The Centre has once again put chartered accountants’ (CAs) fraternity on notice - this time on their attest functions on the income tax front.

Several changes are now being proposed – to be effective from June 1 -- on the eligibility criteria for CAs to undertake attestation (audit/certification) work under the income tax law.

These are to be implemented through a change in the meaning of an “accountant” in the income tax law—a proposal to this effect has been made in the latest budget.

The overall objective seems to be to avoid conflict of interest and enhance comfort to the revenue authorities on the findings of tax audit reports.

More rigour is being brought into the aspect of judging “independence” of CAs, whose audit/certification are usually accepted by Indian tax authorities.

With the audit/certification work of CAs intended to protect the interest of the revenue, the Centre is of the view that an auditor who is not independent cannot meaningfully discharge his function of protecting the interest of revenue.

So, the latest budget has now proposed that a person who is not eligible to be appointed as an auditor of a company will not be eligible to carry out attest functions under the income tax law.

Also, detailed restrictions have been proposed on CAs as regards tax audit reports on non-corporate assesses where they have financial interest either directly or through relatives.

CERTIFICATE OF PRACTICE

It is also now proposed that only CAs with full time certificate of practice could undertake attest functions under the income tax law.

This would mean that members of the CA Institute with part-time certificate of practice cannot legally attest reports for income tax purposes.

Currently, the income tax law—for the meaning of an accountant — does not distinguish between CAs holding a certificate of practice and others.

This was misinterpreted as if the reports can be issued by any CAs whether he holds the certificate of practice or not, according to G Ramaswamy, former CA Institute President.

Now, the proposed amendment clarifies that those who are holding a valid (full time) certificate of practice only are eligible to issue such reports, Ramaswamy told Business Line.

The CA Institute has already prohibited CAs with part time certificate of practice from carrying out attest functions, he said.

“Already CA institute has issued many guidelines for maintaining independence for CAs, including internal auditor should not be tax auditor. This proposed amendment to income tax law will give more clarity to users of CAs services”, Ramaswamy said.

This is aimed at avoiding any conflict of interest in the discharge of this important fiduciary duty, he said. (K.R.Srivats - The Hindu)