The Institute of Chartered Accountants of India (ICAI) has held that failure to verify books of account before certifying ended up in unjust enrichment by refunding service tax amounts to guilty of Professional Misconduct.
The respondent stated that the concerned statutory auditor has already completed his work for the financial year ended 31.03.2012 before the issuance of his certificate. The Statutory auditor report did not contain any qualification or modification concerning the fact of the case. The statutory auditor mentioned that contingent liability exists in respect of disputed service tax demanded by the authority on abandoned cargo during the years 2003-04 to 2011-12.
The Respondent stated that he had mentioned in his written statement that he had verified the payment of service tax. Further, the amount recoverable on account of service tax was not disclosed on the face of the balance as a separate line item, but the said amount was included as part of “advances recoverable in cash or kind or for value to be recovered” amounting to Rs. 3.44 crores.
The Respondent had obtained the break-up of the amount of Rs. 3.44 crores from the Company before the issuance of the certificate which includes an amount of Rs. 50,25,485.00 for service tax.
It was argued that when a refund was being claimed by the entity which maintains its accounts on a double entry basis, the amount of service tax would naturally be included in the amount disclosed as recoverable in the balance sheet.
The Committee comprising CA. (Dr.) Debashis Mitra, Mrs Rani Nair, Shri Arun Kumar, CA. Rajendra Kumar P, Member and CA. Cotha S Srinivas held that the Respondent was Guilty of Professional Misconduct falling within the meaning of Item (7) of Part I of Second Schedule to the Chartered Accountants Act, 1949.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
