The term ‘accountant’ has been defined in clause (i) of section 92F as under:

‘accountant’ shall have the same meaning as in the Explanation below subsection (2) of section 288.

The above-mentioned Explanation reads as under:

“accountant” means a chartered accountant as defined in clause (b) of subsection (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act, but does not include [except for the purposes of representing the

Assessee under sub-section (1)] 

Therefore, the meaning of “accountant” now applies for the definition of an “Authorized Representative” under section 288(2). As a result, in order to be appointed as an Authorized Representative for an Assessee for any proceedings under the Act, a Chartered Accountant must have a certificate of practice. However, a Chartered Accountant having any other qualification specified in section 288 may be appointed as an Authorized Representative.

Therefore, after this amendment, a Chartered Accountant who does not satisfy both the following conditions cannot be appointed as an Authorized Representative for an Assessee:

  • He/she does not have a certificate of practice; and
  • He/she does not have any other specified qualification.

Section 92E does not stipulate that only the statutory auditor appointed under the Companies Act or other similar statute should perform the examination. The examination can, therefore, be conducted either by the statutory auditor or by any other chartered accountant in practice having certificate of practice.

The accountant should obtain from the Assessee a letter of appointment for conducting the examination as mentioned in section 92E. It is advisable that such an appointment letter should be signed by the person competent to sign/verify the return of income in terms of the provisions of section 140 or by any person who has been authorized by the company to make such an appointment. The accountant should get the statement of particulars, as required in the annexure to the report, authenticated by the Assessee before he proceeds to verify the same. The accountant is required to submit his report to the person appointing him viz. the Assessee.

The Act prohibits a relative or an employee of the Assessee being appointed as an accountant under section 92E. Also, as per a decision of the Council (reported in the Code of Ethics under clause (4) of Part I of Second Schedule), a chartered accountant who is in employment of a concern or in any other concern under the same management cannot be appointed as an auditor of that concern. Therefore, an employee of an Assessee or an employee of a concern under the same management cannot examine the accounts and records of an Assessee under section 92E.

An accountant responsible for writing or the maintenance of the books of account of the Assessee should not examine such accounts. This principle will apply to the partner of such an accountant as well as to the firm in which he is a partner. In view of this, an accountant who is responsible for writing or the maintenance of the books of account, his partner or the firm in which he is a partner should not accept the examination assignment under section 92E in the case of such an Assessee. 

Similarly, an internal auditor of the Assessee cannot conduct the examination if he is an employee of the Assessee. However, an accountant or a firm of accountants appointed as tax consultants of the Assessee can conduct the examination under section 92E.

In the case of an examination, the accountant is required to express his opinion as to whether the Assessee has maintained the proper information and documents, as prescribed, in respect of the international transactions entered into by him. As regards the statement of particulars to be annexed to the report, he is required to give his opinion as to whether the particulars are true and correct. In giving his report the accountant will have to use his professional skill and expertise and apply such tests as the circumstances of the case may require, considering the contents of the report.

The report by the accountant given under section 92E sets forth such particulars as have been prescribed in Form 3CEB. In order that the accountant may be in a position to explain any question which may arise later on, it is necessary that he should keep detailed notes about the evidence on which he has relied upon while conducting the examination and also maintain all his working papers. Such working papers should include his notes on the following, amongst other matters:

  • work done while conducting the examination and by whom;
  • explanations and information given to him during the course of the examination and by whom;
  • decision on the various points taken;
  • the judicial pronouncements relied upon by him while making the report;
  • certificates issued by the client
  • representation letter issued by the management of the Assessee; and
  • annexure to Form No.3CEB duly filled in and authenticated by the client.

The extent of check undertaken would have to be indicated by the accountant in his working papers. The accountant is advised to design his examination programme in such a manner, which will reveal the extent of checking undertaken by the accountant and ensures that adequate documentation in maintained in support of the information being certified by him.

The accountant must ensure that he receives a standard Management Representation Letter in respect of all oral representations explicitly or implicitly given to him. The letter should indicate and document the continuing appropriateness of the representations made to him and reduce the possibility of any misunderstanding concerning the matters which are the subject of the representations. Further, in relation to certain transactions, such as deemed international transactions, free of cost services/ goods, etc. the extent of reliance placed by the Accountant on the Assessee is higher as compared to transactions such as sales/ purchase of goods, provision of services, etc. In these cases, while the Accountant should exercise due professional judgement and care, the onus to identify and disclose such transactions (i.e., deemed international transactions, free of cost services/ goods, etc.) is with the Assessee. Therefore, in such scenario Accountant is entitled to place reliance on management representation letter issued by the Assessee. However, it may be noted that in respect of matters that may be directly verified by the accountant, mere obtaining of a management representation letter will not be sufficient compliance with the Generally Accepted Auditing Standards.

Where Accountant’s Report is issued to non-resident Assessee and such non-resident is not statutorily required to maintain books of accounts in India under any law, the Accountant should place reliance on Form 26AS, invoices, agreements etc. The Accountant may also place reliance on documents, information and accounts maintained by the Indian Assessee with whom the non-resident Assessee has entered into international transaction(s).

Paragraph 3 of Form No. 3CEB requires the accountant to state whether the prescribed particulars are furnished in the annexure to the report and whether in his opinion and to the best of his information and according to the explanations given to him, they are true and correct. The accountant may have a difference of opinion with regard to the particulars furnished by the Assessee and he has to bring these differences under various clauses in Form No.3CEB. The accountant should make a specific reference to those clauses in Form No. 3CEB in which he has expressed his reservations, difference of opinion, disclaimer etc. in this paragraph.

In case the prescribed particulars are given in part or piecemeal to the accountant or the relevant form is incomplete and the Assessee does not give the information against all or any of the clauses, the accountant should not withhold the entire report. In such a case, he can qualify his report on matters in respect of which information is not furnished to him. In the absence of relevant information, the accountant would have no option but to state in his report that the relevant information has not been furnished by the Assessee. As a good practice, the Accountant should provide a note detailing the rationale of Accountant. Such note should be provided along with the Accountant’s Report.

Accountant should communicate basis for each position taken to the Enterprise in writing.

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