICE TO MINISTRY OF FINANCE, GOVT. OF INDIA,
    IN THE ABOVE MATTER.

    I HERE BELOW FURNISH NAME & ADDRESS OF PERSON IN MINISTRY OF FINANCE TO WHOM SECTION 80 CPC NOTICE HAS TO BE SERVED ABOUT PRACTICE OF INCOME-TAX LAW BY ACCOUNTANTS

    SMT.RASHMITA JHA,
    DIRECTOR (V&L),
    CBDT, ROOM NO.253A,
    NORTH BLOCK,
    NEW DELHI-110001

    Tel No.: 011-23092786
    E-Mail : umasingh@nic.in

    I HOPE THAT MY ADVOCATE FRIENDS WILL MAKE USE OF THE ABOVE INFORMATION TO SERVE SECTION 80 CPC NOTICE TO MINISTRY OF FINANCE, GOVT. OF INDIA IN THE ABOVE MATTER

  7. B.S.K.RAO says:

    In the case of Sales Tax Practitioners Association of Maharashtra & Bar Council of Maharashtra, about Audit and Certification of Sales Tax Returns, recently Hon’ble Supreme Court held that “There must be judicial restraint, We will not interfere, Tell legislature to amend the law” – Justice Markandey Katju (SC)

  8. B.S.K.RAO says:

    DEAR ALL ADV/CA/CMA/CS/ITP,

    Audit means “verification”, depending on the purpose they are classified as Energy Audit, Environment Audit, Product Audit, Process Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Here, person conducting audit should be specialized in that subject. Hence, the word “Audit” is not the domain of CA/CMA, Assessing officers of Income-Tax Deptt. who come from different streams conducting audit in scrutiny assessment proceedings are not CA/CMA. In fact, criteria of considering Accountant to conduct Audit under Income-Tax Law or DTC is wrong. Because, it amounts to allowing person writing books of accounts to conduct audit. In conclusion, person specialized in Income-Tax law should issue Certificates/Reports in Income-Tax Act….

    Indian legislature provided special class of persons called Advocates in Advocates Act, 1961 to practice all Indian laws. Therefore, appearance clause is not yet all required in any Indian statute. Bar Council of India Vs A.K.Balaji [SLP (Civil) No(s) 17150-17154/2012] Dt.04.07.2012 (SC) and A.K.Balaji Vs Govt. of India (2012) 35 KLR 290 21.02.2012 (Madras HC) it was clearly held by Hon’ble Supreme Court & Madras High Court that Advocates alone are entitled to practice the Profession of Law both in litigious & non-litigious matters, nullifying the effect of Section 33 of Advocates Act. This also confirms to Section 29 of Advocates Act. As practice of law is the domain of Advocates, it is not only power, but also a prerogative power of Advocates to conduct Tax Law Audit in India in view of latest SC verdict

    FINAL OPINION IN THE INTEREST OF GOVT. REVENUE & ALL TAX PROFESSIONALS

    On careful study of Section 288(2) of Income-Tax Act, 1961 read with Rule 12A of Income-Tax Rules, 1962, it has to be presumed that all five class of person’s viz. Legal Practitioners, Chartered Accountants, Cost & Management Accountants, Company Secretaries & Income-Tax Practitioners possess 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. Further, Accounting Standard framed by ICAI (Financials) & IFRS not 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.

  9. B.S.K.RAO says:

    DEAR ALL FRIENDS,

    Section 44AD, Ceiling on Tax Audit, Uploading of Tax Audit Report and wrong amendment in 2nd Proviso to Section 44AB of Income-Tax Act in Finance Act 2001 are the main cause for above changes reflected in DTC-2013.

  10. B.S.K.RAO says:

    Particulars of Income-tax admitted in tax audit cases for Asst. Year 2012-13 & 2013-14 that relates to return filed in ITR-4, 5 & 6 as provided by CPC, Bangalore as at 28.05.2014 are as under:-

    Particulars……………..Asst. Year 2012-13..Asst. Year 2013-14

    Total Tax Admitted in ITR-4 Rs. 23,986 Crores Rs. 23,952 Crores
    Total Tax Admitted in ITR-5 Rs. 20,712 Crores Rs. 21,556 Crores
    Total Tax Admitted in ITR-6 Rs.2,92,266 Crores Rs.2,34,456 Crores

    Margin derived by farmers is not taxed in Income-Tax Act, but margin derived by next sellers of such agricultural output is taxed in their hands in Income-Tax Act. Presuming the output of corporate assessees reach the ultimate consumer in three stages & considering tax admission in corporate cases & 50% of such corporate assessees do business with non-corporates covered by tax audit, who are in between the corporates & retailers and also considering non-corporates engaged in service sector, I am of the strong view that combined Income-Tax admission as per return filed in ITR-4 and 5 covered by tax audit U/s 44AB should have crossed at least Rs. 15,00,000/-Crores. (Basis being 80:20 ratio of Ag. & Ind. Output).

