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Section 44 AB Inserted by the Finance Act, 1984, w.e.f., 01-04-1985: A boon to   C.A’s Practice. Up to that time, except Bank Audits, Company Audits, there is not much difference between work handled by the Income Tax Practioners, (TAX) Advocates and Accountants. Recently, TRP came and gone.S.44AB made a difference and distinguished C.A’s from other Tax Professionals.S.44 AB Prompted Many C.A’s in employment, at that time, to quit the jobs in both the Public sector and Private sector. The 2001 Bank VRS Scheme brought some C.A’s in Banking sector to Practice, mainly by S. 44AB attraction.

Now for the last 5 years or more, 95% of the students passing C.A course are opting for employment. The irony is even the successful Practioners are bidding a farewell to the Profession and Joining employment.

The reasons for shifting of Preferences from practice to employment are to be analysed. My Understanding is as follows –

Some of us are, yet times, NOT following the Rules of the Profession, Code of Conduct, Ethics. Who can save us? Not anybody from Outside/Inside/High side etc., But by SOUL searching we can save ourselves by the following measures: –

Let us not compromise Our Independence for an Assessee, Other Non qualified Professionals and Accountants.

A case study:

‘Comparison of Turnover / Sales as per books of accounts, as per VAT Returns and as per Commercial Tax website’.

In Income Tax Assessment proceedings the Assessing Officer called for copies of VAT Returns and compared them with the figures as per books of account, which revealed that the Sales, as per VAT Returns, are more by Rs.130 (thousands or lacs or crore) and the Purchases, as per VAT Returns, are more by Rs.80 (thousands or lacs or crore).  The original Trading Account is as follows:

Trading Account of x

Particulars

Amount

Particulars

Amount

Opening Stock

xx

Sales

xxxx

Purchases

xxxx

Closing Stock

xx

Gross Profit

xx

Total

xxxx

Total

xxxx

Selling & admn. Expenses, interest, depreciation, etc.,

xx

Gross Profit

xx

Net profit

xx

Total

xx

Total

xx

The Assessing Officer proceeded to revise the Trading Account, as follows, on account of differences mentioned above. 

Revised Trading Account of x

Particulars

Amount

Particulars

Amount

Opening Stock

xx

Sales

xxxx+130

Purchases

xxxx+80

Closing Stock

xx

Gross Profit

xx+50

Total

xxxx

Total

xxxx

Selling & admn. Expenses, interest, depreciation, etc.,

xx

Gross Profit

xx+50

Net profit

xx+50

Total

xx

Total

xx

The Assessing Officer arrived at the taxable income as xx + 50 against returned income of xx, which caused burden to the Assessee.

Taking the clue from the above case, we started comparing the VAT returns with the books, with more concentration than earlier, and struck a land mine in the first Rice Mill case where the Turnover as per books is Rs.4 crore, as per VAT Returns Rs.6 crore and, to my surprise, Turnover as per Commercial Tax website is Rs.6.5 crores, which caused panic to me as if the Assessing Officer, proceeds for an addition of Rs.2 crores (kind enough not to reject the books of account, pull up the CA by reporting to the Regulator as well the Authorities, or not calling for S.142A Audit etc.,) the fate of the Assessee would be to file I.P. and or abscond.

This exercise revealed that in 10 % of my Audit cases there are substantial differences between the Turnover as per books and the Turnover as per VAT Returns, resulting in payment of Rs.2.54 lacs VAT, in aggregate which I would like to share with you. The reason for the difference, as per my understanding of the facts, is first filling and filing the Returns and later writing up / preparation of the books of accounts i.e., a cart is put before the horse instead of the ordinary course of putting the horse before the cart by the ever busy part-time accountants.

We are forced to sign/Attest Audit Reports prepared by people who doesn’t Know even the existence of Accounting Standards, Other Professional Pronouncements of ICAI, leave alone Implementing the same. They don’t, some times, prepare even the books of Account rather cook the Accounts by entering some, DATA on a summary basis in a Computer System, using XYZ software and bring paper copies of Financial Statements, if we are lucky, otherwise bring a PD/CD,  without any supporting evidences, and ask us to conduct Audit, If we can call it as an  Audit rather than filling up Form 3CD with ‘YES’ ,‘NO’,’N.A’ (either Not Applicable or Not Available). 

