Page 16 - Banking Finance October 2015

ROUNDUP

ICAI regulator steps in to curb violations in tax audit CBDT signals 7 more PSUs
to raise Rs.40K crore from
norms
tax free bonds
The recent report by the Comptroller analysis and has more dimensions than
and Auditor General of India had what appears on the surface," said The Central Board of Direct Taxes
prompted the Institute of Chartered Fadnis . (CBDT) allowed 7
Accountants in India (ICAI) to step in entities including
and form a committee to examine the Over the last few years, the spotlight NHAI, NTPC and REC
breach in tax audit norms committed has been on some of these violations to raise Rs.40,000
by the CAs. by auditors. In 2008, founder of crore in the current
Satyam Computer Services, Ramalinga financial year
The CAG report has pointed out that Raju confessed to an accounting fraud
at least 18.87 per cent of CAs (12,435) of Rs 7,136 crore. More recently, proxy through tax-free bonds.
in India issued more tax audit reports investor advisory service firms have
than prescribed by ICAI for assessment called for an examination of the role A notification issued by the CBDT said
year 2013-14. This forms part of the of auditors in the ongoing fight be- that the National Highways Authority
2014-15 annual report of the finance tween United Spirits Ltd. board and its of India (NGAI) has been permitted to
ministry released last month. chairman Vijay Mallya. raise Rs.24,000 crore while Indian Rail-
ways Finance Corporation (IRFC)
Rules which are in force stipulate that The board wants Mallya to step down Rs.6,000 crore and Housing and Urban
a partner in a chartered accountancy after an internal probe revealed a di- Development Corporation (HUDCO)
firm can sign not more than 45 tax version of funds from USL and its sub- Rs.5,000 crore.
audits in a year. So if there are 10 part- sidiaries to some UB Group companies.
ners in a CA firm, then all the partners But some chartered accountants have NTPC,Power Finance Corporation and
can collectively sign 450 tax audit re- pointed out that the CAG report may Rural Electrification Corporation (REC)
ports. But there is a twist. after all be erroneous. can issue tax-free bonds worth
Rs.1,000 crore each. The notification
This maximum limit of 450 tax audit as- The CAG report has found that CAs follows the announcement made by
signments can also be distributed be- have "certified wrong information/ finance minister Arun Jaitley in Budget
tween the partners in any manner. claims for various exemptions" in at 2015-16, that PSUs would be allowed
Thus, a single partner can also sign 450 least 74 cases having a tax effect of Rs to raise funds through tax free bonds
tax audits if the other nine decide not 259.72 crore in assessment year 2013- for development of infrastructure.
to sign any audit report, the ICAI has 14.
indicated on its website. The CBDT further added that the re-
According to some chartered accoun- tail investors, which include HUFs and
According to Manoj Fadnis, president tants, CAs are violating the norms be- non-resident Indians investing on repa-
of ICAI, the issue is be- cause there are too many CA firms and triation basis, can invest up to Rs.10
ing addressed and the the Indian market is too fragmented. lakh in such bonds while those invest-
group is in touch with "Many auditors are willing to sign ing a higher amount would be classi-
the CAG and Central documents all too easily and don't care fied as high net worth individuals.
Board of Direct Taxes or about ethics," says Amit Maheshwari,
CBDT. "This issue (CAG a partner at chartered accountants
report) needs in-depth Ashok Maheshwary & Associates.

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16 | 2015 | OCTOBER | BANKING FINANCE

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