ICAI Reprimands CA for Wrongly Certifying Unabsorbed Depreciation in Tax Audit Report

The Disciplinary Committee of the Institute of Chartered Accountants of India examined a complaint filed by Shri Je Kook Ryu, Managing Director of M/s Glotech Mold India Pvt. Ltd., Pune, against CA Upendra Vasant Bodas (M. No. 041343).

The allegation related to the Tax Audit Report for AY 2015-16, wherein unabsorbed depreciation of Rs. 2,00,89,668/- was reported as available for set-off, despite having been fully adjusted in AY 2009-10. The complainant alleged that this resulted in an understatement of taxable income and tax demand.

Main Issue: Whether certifying incorrect unabsorbed depreciation in Form 3CD without proper verification amounts to professional misconduct under Item (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949.

Committee’s Order: The Committee observed that although there was no conclusive evidence that the Respondent filed the income tax return, he had admittedly signed and certified the Tax Audit Report for AY 2015-16. A comparison of audit reports for AY 2014-15 and AY 2015-16 showed that depreciation figures had been incorrectly clubbed, resulting in previously set-off depreciation being shown again as available.

The Committee held that a Tax Auditor cannot mechanically rely on software-generated data without independent verification. Certification of statutory reports requires application of professional judgment and due diligence. The Committee concluded that the Respondent failed to exercise due care and was guilty of professional misconduct under Item (7) of Part I of the Second Schedule. He was accordingly Reprimanded under Section 21B(3)(a) of the Act.

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