Let us not succumb to the pressures of last minute [not even 27 minutes time given to us for seeing the accounts whereas the Department has 27 full months time to complete the Assessment Proceedings and some times we may have to be face less for signing such an Audit Report boldly (blindly) in such a mad rush, may be attracting Gross Negligence]

The Disciplinary-Committee now includes Bureaucrats.

The criticism in the delay (Justice delayed is Justice denied) in proceedings brought the amendments to the ‘Act’. Let us save our skin by following the Rules of the Profession.

We are all subject to Peer Review Mechanism (Prasad Raghavendra Mandava, the paper writer is also a Peer Reviewer and also subjected to Peer Review by another Senior Professional)

Let us Welcome and Face it for the Good of the Profession

Fees under - cutting.

The demand and supply, Market forces decide the Fee.

CA Mohan Das Pai, Ex-CFO, Infosys, four years back estimated CA’s requirement for soft ware industry (Big four Indian MNC’s) alone at 5.00 (Five)  lacs. We are just about Rs.1.70 lacs, including those retired, on the verge of retirement, In employment in India as well abroad including Gulf, African countries, U.S.A, Europe etc., Then what is the need for charging as low as  Rs.3,500/- for a S.44AB Audit, when the Minimum fee charged for the First A.Y 2005-06 itself  was Rs.4,000/- . A bag of 50 KG cement cost about Rs.50/- in 1986 and now in 2011, in a cement surplus (Supply > Demand) state is above Rs.250/- per bag i.e., 500% to commensurate with the inflation etc.,

The committee for Capacity Building for SMP’s has prescribed minimum of Rs.12,500/- as one alternative. Where are we? Particularly when there is a ceiling on No. of Audits to be conducted by a CA, which is not there for any profession in India or the world. Why? because we have to issue Quality audit reports, not diluting or compromising  or attracting negligence etc.,  CA earns Rs.1,57,500/- (45@Rs.3,500/-). An average fresh pass-out gets above Rs.5,00,000/- CTC in the first year itself. If one charges as prescribed by the SMP committee, he can expect Rs.5,62,500/- (45@12,500/-) i.e., at par with a first year employee.

We all know that to go to a Doctor, we need to have an appointment else wait from 11.00 am (noon show) to 3 or 4 pm (middle of matinee show), or from 6.00 pm (first show) to 10.00 pm, even after paying the fees in advance.  No Assessee pay’s fees in advance to a CA (may be to avoid disqualification of CA U/s 226 of the Companies Act, 1956 i.e., owing more than Rs.1,000/-)  

We all know that an Advocate, survives, even with single digit number of cases on hand, by charging many times the fees prescribed and not filing even a single paper before the Judicial / other Authorities before collecting his fees, even if, it is a time baring case and the party may loose valuable claim.  Even for condonation of delay, it is separately billed and collected in advance as they follow CASH accounting.

Why not a CA collect fees immediately after the completion of the service, [why wait for 2 or 3 years, for the mercy of the client, accept something less (under quoting er... under accepting), some times rounding (3 years x Rs.12,500/- as per CA = Rs.25,000/- or even less pay by Assessee or better than bad debts)].  Thanks to passing of the Point of Taxation Rules in July 2011, under Service Tax Rules permitting CAs, CSs, CWAs to pay Service Tax on CASH basis, whereas all other Service Tax Assessees have to pay Service Tax at the EARLIEST of 1) Rendering / completion of Service; 2) Date of acceptance of advance; and 3) Date of invoice, without any abatement, reduction, deduction, exemption, relief for rounding problems as above and bad debts.

Communication with the Previous Auditor.

When an Assessee is asked to get his Accounts printed, for that simple, necessary reason, he wanted to change the Auditor (may be he misheard the printing of Accounts as painting of the Auditor’s house) but, thanks to elder and younger brothers in the profession, he came back by getting his Accounts printed. (The CA is prepared to lost the client).

When an Assessee, (in whose case S.132 took place and scrutiny Assessment Proceeding are under Progress) is requested to give his Contact numbers, he declined. Even where the fee is in arrears for 3 Years. This is a case where the CA wish to lost the client as he was in doubt whether he can serve the Assessee to the best of his ability when particularly the department is so demanding in extracting the information at a racket speed in order to complete Assessments with in the Due date. Thanks to the Professional brother who saw it that the Arrear fee is cleared before his taking up the case.

