Tax audit responsibility

Is auditor who certified audit report is responsible for correct treatment of accounts according to tax law . Assume I am eligible for audit and provided all details as my CA wanted for audit purpose . Now in case he is not aware completely about capital markets or any other law and signs my audit report or makes some harmless error who would face responsiblity.



There is a provision for a Rs. 10,000 penalty for CAs under Section 271J of the IT Act:

Penalty for furnishing incorrect information in reports or certificates. —Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate.

Explanation .—For the purposes of this section, —

a. “accountant” means an accountant referred to in the Explanation below sub-section (2) of section 288;
b. “merchant banker” means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);|
c. “registered valuer” means a person defined in clause ( oaa ) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

However, this penalty on the CA may not be levied if the mistake is not deliberate and malafide. If the mistake has led to lower taxes, the AO would direct you to pay the difference along with interest even if he pardons any penalty leviable on you. As long as you’re documenting your accounts well, mistakes wouldn’t be fatal.

You should consult a CA or taxation advocate to check all the legal repercussions.

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Hi @Prakhar_Agrawal

A CA is required to verify the accounts prepared by the taxpayer. He needs to report the required information as per the defined clauses in the tax audit report.
The intention is to truly reflect the income situation of the taxpayer.
If there is a genuine mistake, it can be rectified by filing a revised tax audit report and revised tax return.
However, if it there is any fraudulent practice, both the taxpayer and auditor would be responsible.

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