CAs, merchant bankers face fine if assessees file wrong tax info

Rs 10,000 penalty for each such reports, according to a provision in Budget

From April 1, chartered accountants (CAs), merchant bankers and valuers can't escape responsibility for filing of incorrect information in certificates or reports attached with income tax returns of assessees.

They will be fined Rs 10,000 for each such certificates or reports, according to a provision in the Budget for 2017-18.

For this purpose, the Budget has proposed to insert a new section, 271J, in the Income Tax Act.  

"Under Section 271J... we have entrusted responsibility with chartered accountants, valuers and merchant bankers who files audit, valuation reports and other things...," CBDT Chairman Sushil Chandra said at a post-Budget interaction with PHD Chamber of Commerce and Industry here. “So, if they file any incorrect information in the returns, they are also liable for a token penalty of Rs 10,000.”

The whole system is based on "a lot of faith on CAs and assessees and they have to be more responsible", he said.

While there are many provisions to penalise the defaulting assessees, there was none to penalise CAs, merchant bankers and valuers.

A memorandum to the Finance Bill said: "In order to ensure that the person furnishing reports or certificates undertakes due diligence before making such certification, it is proposed to insert a new section (271J in the Act) so as to provide that if an accountant or a merchant banker or a registered valuer furnishes incorrect information in a report or certificate, the assessing officer or the commissioner (appeals) may direct him to pay a sum of Rs 10,000 for each such report or certificate by way of penalty."

Chandra said the objective of the Budget was to improve tax compliance along with increasing tax base and improving ease of doing business.

Non-compliance level was high despite low tax, he said, adding that Indians named in various black money reports, including Panama Papers, were among the highest.

He pointed to high level of evasion of tax and tendency to export black money to foreign shores in spite of having global practices and standards, emphasising that this has to come down. "The department has done its bit, now it's time for the taxpayers to show their respect to the law of land," he said.

On long-term capital gains tax, he said the Budget has tried to plug gaps.

In the past few years, the tax department has detected Rs 80,000-crore sale consideration through the penny stock mechanism, the CBDT chief said, adding that this was used for conversion of black money into white.

However, "neither have we changed capital tax regime nor have we changed any law. So, whosoever was getting the benefit of long-term capital gains through ESOP, IPO and FPO is not going to change".

Nothing is going to change except misuse, he clarified.