The Institute of Chartered Accountants of India (ICAI) imposed sanctions on a Chartered Accountant (CA) who conducted over 45 tax audits under Section 44AB of the Income Tax Act, 1961, during the financial years 2010-11 and 2011-2012, contrary to the Council’s guidelines.
The charge against the Respondent – CA Buchayya Chetty Atmakuri is that during the financial years 2010-11 and 2011-12, he conducted the Tax Audits under Section 44AB of the Income Tax Act beyond the limit prescribed by the Institute vide Council Guidelines No. 1-CA(7)/02/2008.
The Committee noted that the Council General Guidelines, No. dated 8th August,2008 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, 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 assesses 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 non- corporate assesses.
IN 2014, the number of tax audits a CA can do was raised from 45 to 60 by the Council of the ICAI. However, the financial years under consideration are 2010-11 and 2011-12. Thus, the CA was not supposed to raise the number of the audit assignments under Section 44AB.
The Committee stated that the restriction applies only to the audit assignments under Section 44AB of the Income Tax Act, 1961. There is no restriction as far as the other audit works. Further, Tax audit assignment is a time-bound assignment in the case of those coming under Section 44AB of the Income-tax Act and unlike other professional fields, the work of audit requires precision.
Further, the certificate of audit issued by a Chartered Accountant 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.
Taking note of all these relevant factors, the committee said that it cannot be said that the ceiling of the tax audit limit Is in any way unreasonable or discriminatory. Therefore, there is no basis for the contention that there is Violation of Article 14 or Article 19(I)(g) Of the Constitution of India.
While delivering the order, the disciplinary committee stated that In the process of regulating and maintaining the status of chartered accountant, the measures taken to put a cap on tax audit assignments are intended to maintain and improve the quality of work and cannot in any way be stated to be an unreasonable restriction. Such restrictions are necessary for maintaining the status of Chartered Accountants and also for ensuring quality of work by Chartered Accountants.
The Disciplinary Committee of ICAI concluded that the actions of the Respondent clearly amounted to misconduct as defined by Clause (1) of Part II of the Second Schedule. After considering the case’s details, evidence, and the Committee’s conclusions, the Committee chose to levy a penalty of Rs. 90,000/- on the Respondent.
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