CAG'S comments on Tax Audit Reports by CAs:Tabled of the Parliament house

The Report has been laid on the table of the Parliament house on 19-12-2014

Preface

This Report for the year ended March 2014 has been prepared for submission to the President under Article 151 of the Constitution of India.

"We found cases (a) where the CAs failed to report full and correct information in 367 cases leading to short levy of taxes of Rs. 2,813.11 crore and (b) where the AOs failed to utilize the information

available in 102 reports/certificates submitted to them leading to short levy of taxes of Rs. 1,310.05 crore.

Some of the important audit findings are as follows:

a.   Tax auditors failed to give correct information relating to allowance of depreciation in 66 cases involving short levy of tax of Rs. 457.79 crore (Paragraph 2.3).

b.   Tax auditors did not report correct information regarding brought forward loss/depreciation resulting in irregular brought forward loss/depreciation allowance in 46 cases involving short levy of tax of Rs.  557.79 crore (Paragraph 2.4).

c.    In 42 cases personal/capital expenditure was incorrectly allowed as the tax auditors did not report the amount in their tax audit reports which resulted in short levy of tax of Rs. 477.89 crore (Paragraph 2.5).

d.    CAs have certified wrong information/claims for various exemptions and deductions in 74 cases having tax effect of Rs. 259.72 crore (Paragraph 2.7).

e. CAs gave incorrect/incomplete information in TARs/certificates in 132 cases having a revenue impact of Rs. 1,037.61 crore (Paragraph 2.8).

We also found in another 616 cases where CAs committed mistakes viz. in allowance of exemption/deductions, charging of tax on Book Profit under Section 115JB, adoption of Arm’s Length Price and reporting on cash payments exceeding Rs. 20,000 per day (Paragraphs 2.6 and 2.10-2.12). In 109 cases, assessees did not furnish requisite Form 3CEB on verification of ALP and Form 29B relating to certification for Book Profit (Paragraphs 2.10-2.11).

We have also commented on lacunae in the existing Forms which need modification in order to capture full information of the affairs of assessees so that taxes are applied correctly (Paragraph 3.2-3.4). Regarding monitoring of work of CAs and ensuring quality tax audit, ICAI issued guidance to its members for limiting the tax audit assignments in a financial year. We found that 18.87 per cent of CAs (12,435 CAs) for AY 2013-14 issued more tax audit reports than prescribed by ICAI (Paragraph 3.6)."