The Disciplinary Committee of ICAI has imposed penalty of Rs.5 Lakh and removed Chartered Accountant from Register of members for a period of 03 (Three) Months for professional misconduct on conducting tax audit under section 44AB of Income Tax Act, 1961 beyond the limit prescribed by the Institute during financial years 2010-11, 2011-12 and 2013-2014.
Findings of the Committee
The Committee noted the following:-
Section 44AB of the Income-tax Act, 1961 came into force w.e.f. 01.04.1985. The Government of India, Ministry of Finance, Department of Revenue (CBDT), New Delhi, examined the tax audit reports submitted by Chartered Accountants in a large number of cases, pursuant to introduction of Section 44AB, in the next two years or so. It was noticed by the Government that some of the auditors were completing around fifty (50) audits in a month, which resulted in deterioration of the quality of audit. It was therefore suggested to the Government by the Tax Authorities in the field, that the Government may fix the maximum number of audits, which an auditor may be allowed to undertake under the provisions of Section 44AB of the Income-tax Act, 1961, on the same lines, as Section 224 of the Companies Act, 1956, whereby the number of company audits which a Chartered Accountant could do had been restricted to twenty (20).
Later Council decided to put a ceiling of thirty (30) tax audit assignments w.e.f. 1st April, 1989. Subsequent to the above, the matter was considered number of times by Council with regard to revision of ceiling on the number of tax audits and the same was increased from 30 to 45 in the year 2007. Tax audit limit further increased to 60 in the year 2014 by the Council of the Institute. Considering that the turnover of the limit of tax audit has been increased from Rs. 40 Lakhs to Rs. 1 Crore in recent years, the Council decide.
The Committee noted that under Chapter VI "Tax Audit assignments under Section 44AB of the Income tax Act, 1961″, provide that a member of the Institute in practice shall not accept, in a financial year, more than the "the specified number of tax audit assignments" under Section 44AB of the Income-tax Act 1961. Further, in Explanation given in Para 6.1, in sub-para(a) & (b) states that :
"the specified number of tax audit assignments" means –
(a) in the case of a Chartered Accountant in practice or a proprietary firm of Chartered Accountants, 45 tax audit assignments, in a financial year, whether in case of corporate or non-corporate assessees and
(b) in the case of firm of Chartered Accountants in practice, 45 tax audit assignments per partner in the firm, in a financial year, whether in respect of corporate or noncorporate assessees.
The Committee further noted that the tax audit assignment under Section 44AB of the Income-Tax Act 1961 is a time-bound assignment unlike other professional fields, and the work of audit requires precision. The certificate of audit issued by a Chartered Accountant under Section 44AB of Income Tax Act 1961 has statutory force for the purpose of Income Tax whereas a Chartered Accountant in practice is free to accept audits under Sections 44AD and 44AE of the Income-tax Act, 1961 without any limit. Thus, considering all these relevant factors, the Committee viewed that the ceiling of tax audit limit is not in any way unreasonable or discriminatory.
The Committee, accordingly, after consideration of all relevant facts and material on record as also the nature of tax audits, had found such a ceiling to be necessary in the larger interest of the profession and the guidelines on the tax audit assignment under Section 44AB of the Income Tax Act, 1961. The Committee noted that the Respondent had violated Council guidelines bearing No.1-CA (7)/02/2008 dated 8th August, 2008 by conducting tax audits under section 44AB of Income Tax Act, 1961 in excess of number stipulated in said guidelines.
Order
Keeping in view the facts and circumstances of the case and material on record, the Committee , ordered that the name of the Respondent i.e. CA Rajender Kumar (M. No. 084956), Palwal be removed from Register of members for a period of 03 (Three) Months and also imposed a fine of Rs. 5,00,000/- {Rupees Five lakhs} which shall be paid within a period of 03 (Three) months from the date of receipt of this Order.
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