Recently a CAG report said the failure on behalf of the chartered accountants hired by the income tax department to furnish authentic tax information has resulted in levying of lower amount of income tax by the government.
A report of the official auditor revealed that cases where the chartered accountants failed to report genuine information pointed out shortfall of Rs 2,813.11 crore of taxes and where the Assessment Officers failed to use the information provided to them in 102 reports submitted to them resulted in shortfall of more than Rs. 1 crore of taxes.
The audit covered assessments made during the financial years 2010-11 to 2012-13 and till the date of audit.
In most of the audit observations it was categorically stated that the assessment records of the previous assessment years were also referred wherever it was found necessary.
Responsibility of the chartered accountants:
The chartered accountants furnish the Tax audit report under the provisions of section 44AB of the Income Tax Act, 1961 after the introduction of tax audit provision. The law provides that they should discharge their responsibility efficiently and effectively. A number of amendments have been made in the Act which focused on tax audit reporting requirements which was followed by the issuance of supplementary guidance.
The purpose of introduction of audit under section 44AB was to check whether the books of account are properly maintained by the assessees and they honestly reflect the income of the taxpayers and claims for deduction they make are genuine. Accordingly this responsibility was imposed upon chartered accountants.
Latches found on the part of the CAs:
More than 18% of the chartered accountants for the financial year 2013-14 issued more tax audit reports than were prescribed by the Institute of Chartered Accountants of India. There were also cases where the chartered accountants did not mention their membership numbers.
However the Income tax department did not refer any case to the Institute of Chartered Accountants of India for taking action against such chartered accountants.
The report also said that the chartered accountants failed to provide authentic information regarding allowance of depreciation in many cases as a result of which there was a decrease in the levy of tax amounting to more than Rs. 450 crore.
The Income Tax auditors also did not report proper information relating to carrying forward of loss or depreciation for which there was irregularity in carried forward loss or depreciation allowance in many cases resulting in shortfall in levy of tax of Rs. 557.79 crore.
The report also highlighted the existence of lacunae in the income tax forms which require modification so that total details of information of the affairs of assessees can be traced and income tax can be levied correctly.
It was further mentioned that the chartered accountants are considered as facilitators for the Income Tax Department in applying the laws provided in the Income Tax Act, 1961. The tax audit reports or certificates which the chartered accountants normally issue are valuable reference guides to the Assessing Officers at the time of making assessments.