Allow Tax audit by “Cost Accountant” under Income Tax Act-ICMAI represents to Finmin

ICMAI representation for inclusion of “Cost Accountant” u/s 288 of Income Tax Act to allow tax audit by cost accountant

The Institute of Cost Accountants of India representation for modification of definition of “Accountant” u/s 288 of the Income Tax Act, 1961 to include the “Cost Accountant” therein.

In a representation addressed to Smt Nirmala Sitharaman, Minister of Finance, the ICMAI has drawn her attention to the various representations made already between 2015-2018.

It has been reiterated that the ICMAI and its members have been contributing constructively in the field of accountancy and Taxation besides cost & management accounting at par with its peer Institutions. The members of the Institute are professionally qualified and experts to handle
the critical issues relating to Accounting and taxation in and outside the Country. With members of the Institute both in practice and employed in industry, the Institute has been one of the major pillars of the accounting and taxation system of country. 

The Finance Minister has been requested that there is a urgent need to amend meaning of the term “accountant” as assigned in the Explanation below section 288 of the Income Tax Act, 1961 so as to bring both Cost Accountants and Chartered Accountants at par under its ambit.

Under the existing provisions, as per explanation below sub-section (2), “accountant” means a Chartered Accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice. 

In its support the ICMAI has even quoted the following judgments:

 Hon’ble Supreme Court upheld the decision of Mumbai High court and held both Cost Accountants and Chartered Accountants as’ Accountant’ under section 61 of the Maharashtra Value Added Tax Act, 2002. Further, both are recognized as ‘Accountants’ under the VAT Acts of 22 States & UTs of India. [200814STT348,(2008)14VST69Bom]

 It may be noted that VAT audits are akin to the tax audit.

 Hon’ble Karnataka High Court in W.A. No. 31061/2013(CS) has ruled that ‘Auditor’ does not mean a person holding the degree of Chartered Accountant under section 63 of the Karnataka Co-operative Societies Act, 1959 read with Article 243 ZM of the Constitution of India.

 Writ Petition Nos. 2026-2031 of 2015 filed by the Karnataka State Chartered Accountants in Karnataka High Court challenging the inclusion of Cost Accountants and Cost Accountant Firms for Statutory Audit of annual accounts of Cooperative Societies was dismissed on 29.03.2016.

Quoting Banking scams , the ICMAI has made a point that allowing all tax audits and various certifications required under the Income Tax Act only to a single profession and restricting another equivalent profession viz. Cost Accountants is neither in the best interest of the Department nor it benefits the assessee.

Not only this, the ICMAI has even stated that in number of cases, serious inadequacies, or inaccuracies were observed in the tax audit reports signed by the chartered accountants.

Suggested Draft Modification in Explanation below Section 288 (2) (iv):

[Explanation.—In this section, “accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 who holds a valid certificate of practice under sub-section (1) of section 6 of that Act, or a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act, but does not include [except for the purposes of representing the assessee under sub-section (1)]—

(a) in case of an assessee, being a company, the person who is not eligible for appointment as an auditor of the said company in accordance with the provisions of sub-section (3) of section 141 of the Companies Act, 2013 [18 of 2013]; or who is not eligible for appointment as auditor of the said company in accordance with the provisions of sub-section (3) of section 148 of that Act;

Download ICMAI Representation Click Here >>

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