    Since introduction of Tax Audit by only CA’s in 1984, our esteemed Central Govt. has lost heavily on account of Income-Tax. Therefore, ICAI (Financials) should reimburse the same to the Central Govt.

  11. B.S.K.RAO says:

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

    (1) Cost Accounts=> Manufacturing/Processing Activity..
    (2) Financial Accounts = > Trading Activity..
    (3) Management Accounts => Management Level/Decision Making..

    Note:-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 & Management Accounts. And hence, Institute of Cost Accountants of India should be called full accounting body in India. 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.

  12. B.S.K.RAO says:

    Below is the title given to BSKRAO by learned CA Ashish Goel (UP), See how much CA’s are Civilized ….. Mukesh Ji, Who is this learned idiot ? ….. CA ASHISH GOEL …… 9412657298…. 9760914729

  13. SUDIPTA MAJUMDAR says:

    Chartered Institute demand that Tax Audit is the exclusive domain of Chartered Accountants only. WHAT IS THIS ? THERE IS NOTHING CALLED EXCLUSIVE DOMAIN IN THIS WORLD …..ANY ONE WHO HAS CAPABLE DO ANY THING.

  14. B.S.K.RAO says:

    DEPTT. OF REVENUE, MINISTRY OF FINANCE, GOVT. OF INDIA SHOULD CONSIDER THE CONCERN OF ICAI (FINANCIALS) ABOUT EXPANDING THE DEFINITION OF ACCOUNTANT IN DTC-2013. IF NOT ICAI (FINANCIALS) NOT ONLY ACT WILD/CRUEL, THEY DO NOT ALLOW DTC-2013 TO COME OUT SMOOTHLY. THEREFORE, IT IS BETTER TO ACCEDE TO THE WISHES OF ICAI (FINANCIALS) AND INTRODUCE TAX PRACTITIONERS BILL PREVAILING IN OTHER COUNTRY’S THROUGHOUT THE WORLD TO WIDEN GENUINE TAX BASE OF ASSESSES IN INDIA

  15. TAXWELL says:

    I THINKM DTC2013 MUST BE IMPLIMENTED IN JULY 2014 BUTDGET ITSELF. WIH CERTAIN AMENDMENTS LIKE ADVOCATES RIGHTS IN TAXATION

  16. B.S.K.RAO says:

    MANDEEP SINGH JI,

    You are correct that CAs should restrict their work to writing books of financial accounts of assessees, the authority granted in their statute. They should not interfere in any Indian law matters both in litigious & non-litigious matters in view of latest Apex Court verdict in the case of Bar Council of India Vs A.K.Balaji. Therefore, appearance clause both in Income-Tax Act, Direct Taxes Code & all Indian State & Central Govt. Taxation Laws require deletion. This will happen today or tomorrow definetly.

  17. B.S.K.RAO says:

    TILL DATE, MINISTRY OF FINANCE SAW ONE FACE OF ICAI (FINANCIALS). AS MINISTRY OF FINANCE NOW COME OUT WITH THE PROPOSAL OF EXPANDING DEFINITION OF ACCOUNTANT IN DTC-2013, NOW HON’BLE MINISTRY OF FINANCE WILL SEE ANOTHER CRUEL FACE OF ICAI (FINANCIALS)

  18. B.S.K.RAO says:

    ATUL SIR,

    I DO AGREE DTC-2013 WILL NOT COME, BUT TAX PRACTITIONERS BILL IS THE NEED OF THE HOUR TO PRACTICE OF LAW BY OTHER THAN ADVOCATES. THEREFORE, I AM OF THE STRONG VIEW THAT TAX PRACTITIONERS BILL WHICH IS PREVAILING IN OTHER COUNTRY’S THROUGHOUT THE WORLD, WILL COME IN INDIA ALSO.

  19. K.MUKAMBIKA says:

    DEAR ALL FRIENDS,

    MINISTRY OF FINANCE WILL NOW REALISE THAT ICAI (FINANCIALS) READY TO DO ANY THING FOR MONEY & POWER FROM THE EVENT OF “PUSHING THE DTC-2013” IN LOK SABHA FOR ITS PASSAGE.

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