Penalty proposed in Budget u/s 271J on CAs: Valid or invalid?

CA Saba Naaz , Last updated: 06 February 2017  
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After the presentation of the new Budget on 1st February, 2017 by the Finance Minister of India, Shri Arun Jaitley. Every CA professional is discussing the Penalty proposed by him on the Chartered Accountants u/s 271J of the Finance Bill,2017. Here's the extract from the notes of the Finance Bill, 2017:

"Clause 86 of the Bill seeks to insert a new Section 271J in the Income-tax Act relating to penalty for furnishing incorrect information in reports or certificates.

It is proposed to provide that if an accountant or a merchant banker or a registered valuer furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals), without prejudice to the provisions of the Income-tax Act, may direct him to pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate. It is also proposed to define the expressions of "accountant", "merchant banker" and "registered valuer".

Clause 87 of the Bill seeks to amend Section 273B in the Income-tax Act relating to the penalty not to be imposed in certain cases.

It is proposed that penalty shall not be imposable in respect of the proposed section 271J also if the person proves that there was reasonable cause for the failure referred to in the said section.

This amendment is consequential in nature.
This amendment will take effect from 1st April, 2017."

Some Chartered accountants are against this section. Their point of view is that ICAI's code of conduct is strong enough to handle the erring members. The imposition of this penalty will give undue power to the officers of the Income tax department. This will lead to harassment of CAs. The officers will misuse this power and will create unnecessary problems for the CAs. Therefore, CAs should protest this section.

While some CAs think that imposition of penalty is not completely wrong and there's nothing scary about it. If a CA proves the genuineness of the documents or reports certified by him/her and is sure about the correctness of the information furnished, then the Income Tax department can't impose any penalty u/s 271J. Further, according to Section 273B, penalty shall not be imposable if the person proves that there was reasonable cause for the failure (if any). So, why to go against it? And, protesting can create an impression that CAs support such wrong things. Apart from this, the power may be shifted from CAs to other professionals in case of protest.

I personally believe that there's nothing wrong in this provision. The Income tax department can't exercise any wrong power in case the genuineness is proved. In fact, this will surely improve reporting and no one will certify the reports or other documents in a negligible manner.

CHARTERED ACCOUNTANTS ARE ALREADY KNOWN FOR MAINTAINING HIGH STANDARDS, MORALS AND VALUES IN THEIR PROFESSIONAL WORK.

WE ARE CHARTERED ACCOUNTANTS AND WE SHOULD NOT BE SCARED OF ANYONE. IF WE ARE RIGHT, THEN NO ONE CAN HARM US.yessmiley

This is my personal opinion. Opinion may differ from person to person.

Thanks!
The author can also be reached at saba.naaz9@rediffmail.com

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CA Saba Naaz
(Chartered Accountant)
Category Others   Report

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Comments

18 September 2017 BSKRAO

Against the allegation of mandatory CA Certificates in Income-Tax Act, CBDT introduced penalty U/s 271J Rs.10,000/- on Chartered Accountants for furnishing incorrect Certificates/Reports in Finance Act, 2017. This action of CBDT is only an eye wash against the allegation made. In reality, now fees for signing Tax Audit Certificate increased by Rs.10,000/- & it has become one more cost burden to the Tax Payer. Problem of approaching two tax professionals for giving compliance not yet solved by CBDT rather Tax Audit Certificate Form No.3CD revised and complicated by CBDT. Recently, on the instructions of ICAI, President of Shimoga CA Association gave specific instructions to CAs not to sign for related tax professionals. This intent of ICAI is evident from Page No.4 & 5 of ICAI letter Dt.29.01.2013 addressed to CBDT enclosed to this grievance.


14 June 2017 khan iftekhar

asslam alaikum


18 February 2017 M.srinivas

Dear friend the appointment of auditor and tax practitioner can't be empelled through the banker or any another other entiities, because only those who members of c.a's and candidate of c.a's or students whose r in experienced can only can handle in filling of returns , those who r not registered under n icai will get authorisation from commission of i.t dep, whose who r tax consultants some of few may get appointed and empelled from it,c


18 February 2017 CA Pradeep Garg

The appointment of Auditor & Advocate should be through empaneled practitioners only of the bankers, financial institutions, tax authorities etc. For example Tax Auditor must be empaneled with the respective commissioner of income tax, thus every tax payer shall hire local auditor or advocate of his jurisdictional officer only who will be responsible to revenue as well as client.


17 February 2017 M.srinivas

all these sec can cause newsence, because CA's and accountants are skilled more than I .T, department, because the appointment of of I.T is tough but C.A 's are more tough for ever in life standard of their service, so balancing the sec can cause defect for cleint for filling in their returns of assessments


10 February 2017 K.chandrasekaran

whatever may be the issue regarding the professional works ofCA it should be left only to the Institute to handle the subject as all officers working in the departments are not competent to decide the penalty as only court can leavy the same after consulting /recommendations of the CA institute and the Institute should protest the same in the parliament


08 February 2017 CA Surya Prasad Vishwakarma

Already Assessing Officer is having power to pass wrong order, those who are practicing in taxation can understand, section 154 rectification, where A.O do deliberately TDS refunds as demand in final order stating it is writing mistake, and CPC do not entertains if A .O uploads the erroneous demand. if they are not satisfied for their unjustified demand. then we have to follow up several time , and they do not rectify, if you go to higher authority, they will create further trouble to you, in coming assessment years. I think , it will create undue advantage to them to blackmail the CA's. right approach will be to form a separate body jointly with ICAI and Income tax to see such misconducts.


08 February 2017 JP Sharma

absolutely agree


07 February 2017 CA Saba Naaz

Thank you all for expressing your views. And yes..there are still loop holes in the system that need improvement. ICAI and the Ministry of finance of India should take further steps towards it. Firstly they should clarify the mistakes covered under this provision and also try to make the system more transparent in order to tackle the problem of unethical work and corruption. Similar steps should be taken against corrupt officers of the Income tax department also.


07 February 2017 Nithya Dilip

Agree


Guest
07 February 2017 Anonymous

But, my point is merely imposing penalties will not solve the problem. We need to overhaul the system of appointment of auditors. Currently, if a corrupt businessman needs some unethical work to be done he can easily find a corrupt CA. As a result, an honest CA loses work or is forced to compromise if he wants to get more work.


Guest
07 February 2017 Anonymous

Very good article. And, I totally agree with Saba Ma'm!


Guest
07 February 2017 Anonymous

Nice Article


07 February 2017 parshva

sure, but is there any way to impose penalty on ASSESSING OFFICERs.


06 February 2017 vishal

the big thing is they have not clarifed what type of mistakes are covered...? is very small mistake also covered...? that will really lead to


06 February 2017 CA Pradeep Garg

I am not against the proposed provision as I know many professionals issue certificate without proper inquiry and documents from clients. However certificate u/sec 196 Form 15CB, TDS returns, Form 16 etc can be issued by CMA & CS also but these certificates are based on specific documents only that can be obtained by professional to protect him, but on the other hand Tax Audit u/sec 44AB is quite different footing. No statutory audit is required for the Tax Audit and there can be gross mismatch of information provided in tax audit report and statutory audit reports of one tax payer. Therefore I suggest consolidation of diverse provisions of company law and taxation law related to accounts & audit so that redundant work may be reduced and compliance be increased


06 February 2017 M.KEERTHANA

Not wrong in this provision it improves our professional standards


Guest
06 February 2017 Anonymous

Valid


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