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CAG Report on Certification by CAs & Mistake Committed

Written By Admin on Tuesday, 23 December 2014 | Tuesday, December 23, 2014

Chapter II: Appreciation of Accountants’ certifications

Certain assessees are required to get their accounts audited by a CA under Section 44AB of the Income Tax Act, 1961 (Act) and submit the report in the Forms prescribed in Rule 6G of the Income Tax Rules, 1962 (Rules). The CAs (also tax auditor) furnish the Tax Audit Report (TAR) in Form 3CA or 3CB and 3CD. In TAR, the CAs are required to furnish various information/details. In addition, the assessee is required to obtain certificates from a CA in the prescribed Forms and furnish them to the AOs to claim various deductions/ exemptions available under the various provisions of the Act. All these reports/certificates are helpful to the AOs in detailed scrutiny of the accounts during the assessment proceedings. It is, therefore, necessary that (a) the AOs collect all the required reports/certificates at the time of assessment and (b) the CAs furnish correct reports/ certificates.

CBDT’s Instruction no. 1959 issued in January 1999 provides that cases where the information given in the TAR is incomplete or non-committal, should be taken up by the CIT to see if these reflected any professional negligence on the part of the Accountant signing the TAR whereupon action is to be taken as per Section 288 of the Act.

Section 288 of the Act provides that if any person who is a legal practitioner or an Accountant is found guilty of misconduct in his professional capacity by an authority entitled to institute disciplinary proceedings against him, an order passed by that authority shall have effect in relation to his right to attend before an income tax authority as it has in relation to his right to practice as a legal practitioner or Accountant, as the case may be.

Cases where inadequate/inaccurate information is furnished in Accountant’s report and additions is made by the AO or at the instance of the audit, this fact should be brought to the notice of the ICAI for initiating action against the Accountant who had certified inadequate/inaccurate information in TAR.

In a Court case8, it was held that not only ‘gross negligence’, but ‘due diligence’ is equally relevant and important criterion in measuring and determining “professional misconduct” in case of a CA. Thus, a CA shall be punishable even if he does not exercise due diligence and it is not necessary for ICAI to prove that there was negligence on the part of the Accountant.

During this performance audit, we came across certain instances:
Where the CAs failed to report full and correct information.
Where the AOs failed to utilize the information available in the reports/certificates submitted to them.

Audit findings on the above issues are discussed under Section A and Section B respectively.

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