RECENT CAG REPORT
The Comptroller and Auditor General Report no.32 of 2014 has taken the list of Chartered Accountants who have signed tax Audit cases under Income tax Act of more than 400during FY 2012-13 and there are 22people in the list.
ARBITRARY LIMIT OF 45/60 TAX AUDITS
There exists a limit of 45 Tax Audits (now 60) fixed by CA Institute arbitrarily without any logic is my opinion.
FOR EXAMPLE
a) No. of CAS Signing = 66000
b) No. of Audit Cases permitted for each CA= 45
Total (a*b) 29, 70,000
So, there should be only 30 Lakh Tax Audit cases all over India for FY 2012-13 or may be 66000x60 = 40 Lakh cases for whole of India! But, there are 10 lakh Companies in India to Compulsorily File Tax Audit Report besides other Tax Audit Assessees!
CAG COMMENTS
“The information available with DGIT (Systems) has not been shared by ITD to ICAI nor did ICAI approach ever to ITD to furnish such information.
In view of lack of monitoring of number of Tax Audit assignments either by ITD or ICAI the purpose of maintaining the quality of tax audit have suffered”
How did CAG find out the fall in Quality of CAS ? By checking the Books of Accounts audited by us or scrutiny of returns filed by CAS ? The basic principle in Auditing is evidence, and not guesses and surmises!
MORE THAN 400 LESS THAN 400
According to CAG those who have done less than 400 Tax Audits are Qualitative and more than 400 are not.
Besides the Arbitrary tax audit limit of 60 fixed by ICAI, CAG also fixes another yardstick to check the quality of Tax Audits and CAS!
NO SUCH LIMIT IN SIMILAR PROFESSION
I do not find any limit fixed for any other professionals in practice like, Medicine, Engineering or Legal field. Imagine that IMA says that a Surgeon should perform only 60 surgeries in a year (or) attend only to 60 patients per year.
Bar council does not prescribe any limit for number of cases to be attended by a Lawyer. Nor does the Engineers association.
ALREADY DECIDED ISSUE
In K.Bhagavatheeswarn Vs ICAI (1999) 237 ITR 208 (Mad) Madras High Court has categorically stated that Prescribing limit for Tax Audit cases is Un constitutional, arbitrary and illegal. There is no need to reinvent the Wheel again!
CASE BEFORE SUPREME COURT
The case of Mr.Bhagavatheeswaran was appealed by CA Institute in the Supreme Court Civil Appeal no.7208/7209 of 2005 which was subsequently with drawn by CA Institute that any aggrieved can represent his case before CA Institute and that the Institute will consider his case and pass appropriate order.
The Supreme Court has also stated that any member whether made any representation or not, would have a right to challenge it also.
MORE TAX AUDIT MEANS MORE REVENUE
A Chartered Accountant doing more Tax Audit and filing returns brings in more revenue to Government Exchequer which under any Circumstances cannot be denied or restricted
LIMIT NOT APPLICABLE
According to CA Institute the limit of 60 Tax Audits (FY 2014-15) is not applicable to
. Sec 44AD (Income tax)
. VAT Audit prescribed by State Governments.
. Sec 44 AE (Goods Carrying Vehicles)
What is the Logic behind this needs to be explained. The Quality check for CAS, is it not applicable in these three audits?
EFFICIENCY AND KNOWLEDGE ISSUE
Auditing is a subjective concept. Efficiency and knowledge play an important role. A Chartered Accountant can do Tax Audit up to any number of cases per day based on these.
SIXTY SIXTY EVER
The limit of 60 Tax Audit cases (FY 2014-15) 30 years in practice, a CA should have only 60 Tax Audit cases, Is it Logical?
INCOME TAX PRACTITIONERS
This is a recognized Qualification as per Income Tax Act. They do not have power to sign Tax Audit cases. When an ITP approaches CA for Tax Audit, the CA will be forced to refuse it because of upper limit?
There is every possibility, ITP may be forced to file below Rs.1 crore which is obviously a loss of revenue to exchequer!
NO LIMIT UNDER INCOME TAX ACT
Income tax Act nowhere prescribes any limit on Tax audit cases filed under Sec 44AB.
WHO WILL SIGN?
If a Chartered Accountant can sign only up to 60 Tax Audits, the points to be noted are
. Number of Corporates
. LLP
. Assessees having turnover above 1 crore all over India
. Societies, Trust, HUF, Firms, AOP, BOI
. Professionals with Gross receipts above 25 Lakhs- how many?
One has to total everything and divide by the number of Chartered Accountants. There may not be sufficient CAs!
CLIENT'S CHOICE
Choosing a Chartered Accountant for Tax Audit is the choice of Assessee only. One cannot force him to choose another Auditor because the Auditor has exhausted 60 Tax Audits.
FY 2012-13
For a Chartered Accountant to do 45 Tax Audit the remuneration fixed by the CA Institute will not be sufficient even to cover the expenses of his office.
A Fresh, Chartered Accountant in Employment earns 9 Lakhs to 12 Lakhs per annum at the age of 21 (or) 22.
CONCLUSION
It is time that the limit on Tax Audit cases is abolished by the apex Institute on Audit and Taxation!
Courtesy by:
CA R. MURALIDHARAN,
ERODE
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