Audit regulator NFRA slaps Rs 50 lakh penalty on chartered accountant for lapses
Jan 4, 2024
Highest penalty of Rs 50 lakh in recent years was slapped by NFRA on a chartered accountant for professional misconduct that enabled business services provider Quess Corp to claim undue income tax deduction of almost Rs 971 crore over three years. Subsequently, NFRA looked into the professional conduct of the chartered accountants and their firms involved in the certifications that formed the basis of the income tax deduction claims.
The National Financial Reporting Authority (NFRA) has slapped a penalty of Rs 50 lakh, one of the highest in recent years, on a chartered accountant for professional misconduct that enabled business services provider Quess Corp to claim undue income tax deduction of almost Rs 971 crore over three years.
In an order released on Thursday, the audit regulator said the report and the certification by chartered account (CA) Pawan Jain, partner at M/s Kumar Jain & Associates, helped Quess Corp claim the income tax deduction of Rs 113.86 crore in FY19, Rs.428.80 crore in FY20 and Rs.428.16 crore in FY21.
“Thus, the work of the CA has major implications for revenue (to the government),” the NFRA said.
The deductions were claimed under section 80 JJAA of the Income Tax Act, 1961. This section allows eligible enterprises a deduction of 30% on increased employee expenses for three assessment years in a row.
In the order the regulator said: “We find that CA Pawan Jain failed to exercise due diligence in the conduct of professional duties while certifying the information in form 10 DA based on examination of the relevant records.”
“It has been proved that before issuing the reports, the CA did not obtain sufficient appropriate evidence with regard to compliance of conditions stipulated in Section 80 JJAA for claiming deduction in respect of new employees,” it added.
The NFRA order stated that the Director General of Income Tax (Investigation) in Bengaluru had, in August 2022, shared information about the claims of the income tax deductions totalling Rs 1135.41 crore by Quess based on the relevant certifications by two chartered accountants for five years through FY21.
Subsequently, NFRA looked into the professional conduct of the chartered accountants and their firms involved in the certifications that formed the basis of the income tax deduction claims.
[The Economic Times]
