Penalty 271J on CAs. Those afraid of the sword of Damocles should not aspire to be Dionysius. What impression are we offering in opposing – CA Ashutosh Lohani
Budget 2017-18 proposes a penalty upon professionals for furnishing incorrect information in statutory report or certificate.
The text of the proposed section 271J is as under:
Penalty for furnishing incorrect information in reports or certificates.
271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate.
Explanation.––For the purposes of this section,—
(a) “accountant” means an accountant referred to in the Explanation below sub-section (2) of section 288;
(b) “merchant banker” means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992;
(c) “registered valuer” means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957.’
A lot of hue and cry has been generated by a segment of chartered accountants who seems to desperate that the above penal provision should be scrapped. To support it, all kinds of arguments are being advanced that are suited to their convenience.
However, advancing such irrational and illogical arguments only puts us on a negative side projecting us as those who are indulged in fake reporting only. Please bear in mind that due to the deeds of a few, demonetisation has already put a question mark on the ethics of the chartered accountants. The demonetisation has taken its toll on the reputation of CAs and a common man has started to consider us a conduit of black money laundering.
Here there is no need to say that all penal provisions are coupled with affording a reasonable opportunity and as per section 273B no penalty can be imposed if it is proved that the failure is for a reasonable cause.
Anyway, it is interesting to see as to apparently what impressions are we offering in opposing a penal provision that attempts to put a check on casual and/or willful misreporting,
(a) That we are afraid of penalty:
By opposing the penal provisions the first and foremost impression is that we are afraid of the penalty which inherently speaks that we lack honesty, integrity and confidence.
(b) That our reports/certificates do contain incorrect information
We conspicuously know this fact and that’s the prime reason why are we opposed to the penalty.
(c) That there could possibly no reasonable cause for incorrect information
Are we trying to give an impression that all the incorrect information is reasonably known to us before hand. In other words, we work under pressure or for undue considerations.
(d) That there are other provisions under Income Tax Act itself that can deal with incorrect information in reports.
Honestly, hitherto there was no such provision penalising erring professionals directly and in the pretext of such arguments we are trying to avoid the penal provision.
(e) That the chartered accountants would be subjected to harassment
This is indeed a very interesting ground. I would personally like to know who are those chartered accountants that fear harassment by Income Tax Officials if it is not for their own shortcomings. I am of the considerate view that CAs feared of Assessing Officers should stop issuing certificates/reports for professional fees. It can not be more emphasised that those afraid of the sword of Damocles should not aspire to be Dionysius.
Also, being professionals and advancing the notion of harassment itself speaks that either our reports are incorrect or we lack the requisite knowledge of the taxation Laws in issuing reports/certificates.
(f) That penalising CAs should be sole domain of the ICAI
Please bear in mind that penal provisions are incorporated only under the Income Tax Act and not in CrPC. Action that can be taken by ICAI are for misconduct whereas the penalty prescribed is for furnishing incorrect information. Both the offences are distinct and not interdependent.
Going by the argument, professionals guilty under CrPC too should be tried only by their professional bodies.
Therefore, in my view, by opposing the proposed penalty section 271J, CAs are only diminishing their reputation and credibility in the society.
CAs must welcome such provision and channelize their energies in improving the quality of the work and obtaining a reasonable assurance/documentation for whatever reports/certificate are issued. Not to mention, charge reasonably for the work and in appropriate say NO to reports/certificate that are not supported by the reasonable assurance.