Penalty on professionals for furnishing incorrect information in statutory report or certificate

Many people always wonder that all the compliance and prosecutor restrictions will be on taxpayers and not on the professionals who are handling their files. But this is not the case, all the professionals are also held responsible for all the certification work done by them. Today we will have a little discussion on it in this article.

The thrust of the Government in recent past is on voluntary compliance. Certification of various reports and certificates by a qualified professional has been provided in the Act to ensure that the information furnished by an assessee under the provisions of the Act is correct. Various provisions exist under the Act to penalise the defaulting assessee in case of furnishing incorrect information. However, there exist no penal provision for levy of penalty for furnishing incorrect information by the person who is responsible for certifying the same.

In order to ensure that the person furnishing report or certificate undertakes due diligence before making such certification, government has inserted a section 271J so as to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct him to pay a sum of ten thousand rupees for each such report or certificate by way of penalty.

It is further proposed to define the expressions “accountant”, “merchant banker” and “registered valuer“. It is also proposed to provide through amendment of Section 273B that if the person proves that there was reasonable cause for the failure referred to in the said section, then penalty shall not be imposable in respect of the proposed section 271J.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

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  1. bharat says:

    Mostly All CA’s (may there are honest also) are making false financial statement by advising client to make false Expenses or ignoring certain expenses which are belived to be not admissible to evade tax. For that they are charging. I think that they all are punished with higher penalties, as they are harming government revenue, i. e. What ever the revenue loss should be recovered from CA with 100% penalties.

  2. subash chandra dwibedy says:

    All CAs must apply their Viveka and must stand for truth while discharging their professional obligations.
    I fully agree to the statute of penalizing wrong doing.
    But it should be made applicable to all professions.

  3. subash chandra dwibedy says:

    Why not a CA must apply his Viveka while providing his professional services ? I fully subscribe to the new statute.
    My view is that it must apply to all professions equally.

  4. CA Gajanan Kondhare says:

    Such type of penalty cannot be applicable only to only one professionals or community. All persons who are involved in wrong doings has to be covered and the person who have authority to punish should be independent one

  5. GURNANI ISHWAR G. says:

    Personally I am in favour of such strict rules. Such rules should be applied to all professions like Doctors, Lawyers, Engineers etc. We Chartered Accountants should not be singled out to give such treatment.
    Recently Hon. Supreme Court gave the verdict that Lawyers and Doctors can not give guarantee for the result of their efforts and advise, so they can not be penalized even if the advice given by them is wrong.

  6. Ravi Khurana says:

    The Government in conjuction with Bankers and tax authorities can easily identify the Statutory auditor who never declares in the audit report the amount of tax arrears i e income tax, tds, service tax,, etc,
    Majority of the companies who have fraudulently siphoned off the funds have not deposited the above dues and have become NPA’S.
    All these Statutory Auditors should not only be penalised but their names removed from membership.

  7. CA. G. SURYA PRAKASH says:


  8. CA MBG Tilak says:

    when there is no accountability for most of the corrupt bureaucracy, corrupt political bosses,corrupt & incompetent judiciary in our country as of now & infuture as it appears to be ,how can the Finance Minister unilaterally enforce stringent accountability for Chartered Accountants alone?The recent finance act has done hardly done any thing in this direction of setting right corrupt & incompetent Govt”s machinery!Perhaps it may be the beginning of dooms day!The Council of the ICAI ought to strongly protest with Finance Minister,being in Independent position as Chartered Accountants in the Country shunning appeasement policies in the interests & prestige of profession

  9. Dhruv Pandey CA says:

    We strongly oppose this penalty imposed by new budget under provision of new section 271J. It is a tool of authority to litigate the matter without reasonable cause. We CA have our inherent limitations can not go beyond the books of account. This provisions shall be removed immediately.

  10. Saji P. Chacko says:

    I welcome this proposal in the Union Budget 2017. Also, I fully agree to Dr.Arun Draviam in his suggestion that this should not be restricted to CAs alone, instead it should be applied to all professionals making similar certifications, or making their clients to file affidavits, declarations, etc. like Advocates, Company Secretaries, Doctors, Tax Practitioners, Chartered Engineers, etc. etc.
    Similarly there should be unification of fees charged by the professionals for the services rendered. Many professionals, especially advocates charge clients ‘as the wind blows’ which is tantamount to looting the helpless clients. Though there is provision to complain to the governing professional body like the Bar Council, in a very vast majority of the cases, the aggrieved clients do not go for such unpleasant courses of law; many a times the client wont be able to air his or her displeasure or objection at least to the professional himself, but to gulp the anguish.

  11. Dr. Arun Draviam says:

    It is a welcome measure that CAs and like professionals will be subjected to penalty for wrong certification of any document, in the context of the application of the law relating to Income Tax. It is however, wrong to restrict the application of this penal provision to compliance with income tax law. It would be better to insert such provisions in the conduct rules of the professional body viz. the Institute of Chartered Accountants of India. In that case, it will be easier for the Banks that occupy a crucial place in the digital economy, to track the updating of KYC. Similar, provisions should be made in the conduct rules of the Institute of Company Secretaries of India whose member undertake certification of Memorandum & Articles of Associations of Companies, Cooperatives and Societies, that have duty towards the public. The next target should be to bring under scrutiny the actions of Advocates who make their clients file wrong affidavits or give false evidence in courts of law.

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October 2021