Cost Auditors make representations for Tax Audit Eligibility [Read Representation]

A request has been made before the Chairman of Select Committee of Income Tax Bill 2025 to include Cost Accountants in the Definition of “Accountant” in the Income Tax Bill 2025.

Former Vice President of ICMAI, CMA Rakesh Bhalla has sent a representation on the matter for tax audit eligibility for the cost accountants.

The Representation Read as Follows:

I am CMA Rakesh Bhalla, Vice President (2022-23) ICMAI, Chairman Direct Tax Committee2019-22(CMA Institute), Chairman of ASSOCHAM Chandigarh, serving as CFO at SML ISUZU LTD, and working as Convenor of the Professional Cell, BJP Chandigarh State, also Member of Advisory Council Chandigarh (UT).

At the outset, I extend my heartfelt gratitude on behalf of all the organizations I am associated with for a historic budget presented by the Government. This budget has brought immense satisfaction to every section of society, particularly the Middle Class, Yuva, and Nari Shakti, as their interests have been well safeguarded.

I also take this opportunity to sincerely congratulate to entire team in the Finance Department for your relentless hard work in preparing the modified Income Tax Bill, presented in the Lok Sabha on 13/02/2025 and subsequently referred to the select committee under your Chairmanship. This new bill not only simplifies the complexities of the Income Tax Act but also enhances transparency, strengthens tax compliance, and broadens the tax base.

However, I would like to bring to your attention a long-pending issue regarding the definition of “Accountant.” As per Clause 2, only Chartered Accountants are eligible, which contradicts the government’s earlier intent, particularly since Hon’ble Prime Minister Shri Narendra Modi Ji assumed office 11 years ago. The guiding principle has always been that, apart from three designated audits—Statutory Audit by Chartered Accountants, Cost Audit by Cost Accountants, and Secretarial Audit by Company Secretaries—all other taxation-related assignments should be open to professionals from any of the three institutes.

This amendment is crucial –

1. It is also predominant to mention here that in earlier DTC proposals the recommendations by the standing committee it was proposed to widen the scope for inclusion of Cost Accountant / Company Secretary in the definition of Accountant.

2. To prevent monopolistic and restrictive practices, which often lead to inefficiency, complacency, and corruption.

Our institute, the Institute of Cost Accountants of India (ICAI-CMA), has already made detailed presentations to the ministry on this matter. For your ready reference, I am providing a brief summary outlining the current situation and the justified demand of Cost Accountants in India.

We sincerely hope for your kind consideration and necessary action on this important issue.

Gist

1. Proposed Situation as per IT Bill 2025

As per explanation below sub-section (3b) of section 515 of the Income Tax Bill, 2025, “accountant” means a Chartered Accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice.

2. Demand of the Institute of Cost Accountants of India

Modification of the term “Accountant” as appearing in the Explanation below sub-section (3b) of section 515 of the Income Tax Bill, 2025 to include the “Cost Accountants”.

3. Merits of the Demand

• Government of India has considered both professional bodies viz. Institute of Chartered Accountants of India and Institute of Cost Accountants of India at par to represent the assesse as authorized representative u/s 288 of the Income Tax Act, 1961 and also in new Bill 2025 Section 515 sub-section (3b).
• Recommendation by the Parliamentary Committee to include Cost Accountants in the definition of ‘accountant’ in its 49th Report of 15th Lok Sabha, relating to “The Direct Taxes Code Bill, 2010”.
• Recognition at par under all other Statutes-
  • Goods and Services Tax [GST]: {Central Goods and Service Act define auditor. Under section 35(5) of CGST audit of accounts shall be conducted by Chartered Accountant or Cost Accountant. Similarly
    special audit u/s 66 (i) of CGST shall be conducted by Chartered Accountant or Cost Accountant}
  • Customs Act
  • Erstwhile Central Excise Act
  • Service Tax Act
  • Certifications under VAT (Delhi VAT Act)
  • Tax Return Preparer (Amendment) Scheme, 2018
• Role of Cost Accountant is important for the following areas also-
  • Computation of arm’s length price under section 92- cost plus method, profit split method and transactional net margin method require calculations based on the cost accounting principles
  • Tax Audit under Section 44AB
    • Cost Accountants are allowed to undertake financial audit of cooperative societies in certain States
    • All figures required to be furnished in Form CD are to be computed and data as required by the Tax Authorities and certify its correctness.
    • It would be more prudent if the tax audit of an entity is done by an accountant [i.e.by a cost accountant] other than the chartered accountants who has already conducted the financial audit of the same entity.
• Recognition of ‘Cost Accountant’ by US Laws for doing financial audit of US-SEC Listed Companies.
• Indian Cost Accountants’ firms registered with the PCAOB are permitted to undertake statutory financial audit of all US-SEC listed companies operating anywhere in the world.
• MOUs entered by the Institute of Cost Accountants of India

Both these Institutes viz. Institute of Chartered Accountants of India and Institute of Cost Accountants of India are members of all international bodies of accountants, viz., International Federation of Accountants (IFAC), Confederation of Asian and Pacific Accountants (CAPA), and South Asian Federation of Accountants (SAFA).

Hence, internationally, both are known as ‘accountant’. Hence, same treatment or recognition is to be accorded to the members of both these National level Accounting Institutes set-up by the Parliament of India.

List of MOUs entered by the Institute of Cost Accountants of India

• • Chartered Institute Of Public Finance And Accountancy (CIPFA)
  • Chartered Institute for Securities and Investment (CISI),
  • National Institute of Accountants, Australia
  • Institute of Professional Accountants and Auditors of Russia (IPAR)
  • Omar Zawawi Establishment LLC (OMZEST)
  • Institution of Valuers
  • Competition Commission of India
  • Bharatiya Mahila Bank
  • Genpact
  • Development of MSMEs – Venture with ASSOCHAM
  • Tata Consultancy Services Ltd
• Both CA and CMA qualifications are equally recognized by the Government of India for entry into the Indian Cost Accounts Service.
• Both these professionally qualified accountants viz. Cost Accountant and Chartered Accountant pass through the same course curriculum, pedagogy, and practical training.
• Syllabus of Cost Accountancy include full papers on Corporate Laws, Financial Accounting, Direct Taxation, Indirect Taxation, Auditing, and Financial Management.
• Similarity in regulation 166 of Chartered Accountants Act & 111 of Cost & Works Accountants Act.
• Members of both the Institutes viz. the cost accountant and chartered accountant are governed by exactly the same code of conduct and disciplinary mechanism.
• Both the Institutes have issued Accounting and Auditing Standards that are binding on the Members in practice.
• In Companies Act 2013, section 138 defines that Internal Auditor shall be a Chartered Accountant or Cost Accountant.
• Globally, the term ‘accountant’ includes all accountants that are granted professionally qualified degrees by their respective national accounting bodies.

4. Adverse Impact of Monopoly by the Chartered Accountants

Monopolistic and restrictive practices breed inefficiency, complacency and corruption.

Thus, allowing monopoly of all tax audits and various certifications required under the Income Tax Act only to the Chartered Accountants is neither in the best interest of the Department nor it benefits the assesse.

Allowing Cost Accountants to also undertake tax audit & certification work under the Income Tax Act will surely bring in healthy competition that would benefit the tax administration system as well as the assesses, especially the MSME assesses.

For Representation Download PDF Given Below