ICAI Disciplinary Committee Reprimands CA for Incorrect TDS Reporting in Form 3CD

A complaint was filed by CA Umesh Chandra against CA Amit Kumar Puniani regarding the audit of M/s Om Prakash Rathi & Co. for FY 2019-20. It was alleged that Rs. 11,50,000 was paid to Ms. Radha Gupta/Aggarwal, of which Rs. 10,50,000 was claimed as expenditure without deduction of TDS. The amount constituted over 70% of the firm’s total expenses and was inconsistently reflected as “Salary” in the Profit & Loss Account and as “Professional Charges” in the annexure.

The Respondent contended that the amount represented professional charges for outsourced services, that he relied on partners’ explanations, and that the classification difference was clerical. He argued that verification of genuineness was not required and that the recipient had offered the income to tax.

Issue Raised: Whether the Respondent failed to exercise due diligence while certifying Form 3CD by reporting non-applicability of TDS provisions on a materially significant payment of Rs. 10,50,000.

Committee’s Order: The Disciplinary Committee of the Institute of Chartered Accountants of India held that the Respondent was guilty of professional misconduct. It observed that Rs. 10,50,000 formed a substantial portion of total expenditure and was classified as professional charges, yet Clause 34(a) of Form 3CD stated that TDS provisions were not applicable. The Committee also noted inconsistency in presentation and absence of supporting documentation such as invoices or agreements.

The Committee held that incorrect reporting of TDS applicability in a certified tax audit report amounts to lack of due diligence. Once a Chartered Accountant signs Form 3CD, professional responsibility attaches. Accordingly, under Section 21B(3)(a) of the Chartered Accountants Act, 1949, the Respondent was found guilty under Clause (7) of Part I of the Second Schedule and was ordered to be Reprimanded.

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