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Monday, June 29, 2015

Eligibility Norms for Chartered Accountants to Conduct Audit under Income Tax Act

As the due date for Audit u/s 44AB and Other Audit under Income tax is coming near, many of us are waiting for the schema and forms to file the Tax audit reports to the Income Tax Department. In most of the cases the Audit are already completed. We would like to bring this to the notice of our fellow Chartered Accountants that the Finance Act 2015 has changed the definition of  "Accountants" and has put some restrictions on Chartered Accountants to carry on Audit/attestation/certification for certain types of assessee. The Chartered Accountants will not be allowed to provide the services other than representation services to these assessee.

CA SAMACHAR
Below is a list of occasions in which Chartered Accountants will not be considered accountants under Income Tax Act:


1. in case of an assessee, being a company, the person who is not eligible for appointment as an auditor of the said company in accordance with the provisions of sub-section (3)of section 141 of the Companies Act, 2013; or
2. the assessee himself or in case of the assessee, being a firm or association of persons or Hindu undivided family, any partner of the firm, or member of the association or the family; 
3. in case of the assessee, being a trust or institution, any persons referred to in clauses (a),(b), (c)and (cc) of sub-section (3) of section 13;
4. in case of a person other than persons referred to in sub-clause (i) and (ii), the person who is competent to verify the return under section 139in accordance with the provisions of the section 140;
5. any relative of any of the persons referred to in sub-clauses (i),(ii)and (iii); (v) an officer or employee of the assessee;
6. an individual who is a partner, or who is in the employment, of an officer or employee of the assessee; 
7.an individual who, or his relative or partner is holding any security of or interest in the assessee. It is also provided that the relative may hold security or interest in the assessee of the face value not exceeding one hundred thousand rupees; an individual who, or his relative or partner is indebted to the assessee. It is also provided that the relative may be indebted to the assessee for an amount not exceeding one hundred thousand rupees; an individual who, or his relative or partner has given a guarantee or provided any security in connection with the indebtedness of any third person to the assessee. It is also provided that the relative may give guarantee or provide any security in connection with the indebtedness of any third person to the assessee for an amount not exceeding one hundred thousand rupees; 
8. a person who, whether directly or indirectly, has business relationship with the assessee of such nature as may be prescribed; 
9. a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction. 
 It is further proposed to amend sub-section (4) of the said section so as to provide that a person who has been convicted by a court of an offence involving fraud shall not be qualified to represent an assessee under sub-section (1) of the said section for a period of ten years from the date of conviction.

It is also proposed to insert an Explanation at the end of the said section so as to provide that the expression “relative” in relation to an individual means
(a) spouse of the individual;
(b)brother or sister of the individual;
(c) brother or sister of the spouse of the individual;
(d) any lineal ascendant or descendant of the individual;
(e) any lineal ascendant or descendant of the spouse of the individual;
(f) spouse of a person referred to in clause (b),clause (c), clause (d) or clause (e);
(g) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual

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