(b) M/s JAZZ & Co. is a partnership firm consisting of two partners CA J and CA Z. CA J is exclusively associated with the firm and is not doing…

As per Chapter VI, Tax Audit assignments under Section 44 AB of the Income-tax Act, 1961, a member of the Institute in practice shall not accept, in a financial year, more than the "specified number of tax audit assignments" under Section 44AB of the Income-tax Act, 1961. Further, in the case of a firm of Chartered Accountants in practice, the "specified number of tax audit assignments” means 60 tax audit assignments per partner in the firm, in a financial year, whether in respect of corporate or non-corporate assesses. It may be noted that the audits conducted under Section 44AD, 44ADA, and 44AE of the Income-tax Act, 1961 shall not be taken into account for the purpose of reckoning the “specified number of tax audit assignments". Furthermore, where any partner of a firm of Chartered Accountants in practice accepts one or more tax audit assignments in his individual capacity, the total number of such assignments which may be accepted by him shall not exceed the "specified number of tax audit assignments” in the aggregate. In computing the "specified number of tax audit assignments”, the number of such assignments, which he or any partner of his firm has accepted, whether singly or in combination with any other Chartered Accountant in practice or firm of such Chartered Accountants, shall be taken into account. According to a clarification on Tax Audit Assignments by Committee on Ethical Standards Board of the Institute, if there are 10 partners in a firm of Chartered Accountants in practice, then all the partners of the firm can collectively sign 600 tax audit reports. This maximum limit of 600 tax audit assignments may be distributed between the partners in any manner whatsoever. For instance, 1 partner can individually sign 600 tax audit reports in case the remaining 9 partners are not signing any tax audit reports. In the instant case, M/s JAZZ & Co. is a partnership firm of Partner CA J and CA Z. CA Z is also doing practice in individual capacity. In the instant case, 60 tax audit assignments per partner in the firm, whether in respect of corporate or non-corporate assesses, in a financial year, will be considered for "specified number of tax audit assignments”, i.e., 120 tax audits = 2 Partners x 60 tax audits. In the given situation, the number of tax audit reports signed under section 44AB are 118 [i.e., 90 reports signed by CA J {i.e., 30 reports for corporate clients and 60 reports for non-corporate clients} whereas, CA Z signed 28 reports (15 reports as a Partner of the Firm {i.e., 5 for corporate clients and 10 for non-corporate clients} and 13 Reports in individual capacity i.e. {i.e., 4 for corporate clients and 9 for non-corporate clients})] and number of tax audit reports signed under section 44AD are 40 (i.e., 20 reports signed by CA J and 20 reports signed by CA Z). It may be noted that the 40 audits conducted under Section 44AD of the Income-tax Act, 1961 shall not be taken into account for the purpose of reckoning the "specified number of tax audit assignments". The firm is also approached further to take up 3 tax audit assignments under section 44AB for corporate clients and 4 tax audit assignments under section 44AD. In view of the above provisions, partner CA J and CA Z of M/s JAZZ & Co. have undertaken 118 audits, which is not more than 120 tax audits, i.e., "specified number of tax audit assignments” under Section 44AB of the Income-tax Act, 1961. Therefore, the firm can accept 2 more tax audit assignments for corporate clients under section 44AB and all 4 tax audit assignments under section 44AD as there is no limit on assignments under Section 44AD.