Nagpur, February 3, 2017

The budget proposal to fine chartered accountants (CA), for giving wrong certificates for their clients has left the professionals miffed. The finance bill calls for pulling up CAs, merchant bankers and registered valuers for giving incorrect certificates or reports.

The power has been vested in the hands of income tax department's assessing officer or commissioner (appeals). They can levy the fine, if, during the proceedings, it is found that a wrong certificate or report has been submitted.

Apart from conducting the statutory audit of a company's accounts, CAs give a slew of certificates on the basis of which tax exemptions can be availed. Even the tax audit reports of the business concern are signed by CAs.

The section 271J of the finance bill, proposed in the budget, calls for levying a penalty of Rs 10,000. The said fine is for each wrong certificate given in reference of a client, say chartered accountants.

CAs, who say this gives arbitrary powers to the department, plan to take up the issue with the finance minster Arun Jaitley. "We have taken up the matter with Institute of Chartered Accountants of India (ICAI) head office and a memorandum will be soon submitted to the minister," said Julfesh Shah who heads ICAI's committee on economic affairs.

Shah said, in several certificates, it is also a question of discretion. The assessing officer can have an opposite view. This will give a free hand to the officer for imposing a penalty on the chartered accountants. ICAI already has strict provisions to deal with professional misconduct.

Certificates are given for a number of purposes such as a certificate for eligibility of industrial undertaking, qualifying for a housing project, tax audit and much more. The professionals have to depend on the information provided by the client. In case of misinformation by clients themselves, the CAs cannot be held responsible, he said.

"Sometimes the facts are missed on account of oversight or wrong information given by the clients. After all the professionals have to depend on the data provided by the client. In such a case, it would be harsh to impose a fine on us," said Naresh Jhakotia, a chartered accountant.

Kailash Jogani, a chartered accountant and president of Nagpur Chamber of Commerce, said there is no need to have the penalty. The ICAI and income tax laws already have a provisions including those for prosecution in case of major frauds, as it happened in Satyam case.

[The Times of India]