The Biggest Nationalised Bank used to call the Statutory Branch Auditors to a Meeting and handover the Appointment Letters and ask for Acceptance of CA’s on the spot. Of course, the previous Branch Auditor may not have any Professional reason for objecting the New Auditor for taking up the Assignment. But we are violating the Rule that unless and until we get the consent of the Previous Auditor, we can’t give our consent to the client.  If the previous Branch Auditor had any valid professional objection then we are in soup, because the CESURA (The Committee on Ethical Standards and Unjustified Removal of Auditors) has a role to play, may be leading to escalating the case to Disciplinary Committee attracting Suspension/Removal of Member from the Register.  Let us bring it to the Notice of Central Statutory Auditors as well Management of the Bank.

Another Nationalized Bank whose Substantial Business Branches are covered by  the Concurrent Audit by Practising CA’s is, may be, Unknowingly asking it’s Concurrent Auditors to conduct Limited Review of  Quarterly Results as per Clause 49  of the listing agreement which we should not do as the Internal Auditor cannot certify the Results as Audited for Publication. Let us bring it to the Notice of Central Statutory Auditors as well Management of the Bank.

Quick Insight :

Let us analyze the following.

How many Audit days required for a 44AB Audit?

MY answer is about 5 days, combination of Junior, Senior Staff as well the CA i.e., (45*5d=225 Audit days).

Month-wise break up of Audits conducted by us?

My answer is 2 Audits   in April, 3 Audits in May, 4 Audits in June, 5 Audits in July, 6 Audits in August, 7 Audits in first Fort-night of September another 7 Audits in the last Fort-night, except last day i.e., the balance quota Audits on the Dooms Day i.e., 30-September, burning midnight oil, attracting Health Hazards, Unable to collect fees for years together. Teasing the staff, Tears to the self, losting personal, family and Social life, attesting with out verification.  Added to the Man made  vows, we had Nature (Act of GOD ) perils like Heart attacks, (in a Health  Session conducted as a part of Regional Seminar, one of the best Cardiologist  working in   the largest corporate hospital quoted statistics to the effect that amongst  all Professionals C.A’s are more prone to Cardiac arrests etc.,) and other health Problems to C.A, any of his family members, Accidents/ loss of life to close people, Cyclone 3-4 years back, Infrastructure bottle necks like the power cut for the current year, Political reasons like the present Telangana agitation and the after effects of the same like Bundh in Vijayawada due to arrest of an M.P, Rasta Roko, Rail Roko, S.132, S. 133A, Operations by the Department and many more obstructions.

“Don’t Let Cerebral Hemorrage break any C.A by New power cut from 10 A.M-1 P.M (first spell) & 3 P.M -6 P.M (Second spell), Adding Air to Fire in addition to lethargy of our client Assesses (GOD’s As per Father of Nation, Sri Mohandas Karamchand Gandhi), half baked PD/CD driven A/C’s by part time accountants giving no time for A/C’s rather landing attesting C.A in MINE:

Be Brave as a Captain to lead Your Staff Soldiers to Succeed in the YAGNA with the least Bruises. Let us not lost Tempers also as we are losting Health and Gaining ALL DISEASES. Let us be COOL and BE CALM (B.COM+++).

WHAT IS THE REMEDY? 

For all the nuances discussed above.  I think we can, together, find a way out to do S.44 AB Audits with all data readily available with the clients, application of all Technical Standards by the Professionals, as if conducting Bank Statutory Branch Audits by adopting the following self regulatory procedures: (The Regulator reposes confidence in us by accepting self declaration for CPE credit towards unstructured learning and on many more occasions)

1. Let us create another e-mail ID with 44 AB name.  Send scanned copies of all appointment letters received from assesses for 44 AB Audit / other audits, from our regular mail ID to 44 AB mail ID and also scanned copies of our acceptances, copies of our communication with the previous Auditors, where applicable, Audit programmes, stages of audit, etc., for future review by either the Peer Reviewer or the Regulator, as it provides an evidence with date and time stamp attached by www to any mail sent and received.  Here we are not revealing any private and confidential data to any third party because we are sending mails from one of our mail ID to designated 44 AB mail ID created by us, controlled by us.

