ICAI imposes penalty of Rs. 50000 on CA for exceeding tax audit limit; More than 500 Audit Assignments were taken

The Disciplinary Committee of ICAI has imposed penalty of Rs.50000 on a Chartered Accountant named Tarak Nath Datta (M. No. 056676) for professional misconduct on conducting tax audit under section 44AB of Income Tax Act, 1961, which exceeds the limit prescribed by the Institute.

The Committee noted that the Council General Guidelines, No.1-CA(7)/02/2008, dated 8th August, 2008 under Chapter VI “Tax Audit assignments under Section 44AB of the Income Tax Act, 1961 “, provides 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-paras (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 Chattered 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 Acco1mtants in practice, 46 tax audit assignment, per partner in the firm, in a financial year, whether in respect of corporate or non­corporate assesses.

The Committee noted that it was alleged that the Respondent has conducted 296 and 242 Tax Audits during the financial years 2010-11 and 2011-12 which is apparently in violation of the Council General Guidelines, No.1-CA(7)/02/2008, dated 8th August, 2008, wherein under Chapter VI “Tax Audit assignments under Section 44AB of the Income-tax Act, 1961″.

It may further be noted that vide Announcement dated 11.02.2014, hosted on institute’s website, the said limit was increased to 60 in place of 45 for the Financial year 2014-15 and onwards. However, the same is not applicable in the instant matter as the charge in the instant matter pertains to the audit done during the financial year 2010-11 and 2011-12. The Respondent admitted that he had conducted audits in excess of the prescribed limit, however, he disagreed with the figures of total number of tax audits alleged against his name. To support his claim, the Respondent submitted affidavit dated 29th September 2021 on record confirming that he had conducted tax audits of 73 & 71 business entities during the financial years 2010-11 and 2011-12 respectively.

The Committee also observed that the Respondent was doing proprietary practice during the alleged period, hence, he was entitled to do maximum 45 tax audit during each financial year u/s 44AB of the Income Tax Act, 1961. Thus, the Committee noted that total 54 excess audits in aggregate u/s 44AB were conducted beyond the maximum limit specified in the Council General Guidelines.

ORDER:

Keeping in view the facts and circumstances of the case, material on record including written and verbal submissions of the Respondent on the findings of the Committee, the Committee is of the view that the professional misconduct on the part of the Respondent is established. Accordingly, it decided to impose a fine of Rs.50000/-(Rupees Fifty Thousand) upon CA. Tarak Nath Datta (M.No.056676) to be paid within 90 days of receipts of the Order. The Committee also ordered that if the Respondent fails to pay the fine within the stipulated period, his name be removed from the Register of Members for a period of one month.

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