Most TP Audit Report by CAs unreliable with pathetic professional work
Wrigley India Pvt Ltd vs. ACIT (ITAT Delhi), I.T.A. Nos. 5648, 5649 and 5650/Del/12, Date of pronouncing the order : December 31, 2014.
It seems CAs are under attack from all parts of the world for good or not so good
reasons. Recently CAG in its report Criticised CAs for alleged Mistakes in Tax Audit Report and signing of Tax Audit
Reports more than the prescribed limit.
ITAT Mumbai has also sounded
warning on falling standards
of CA profession in the case of Vijay V Meghani vs. DCIT.
In One more blow Finance
Ministry has already Proposed to amend the definition of the word Accountant
under the Direct Tax law and to include Cost Accountant, Company
Secretary etc. in the definition. This will enable other professionals
also to Conduct Tax Audit and other Certification under the Income Tax
which is till now the sole domain of Chartered Accountants.
In a new blow to CA
Professionals ITAT Delhi has held in the case of Wrigley India Pvt Ltd
vs. ACIT has drawn the following conclusion from Transfer pricing
Study Reports prepared by CAs and studied by them over a period of time:-
- These TP reports as also certifications by the chartered accounts inspire no confidence.
- Nothing can justify pathetic level of professional work done by chartered accountants.
- Chartered Accountants also responsible for frivolous litigation.
- No purpose served by TP Reports of chartered accountant when reports do not even point glaring infirmities in taxpayers approach vis-a-vis the transfer regulation.
- in an alarming number cases, these audit reports, rather than painting a true and fair picture of the relevant facts, tend to epitomize the art of constant hedging and manoeuvring by the professionals so as they stay within the confines of permissible professional conduct and are yet able to sidestep the inconvenient realities.
Relevant Para of the Judgment is as follows :-
Having
held so, we must also point out that the transfer pricing reports with respect
to the impugned determination of ALP leave a lot to be desired. Just because
the action of the authorities below, in adopting cost plus method in the above manner, is legally
unsustainable, the ALP determination by the assessee cannot be taken as
correct. These TP reports as also certifications by the chartered accounts
inspire no confidence and, quite to the contrary, raise doubts about efficacy
of the built in checks and balances in
transfer pricing regulations. It is somewhat fashionable to criticize the
revenue authorities for their lack of objectivity or even inefficiency but what
in the world can justify such a pathetic level of professional work relied upon
by even the large corporate entities. If the tax judicial system is clogged by
frivolous litigation today and if the tax finality still takes decades to
reach, these saviours of taxpayers are as much to be blamed for this situation
as anybody else. No purpose can be served in reporting by a chartered
accountant when suchreports do not even point out glaring infirmities in
taxpayer’s approach vis-à-vis the transfer regulation, in a comparison of
budgeted profits margin with actual profit margins realized by the comparables
which is stated to be ascertainment of ALP on the basis of the TNMM. It appears
that in an alarming number cases, these audit reports, rather than painting a
true and fair picture of the relevant facts, tend to epitomize the art of
constant hedging and manoeuvring by the professionals so as they stay within
the confines of permissible professional conduct and are yet able to sidestep
the inconvenient realities. Of course, it will be much worse
a situation if they are actually so naïve as to be oblivious of simple
provisions of law, of their onerous responsibilities or of the legitimate
public expectations. It is not to belittle the brilliant work being done by
many a professionals but it is just to point out the dilemma of those who
explore the possibilities of relying upon such audit reports and
certifications, and also the inertia of those who can do something to salvage
this situation and, to thus avoid an inevitable systemic rejection of the
ritualistic certifications. We are particularly pained today as the financial
period before us is mostly even more than a decade old and yet since the TP
reports and certifications before us are, in our considered view, are so much devoid of credibility that,
instead of deciding the things one way or the other, we have no choice except
to remit the matter to the file of the TPO for fresh ascertainment of ALP on
the basis of residuary method, i.e. TNMM. (Para 24)
(Article is Compiled by CA Sandeep Kanoi)
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