2. Let us, voluntarily, inform the statistics only (not revealing the name of the Assessee or his Financial Data) viz., number of Audit assignments received, accepted (by obtaining consent of previous auditors), completed, remuneration billed, remuneration collected, on a WEEKLY basis to the Regulator.  Case-wise we can give an identification number to avoid revealing the names that we may call as CIN (Case Identification Number) and link the CIN with the Turnover (to estimate the volume of work) and the fee collected (to observe whether minimum prescribed fee is being collected).

In MEF ICAI site we are already furnishing Annual statistics of Industry-wise experience, Gross Receipts, Taxable Income (earlier with Income Tax Acknowledgements) and other information.  The change is on a WEEKLY basis instead of ANNUAL statistics with some more information, but not disclosing the names of the ssessees or their Financial Data.

3. I call for any other suggestions from the participants (to my e-mail ID: prasadmr2000@gmail.com; prasadmr_2000@rediffmail.com, so that I can compile the same, submit the same to council through the Branch, Regional Council and Central Council Members for discussion by the Council and seek their guidance) in order to command respect from the Society at large for doing our duties to the best of our utmost ability and to see the Profession in high esteem in the Tax and other Government Departments, Regulators, other Stakeholders.

WWW  = We Will Win, also World Wide Web

IT = Inspirational Thought, Information Technology, Not Necessarily IT (Income Tax).

At Times IT May Raid (Ride) Some, But all time CA Will Guide the same.

Three birds at one shot.  One Assessee – Two files (Income Tax, Wealth Tax). We can double our Services & Revenue. The third one, one time this year, is failure to file 44AB Audit case Return by due date and earned income for reply to penalty notice u/s 271B and for getting it dropped. (Else i.e., if the penalty is ultimately levied then, the Assessee will see to it there will not be any delay in the succeeding years.)

We all know that our Institute is established by an Act of Parliament in 1949 itself, i.e., after attaining Independence (15th August 1947) but before India became Republic (26th January 1950) appreciating the importance attached to the birth of the Act and conferring “CHARTERED” status to the ICAI, Members.

Let us congratulate our Government of India, Ministry of Corporate Affairs (the then Minister – independent charge Sri P.C. Gupta) for reposing confidence and trust in the profession and entrusting “Satyam” case to a team of Professionals including CA Sri Deepak Parekh, Ex-President CA Sri T.N. Manoharan. Laurels to all members of the said team in general and Namaskarams to Sri CA T.N. Manoharan in particular, for their outstanding plan and execution of continuing “Satyam” Company and for the smooth and successful transformation of Management, within the four corners of the law, saving the interests of the employees, the investors, the clients and all other stakeholders of the Company within short time than the mandate given, not taking any Remuneration, and saving the brand INDIA in the World. Mera Bharat Mahan. This rewarded presentation of “PADMASREE” to an eminent Professional CA. Sri T.N. Manoharan. This is a modal case study for all Finance and Management Students not only in India but even for those who are in developed Countries.     

ICAI Founder President Shri G.P. Kapadia, in his message to 100th Council Meeting, July 1982 said “I adore my Profession, I salute my Institute. The public image of the Profession will be made up by the impact made by the professional conduct of everyone in the profession and the extent to which he is accepted for this objectivity and independence apart from his technical expertise. It is more the capacity and expertise of an average member of the Institute that is going to determine the capability generally and also the professional flavour around”.

I conclude with Epilogue in “History of the Accountancy Profession in India written by our first President Shri Kapadia:

The task stands accomplished Nay – it has just begun

It’s not a question of what stands achieved

It’s a question of what still remains to be done

And am I not a creature of Destiny

A mere instrument for ‘His Purpose’

My assignment I see as one of duty

Fruits whereof I cannot and do not seek

With humility and full dedication

I salute my Institute – I adore my profession.

Let us take the Oath taking clue from all Senior Members in general and the Founder President Sri G.P. Kapadia.

Oath:

I Adore my  Profession.

I Respect my council.

I Admire my colleagues in the profession.

I Salute my Institute.

I Am proud to be a CA.

I Dedicate myself to the cause of my profession.

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Category Income Tax, Other Articles by - M.R. PRASAD 



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