M/s. PQR Waste Management Pvt. Ltd., a domestic company, engaged in developing, operating and maintaining a solid waste management system filed its…

CA Final · Direct Tax Laws and International Taxation · PYQS · November 2024
M/s. PQR Waste Management Pvt. Ltd., a domestic company, engaged in developing, operating and maintaining a solid waste management system filed its return of income for A.Y. 2021-22 on 30th September, 2022 claiming deduction under section 80-IA, on the basis of Form 10CCB issued by the chartered accountant. However, in August 2023, it came to the notice of the chartered accountant that the ten year period for which the company had been eligible to claim deduction had expired in A.Y.2020-21. The chartered accountant withdrew the audit report in Form 10CCB and advised the company to file a revised return u/s 139(5). The company, accordingly, filed a revised return withdrawing the claim under section 80-IA. The Assessing Officer completed the assessment on the basis of the revised return and issued the assessment order. However, the department concluded that the concerned chartered accountant had issued Form 10CCB without ensuring that the ten year period had expired or not. The chartered accountant contended that as soon as he came to know about the error, he withdrew his report in Form 10CCB and informed the assesseee accordingly. Further, according to him, his report in Form 10CCB was neither the subject matter at the time of assessment nor at the time of penalty proceedings. Can the chartered accountant be held guilty of professional misconduct for failure to obtain sufficient information and failure to exercise due diligence in discharging the professional responsibilities? Support your answer with relevant provisions of the Income-tax Law and the Chartered Accountant Act, 1949.

Suggested Answer and Working Notes:

(i) Section 80-IA provides for deduction of 100% of the profits and gains derived from the business of, inter alia, developing, operating and maintaining a solid waste management system for 10 consecutive assessment years out of 20 years. Section 80-IA (7) read with Rule 18BBB requires audit of accounts and furnishing of audit report in Form 10CCB on or before the prescribed time for claim of such deduction. Form 10CCB is a declaration provided by the Chartered Accountant that in his opinion the enterprise satisfies the conditions stipulated in section 80-IA and the amount of deduction claimed thereunder is as per the provisions of the Income-tax Act, 1961 and meets the required conditions. As per clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he does not exercise due diligence, or is grossly negligent in the conduct of his professional duties. With respect to Form 10CCB, the Chartered Accountant later came to know about the error that the period of ten years had expired in A.Y. 2020-21 and he withdrew his report in Form 10CCB and informed M/s. PQR Waste Management Pvt. Ltd. Accordingly, the Chartered Accountant can be held "not guilty" of professional misconduct under clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949 as he withdrew his report in Form 10CCB as soon as he came to know about the error and informed the company. Note - In the facts of the question, M/s. PQR Waste Management Pvt. Ltd. filed its return of income for A.Y. 2021-22 on 30.9.2022 claiming deduction under section 80-IA. However, as per section 139, it is not permissible to file a return or a belated return of income for A.Y. 2021-22 beyond 31.12.2021. Moreover, as per section 80AC, no deduction, inter alia, under section 80-IA would be allowed to an assessee unless the assessee furnishes a return of income for that assessment year on or before the due date specified under section 139 (1) i.e., 31.10.2021 4 . Further, date for revising the return of income is given after "August 2023", though a revised return for A.Y. 2021-22 could have been furnished upto 31.12.2021. Accordingly, the above solution has been given ignoring the return filing dates given in the question.

Topics: Tax Audit and Ethical Compliance

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic