12 December 2014
Dear Experts, I am associated with a Pvt Ltd company as Deputy Manager in Finance & Accounts.
My query is: My company Statutory auditors are also doing as tax auditors and filing Income tax returns on behalf of us.
Recently, my company faced due diligence audit in the process of merger with another company. The due diligence auditors pointed out errors committed by tax auditors in the last 3 years Income tax computation and arrived to pay additional tax liability to the tune of 60 Lakhs. We informed the same thing to our tax auditors about the error occurred in computation of income and tax liability. But their contention on the above issue is overlook happened at our end also.
Now, Just I want to know, Who is the ultimate person responsible for preparation of Computation of Income and tax liability and who is responsible for any mistakes or errors committed.
My contention is, Auditors are professionally qualified and experts in preparation of IT returns. Being appointed as tax auditors of the company, they are also held responsible for preparation of accurate IT computation and filing of returns. We are simply relying on them on the assumption that they are into the filed of full time practice and they know better than us because of full time involvement in the field of practice. we are limited to provide the information as requested by tax auditors.
Now, just I want to know, who is the final person responsible for this error. Is it really again company responsible to check the errors done by tax auditors. If that is the case, then why to appoint and pay tax audit fees to them.
Please reply to the query with relevant guidelines provided by ICAI so that we can explain the same to Due diligence auditors.
12 December 2014
Ultimately the concerned COMPANY is held as responsible. In your case, an amount of 60 lakh itself suggests that there is SOME LAW point in the query narrated by you. Can you pleae share the same?
12 December 2014
Dear Amol, Thanks for the reply. If you dont mind, could you please clarify the exact responsibility of tax auditor in preparation of computation of Income and arriving the tax liability thereon.
Auditors are expected to have high level of expertise and knowledge and general tendency to capture the mistakes committed by accountants. It is the responsibility of Auditor to point out the mistakes and caution the company in cases where accountant deviates from the system and law.
Is it company's responsibility also to crosscheck the work performed by the auditors?
12 December 2014
In our case, the responsibility of preparing the Income tax computation and e-filing of returns given to them. They are also charging filing fee and other charges in addition to Tax Audit fees.
I suppose, charging separately for the above services itself accepting beyond the role of Tax auditor.
13 December 2014
01. Yes, You are right.The tax computing person should share the responsibility. 02. Can you please share the mistake/error committed?
13 December 2014
We have Domestic income as well as Foreign income wherein withholding tax also deducted.
My auditors are using purchased software for filing of IT Returns wherein tax computation will be generated from the system itself. As per system generated computation, the tax has been calculated at the rate wherein withholding tax rate deducted (say 10% in our case) on the export income where withholding tax deducted, in fact it should be 30% as per Indian corporate tax. Auditors blindly believed on the system generated computation and taken as final tax liability. We have also informed to them on the issue of taking lesser rate of tax (i.e 10%) for that particular export income where withholding tax deducted by foreign company, for arriving the tax liability. But they replied, by quoting section 90,it works out to that rate. But, now they came up again stating that noticed the absurdity in the tax computation relating to Incomes received from Outside India, where in withheld tax rate is wrongly applied on the income separately apart from relief being claimed as per DTAA.
Could you please cross check that is there any provisions in the income tax,where withholding tax deducted on foreign income, the rate should be taken as per DTAA or the rates as per Income tax act?
13 December 2014
You mean to say, in our case, as per auditors computation, the rate of income tax on foreign income where withholding tax deducted to be taken as 10% only and not as 30% as per India income tax act. In such case, India is losing 20% of tax on the foreign income. Note: We have a valid DTAA agreements where withholding tax deducted on foreign income.
13 December 2014
WHT is a sort of ADVANCE TAX. It is NOT the final computation of income tax. The Company has to pay the ADVANCE tax on or before 15/06, 15/09, 15/12, 15/03, after considering WHT if any. Income tax computation shall be done accordingly.
15 December 2014
I hope you tax assessment will also pending then you can file the rectification u/s 154 to your area income tax office. if your tax liability excess deposit then you can get the refund of the tax
15 December 2014
I hope you tax assessment will also pending then you can file the rectification u/s 154 to your area income tax office. if your tax liability excess deposit then you can get the refund of the tax
15 December 2014
I hope you tax assessment will also pending then you can file the rectification u/s 154 to your area income tax office. if your tax liability excess deposit then you can get the refund of the tax
15 December 2014
I hope you tax assessment will also pending then you can file the rectification u/s 154 to your area income tax office. if your tax liability excess deposit then you can get the refund of the tax
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