01.
Failure to detect short deduction of TDS and
stock mismatch – Non-verification of TDS on the
portal and improper representation before tax
authorities – Discrepancy in opening and closing
stock figures leading to scrutiny – Respondent
held guilty of professional misconduct under
Clause (7) of Part I of the Second Schedule to
the Chartered Accountants Act, 1949.
Held:
In this case, the Respondent was held guilty of
professional misconduct for failing to exercise
due diligence while conducting tax audit and
representing the Company before the Income Tax
Department. During Assessment Year 2012–13,
the Complainant Company had deducted TDS
at 1% instead of 2% on certain payments. The
Respondent, despite being the tax auditor, failed
to verify TDS data from the TDS-CPC portal and
did not report the irregularity under Clause 20 of
Form 3CD. This lapse resulted in disallowance of
expenses under Section 40(a)(ia) and raised a
tax demand of `29 lakhs. Furthermore, during the
assessment proceedings, the Respondent failed to
clarify that Section 40(a)(ia) was applicable only
for non-deduction, not short deduction. He also
initially advised the Company to pay the demand
amount instead of opting for appeal, which he
later agreed to submit only after the Company
approached another Chartered Accountant.
Additionally, the Respondent was found negligent
in preparing the Income Tax Returns, where
the closing stock figures in AY 2012–13 did not
match with the opening stock in AY 2013–14. The
Respondent claimed that the return was filed by
the Company’s accountant; however, this was
contradicted by the Complainant. The Committee
observed that the mismatch arose due to exclusion
of packing material stock, which led to scrutiny by
the Income Tax Department. The Respondent failed
to provide sufficient documentary evidence to
demonstrate due care in this regard. The Committee,
after considering the facts and lack of appropriate
explanation or supporting evidence, concluded that
the Respondent failed to discharge his professional
duties with due diligence. Accordingly, he was held
guilty of professional misconduct under Clause (7)
of Part I of the Second Schedule to the Chartered
Accountants Act, 1949.
[PR-21/2017-DD/59/17/DC/1266/2020]
