The Appellate Authority in a recent order held that the ignorance of new reporting requirements of the Central Board of Direct Taxes (CBDT) would amount to Professional Misconduct on the part of the Chartered Accountant. While reducing the quantum of punishment imposed by the disciplinary committee of the ICAI, the Appellate Authority reprimanded the Chartered Accountant contending the peculiar facts of the case.
A complaint was instituted against the appellant, CA. Ishaq Esmail Lakkadghat, a practicing Chartered Accountant alleging that he carried the audit u/s 44AB of the Income Tax Act, 1961 of Dr. Usman Shaikh Prop, Faujiya Hospital, for the year ended on 31st March 2007, and he did not report about non deduction of the tax u/s 194J of the Income Tax Act, 1961, from professional charges amounting to Rs. 5,45,715/- paid by the said hospital to various doctors.
The appellant took a defence that in such cases the Assessee (client) was not liable to make any TDS under section 194J of the Income Tax Act, 1961 and hence there is no negligence in non-reporting the same.
The disciplinary committee found that the appellant is guilty of Professional Misconduct ad imposed a punishment of removal of his name from the Register of Members for a period of one year.
The appellant approached the Appellate Authority requesting to take a lenient view regarding the quantum of punishment as he was very new in the profession and he might not have been fully aware of the recent amendments in the law, and he also pleaded that the default was for a very small quantum.
The Appellate Authority noted that the CBDT vide Notification No. 208/2006 dated 10th August 2006 had widened reporting requirements of Form 3CD. This Form came into effect for all audit reports signed on or after 10th August 2006. In the present case, the audit was carried out for the year ended on 31.3.2007 and audit report of the same was signed on 23.10.2007.
“Thus, it was the duty of the Appellant to report such transactions in the Form 3CD, which he failed to do,” AA said.
The Appellant said that he was new in the profession and not being able to understand properly the ambit of section 194J of the Income Tax Act.
The AA pointed out that “However, it is a fact that he completely ignored the new reporting requirements imposed by the CBDT from 10th August, 2006, as detailed above. Therefore, we agree with the findings of the Disciplinary Committee that under the circumstances as present in the matter, the Appellant did not exercise due diligence in carrying out his professional duties, which is expected from him. Accordingly, we concur with the finding of Disciplinary Committee holding him guilty under the aforesaid Clause (7) of Part-I of the Second Schedule to the Chartered Accountants Act, 1949 and upheld the same.”
“Looking to all the facts involved and the fact that the Appellant fully cooperated in all proceedings at every level of enquiry, we feel that the “ends of justice” would meet, if the Appellant is awarded punishment to “Reprimand”. We, accordingly modify the Impugned Order of the Disciplinary Committee to this extent. Though, further, we direct the Appellant to be more cautious in future while dealing with such situations,” the AA held.
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